IN THE EMPLOYMENT TRIBUNAL
AT SUVA

Dispute No 8 of 2008

BETWEEN:

VITI NATIONAL UNION OF TAUKEI WORKERS

AND:

PUBLIC SERVICE COMMISSION

VNUTW : Mr A Singh
PSC : Ms T Tagicakibau

DECISION

This decision was delivered by the Chief Tribunal. The Legal Member of the Tribunal (Mr S Kuruduadua) has provided a brief explanation concerning his position.

Initially five of the six Public Sector Unions [Viti National Union of Taukei Workers (VNUTW), Public Employees Union (PEU), Fijian Teachers Association (FTA), Fiji Public Service Association (FPSA) and the Fiji Teachers Union (FTU)] individually reported trade disputes concerning the Public Service Commission's implementation of certain Government policy decisions.

Three of those Public Sector Unions (VNUTW, PEU and FTA) each reported trade disputes that raised the same three issues, namely (1) the reduction of the compulsory retirement age from 60 to 55, (2) 5% pay reduction for all members of the union and (3) shelving of the Partnership Agreement.

With the consent of those three unions the Tribunal directed that their disputes be consolidated and heard as Dispute No 8 of 2008 between the VNUTW (the Union) and the Public Service Commission (the Commission).

The disputes filed by the remaining two unions (FPSA and FTU) have also been consolidated and will be heard at a later date.

The Union reported its trade dispute by letter dated 20 March 2007. The Permanent Secretary by letter dated 28 December 2007 advised the Union's General Secretary that he had accepted the report of the Trade Dispute. 

The Dispute was subsequently referred to a Disputes Committee. It would appear that the Disputes Committee could not reach a consensus decision.

As a result by letter dated 15 September 2008 the Permanent Secretary informed both the Union and the Commission that pursuant to Regulation 58 (2) of the Employment Relations (Administration) Regulations 2008 (the Regulations) and section 170 (4) of the Employment Relations Promulgation 2007 (the Promulgation) the dispute had been referred to the Employment Tribunal.

The Permanent Secretary's reference to the Tribunal stated:

"To adjudicate an employment dispute existing between Viti National Union of Taukei Workers and the Public Service Commission, over the stand taken by the Commission to 

unilaterally implement the following despite strong objections by the Union:

i)	Reduction of the compulsory retirement age from 60 to 55
ii)	5% pay cut for all members of the union
iii)	Shelving of the Partnership Agreement."

The Dispute was initially listed for mention on 8 October 2008. Directions for the conduct of the Dispute and for the filing of submissions were given by the 
Tribunal at subsequent mentions.

The Union informed the Tribunal that the issue concerning the retirement age was the subject of proceedings in the High Court and would not be pursued before the Tribunal.

Furthermore some time after the initial report dated 20 March 2007, the parties, through informal mediation sponsored by the Labour Ministry, had resolved the partial restoration of 1% from the 5% pay reduction. This 1% restoration had been backdated to the date of implementation.

As a result the issues before the Tribunal concerned the remaining 4% pay reduction and the shelving of the Partnership Agreement.

The hearing of the Dispute took place on 12 January 2009 in Suva. The Union called one witness and the Commission called two witnesses to give evidence.

The parties sought and were granted leave to file written final submissions. The Union filed its final submissions on 20 January 2009. The Commission filed answering submissions on 26 January and the Union filed a brief reply submission on 2 February 2009.

The Tribunal proposes to consider each of the two remaining issues separately. It is proposed to consider first the remaining 4% reduction in salaries and wages of government employees.

Although the evidence before the Tribunal was somewhat sparse in detail, it would appear that shortly after 6 December 2006 the Government decided that there would be a 5% reduction in pay for government employees. This was a policy decision that was initially referred to in the Government's mini budget.

The evidence adduced by the Union established that a number of meetings had taken place in January and February 2007 between the Public Sector Unions and the Commission concerning the decision. The Union's evidence also established that during the course of those negotiations a counter proposal was put forward by the Public Sector Unions for the Commission to pass on to the Government for its consideration. The evidence did not establish what the counter proposal was nor was there any evidence before the Tribunal as to how the Commission subsequently dealt with the counter proposal. It would appear that the counter proposal was rejected although that information was not passed to the Public Sector Unions until some time after the implementation of the decision to reduce by 5% the salaries and wages of Government employees.

After the Public Sector Unions had submitted the counter proposal but before the Union had been informed of the Government's response, in other words, while negotiations were on-going, the Commission promulgated PSC Circular No 7 of 2007 dated 2 March 2007. The Circular was addressed to Permanent Secretaries and Heads of Departments. It was signed by Mr Tom Lee as Acting Permanent Secretary for the Public Service and Public Sector Reform. 

The Circular consisted of three pages attached to which were 36 pages of tables of revised salaries, wages, overtime rates and allowances.

The Circular, so far as is relevant, stated

"1.0 Introduction 

1.1	In its efforts to protect fiscal stability and as part of measures towards economic recovery, Government has decided to implement a 5% across the board reduction in public service salaries and wages. This was announced as part of policy measures in the 2007 Mini Budget.

1.2	It is regrettable that a reduction in salaries and wages has become necessary, but given that salaries and wages are by far the largest single component of Government expenditure, comprising of over 40% of the total operating budget, this was considered the most immediate source of relief. It is impossible for the other sectors to sustain larger cuts without seriously affecting the current level of Government services; a core level of operating expenditure must be maintained.

1.3	Under mitigation, the 5% pay reduction is less compared to that implemented in 1988 (15%) and 2000 (12.5%), even though the financial and economical positions are considerably worse this time. The 5% pay reduction also compares favourably to the scenario observed in the private sector, where jobs have been lost and wage cuts of up to 50% have been imposed.

1.4	During a crisis such as this, fiscal stability and economic recovery must be the priority, as through these the long-term interests of the nation will be best assured and maintained.

2.0 Application

2.1	The 5% salary and wage reduction would be applied to all Civil Servants and Government Wage Earners, and also including the Police, Military, Prison and Forest Guard Personnels.

2.2	The Permanent Secretary, Prime Minister's Office, Home Affairs, Immigration And Information is requested by this Circular to where necessary and appropriate, make amendments to the relevant Regulations to effect the 5% salary and wage reduction for those in the Disciplined Services, and the Solicitor General and Permanent Secretary for Justice in respect of the Fiji Prison Service.

2.3	The 5% salary and wage reduction will NOT apply to :

a)	Officers whose salaries are determined under the Judges Remuneration and Emoluments Act and the Prescription of Salaries Act;
b)	Expatriate contract officers; and
c)	Recipients of basic pension under the Pensions Act 1983.	 

3.0	Conversion

3.1	The reduction in salaries for all Civil Servants will be effective from Pay 5 of 2007 on March 08th 2007 and for all Government Wage Earners from Pay 10 of 2007 on March 7th 2007".

Therefore the Commission had implemented the Government's policy decision by promulgating PSC Circular No 7 of 2007.

The evidence adduced by the Commission concerning the decision to reduce salaries and wages was to the effect that it was a necessary response to the state of the economy and Government finances that prevailed at the time when the Government brought down its mini-budget.

However by the end of 2007 the Commission implemented a measure that partially reversed the measures set out in Circular No 7 of 2007. This was the 1% restoration that was backdated to the date of implementation and became effective on the last pay day in 2007.

Then in PSC Circular No 12 of 2008 dated 24 April 2008 the Commission advised that there would be a further partial restoration of 2% to be made on 9 and 10 July 2008. It was also announced in the same Circular that Cabinet had agreed to a further 2% restoration that would fully restore the 5% pay reduction payable on 10 and 11 December 2008. The restoration of 4%, unlike the earlier restoration of 1%, was not backdated.

As a result when the hearing commenced the issue had been narrowed to whether the payment of the partial restoration of 4% should be backdated to March 2007.

The evidence of the two witnesses called by the Commission detailed the decline in economic activity since the beginning of 2007 and the current position of the National Accounts. The evidence also related to the state of government finances as at December 2006. The evidence did establish that external factors such as the dramatic downturn in the global economy, the global credit crisis and the resulting decline in world trade and tourism had severely impacted on the domestic economy. The evidence also referred to the disastrous effects of the severe floods in Fiji at the beginning of 2009. In summary the Commission's evidence was directed at establishing the fact that the Government could not afford to backdate the 4% pay restoration.

Having carefully considered the evidence the Tribunal has concluded that the implementation of the Government's decision by the Commission was not the result of any agreement between the parties. The reduction of 5% in the salaries and wages of Government employees with effect from 7 and 8 March 2007 was implemented without the agreement of the Public Sector Unions and whilst negotiations were on-going.

The Tribunal accepts that the Commission's role was to implement the policy decision taken by the Government that there should be a 5% pay reduction for government employees. However the Commission was required to implement or attempt to implement the decision in a manner that was consistent with its obligations as an employer.

The Commission has the constitutional function of employer in respect of those government employees who are employed in the public service. The Constitution also guarantees certain rights to those employees in the area of labour relations, particularly with reference to collective bargaining and fair labour practices.

Under section 11 (1) (h) of the Public Service Act 1999, the Commission has, in addition to its constitutional functions, the function of performing in relation to employees the functions of an employer including but not limited to, inter alia, the setting of remuneration and other terms of employment.

However, this statutory function must be harmonized with the obligations of an employer that existed at the relevant time under the Trade Disputes Act Cap 97 (the Act).

The long title of the Act was stated as being "An Act to make provision for the Settlement of Trade Disputes and the Regulation of Industrial Relations.
Section 1 (2) of the Act provided:

"This Act shall not apply to members of:

(a)	the Royal Fiji Military Forces
(b)	the Royal Fiji Police Force; and
(c)	the Prisons Service;

but otherwise shall apply to employees employed by or under the Government of Fiji in the same manner as if they were employed by or under a private person."

Furthermore, in section 2 of the Act, "employer" is defined as meaning "

" - - - any person or any firm, corporation or company, public authority or body of persons who or which has entered into a contract of service, as defined by the Employment Act, to employ any person, and includes the Government or any local authority."

It is therefore quite clear that the Commission as the constitutional and statutory employer of government employees employed in the public service was required to perform its functions in accordance with the obligations imposed on an employer by the Trade Disputes Act.

The definition of "collective agreement" in section 2 of the Act states that it is any agreement which

" (a) is made or on behalf of one or more organizations of  employees and one or more employers or organizations  of employers; and

(b) prescribes (wholly or in part) the terms and conditions of employment of employees of one or more descriptions, or a procedure agreement, or both;"

The terms and conditions of employment (including salaries and wages) of employees employed by the Commission in the public service are set out in the General Orders. Since Award No 23 of 1995 handed down by the Arbitration Tribunal on 2 October 1997 it has not been disputed that the General Orders once registered with the Ministry of Labour under section 34 (1) of the Act constitutes the collective agreement between the relevant Public Sector Unions and the Commission.

Since the initial Agreement was registered there have been amendments made to the terms and conditions of employment of those employees employed in the Public Service. Those amendments have come about as a result of agreed variations to the Agreement (i.e. agreed variations to the General Orders), by Awards of the Arbitration Tribunal and even occasionally by written laws.

Pursuant to section 34 (7) of the Act the provisions of any collective agreement (and any amendments made thereto) are an implied condition of contract between every employee and employer to whom the agreement applies.

Under the Act the contract of service between each employee in the public service and the Commission includes as an implied condition the provisions of any collective agreement between the employee's Union and the Commission.

In addition under section 6 (5) of the Act any award settling a dispute between the parties concerning terms and conditions of employment of public servants was binding on both the Commission and the Union or Unions concerned.

Therefore, in view of the above it does appear to the Tribunal that one of its obligations as an employer was for the Commission to have attempted to implement the decision for a 5% pay reduction by engaging in a process of consultation and good faith collective bargaining.

On the evidence that was before the Tribunal, it is clear that good faith collective bargaining did not take place in a manner that was consistent with

 the obligations that were imposed on the Commission as an employer. Instead the Commission proceeded to vary the terms and conditions of 
employment by implementing a 5% pay reduction without agreement and whilst negotiations were on-going. There was no evidence that the variation had otherwise been effected by constitutional or legislative authorization.

The Tribunal has concluded that the Commission as an employer cannot change terms and conditions of employment upon which the Union has a right to negotiate without consultation and agreement. The Commission's powers and authority in respect of the public service should be exercised in a manner that is consistent with the relevant and applicable employment relations legislation (see Fiji Public Service Association v Public Service Commission Award 23 of 1995 (supra) at pages 5 and 6).

In the absence of agreement, the Commission, as an employer, then had the option of attempting to implement the Government's decision by pursuing the dispute resolution mechanisms that were available under the Act. There was no evidence before the Tribunal that indicated that the Commission had pursued the available option of reporting a trade dispute in order to achieve an amendment to the terms and conditions of employment of public servants.

Since the initial implementation of the 5% pay reduction was inconsistent with the Commission's obligations as an employer bound by a collective agreement and the provisions of the Trade Disputes Act, it follows that restoration of the 4% reduction in pay should be backdated to the date of implementation.

The Tribunal accepts the evidence adduced by the Commission concerning the present state of the economy. Neither the global financial crisis nor the consequences of the floods are in any way attributable to present Government policy. However this evidence is only of assistance in determining when such retrospective restoration should be paid.

The Tribunal considers it appropriate to allow some time for retrospective restoration and that payment should be implemented in two stages. Therefore the 2% partial restoration that came into effect on 9 and 10 July 2008 is to be made retrospective backdated to March 2007 and paid within 3 months from the date of this decision. The 2% partial restoration that came into effect on 10 and 11 December 2008 is to be made retrospective backdated to March 2007 and paid within 6 months from the date of this decision. It is noted that as at December 2008 salaries and wages have been fully restored.

The Tribunal notes that International Labour Organization (ILO) Convention No 151 (Protection of the Right to Organize and Procedures for determining conditions of employment in the Public Service) provides that conditions of employment of public servants should be subject to the process of collective bargaining.

Although this Convention has not been ratified by Fiji, it does nevertheless provide some useful guidance in determining the obligations of the Commission as an employer in relation to collective bargaining and fair labour practices.

The second issue before the Tribunal was termed in the reference as the shelving of the Partnership Agreement.

The Partnership Agreement was dated 24 March 2006 and signed by the Prime Minister and the Chairman of the Commission on the one part and by authorized officers from the VNUTW, PEU and FTA on the other part.

Clause 11 of the Partnership Agreement states :

"To execute and effectively implement the provisions of this Agreement, the Commission and the Public Sector Unions shall enter into and sign a Memorandum of Agreement detailing all such provisions relevant to and as agreed by the parties. The signed Memorandum of Agreements are Annexed as Annexure 1 of this Agreement."

Subsequently each of the three Unions involved in this consolidated dispute signed a Memorandum of Agreement with the Commission. The VNUTW signed its Agreement with the Commission on 11 April 2006. The PEU also signed on 11 April and the FTA did so on 1 April 2006. The three Agreements (the Agreements) were registered with the Labour Ministry in accordance with section 34 of the Act. However the copy of the Partnership Agreement that was tendered as evidence did not have any markings to indicate that it had been so registered.

Each of the Agreements was expressed in similar terms and to a very large extent reproduced the essential provisions of the Partnership Agreement.

It is apparent to the Tribunal that the Partnership Agreement and the three subsequent Agreements were comprehensive agreements that attempted to settle a number of long standing issues of concern to both parties. Clearly the Agreements were more than simply agreements for pay increases. 

In the introduction to the Partnership Agreement paragraph 1 stated :

"This Partnership Agreement launches a new era of co-operation between the Government - - - the Public Service Commission - - - and the Public Sector Unions - - - over matters of common interests affecting working conditions and continued improvement on performance and productivity in the Public Service."

The Partnership Agreement sets out the details of certain payments that are to be made to public servants but did not expressly provide any timeframe for those payments. Paragraph 9 stated :

"On the payment set out on paragraphs 5 and 6 above, Government is to submit specific proposals for consideration and agreement by the end of April 2006".

The Partnership Agreement also identified mutually agreed principles and guidelines for policies and standards in the Public Service. Provision was made for the principles to be applied in employment practices, for principles to be applied in determining a reward, remuneration and recognition system and for guidelines for the provision of services to the public.

The last clause of the Preamble in each of the three Agreements re-inforced this point by stating that:

"And Whereas the parties are desirous of settling the foregoing outstanding industrial matters mutually between them, along with other issues that have been pending, including the full implementation of Award - - ".

Each of the Agreements stated in similar terms that payments due under the Agreements were to be made by agreed staggered payments. The proposal for staggered payments was to be submitted by the Government for consideration of both parties.

In a letter dated 10 August 2006 the Commission was in a position to propose to the Unions a schedule of payments that were due under the Partnership Agreement/the three Agreements. Each union received a letter in similar terms, the contents of which stated:

"The Commission would like to take this opportunity to thank you for your prompt response to our call for an urgent meeting that was held on Wednesday, August 9 2006.

As discussed, the Commission in consultation with the Ministry of Finance & National Planning have reviewed the schedule of payments and arrived at the following proposal.

	Payments	Date of Payment	
1	2% in lieu of PMS/Merit Pay – WEF: 01/01/05	August 24 2006	
2	2% - 2003 Log of Claim – WEF 01/01/06	December 21 2006	
3	4% 2005 IRF – WEF: 01/01/05	March 2007	
4	4% 2006 IRF – WEF 01/01/06	December 2007	
5	4% 2007 IRF – WEF:01/01/07	December 2008	

The payments alluded to in 1 through to 5 above are all consolidated into salary and is not split in two as earlier proposed. In addition, the 4% 2005 IRF payment WEF: 01/01/05 has been rescheduled for March 2007 and not December 21 2006 as earlier scheduled.

We hope that in the true spirit of partnership that you will bear with us as we try to find an amicable solution to the payments."

The evidence before the Tribunal established that two of those payments have been made. Payments 2, 4 and 5 remain outstanding.

The Tribunal notes that both the Partnership Agreement and the three subsequent Agreements were made between the parties at a time when both the state of the Fiji economy and the global economic outlook were very different from that which existed at the time when the dispute came on for hearing. For a number of reasons most of which had their origins beyond the shores of Fiji the Fiji economy in particular had suffered a severe downturn.

Just as it is always open to a Union to approach an employer to negotiate changes to the terms and conditions of employment of employees and to seek variations to a collective Agreement, so it also open to an employer to do the same when circumstances change.

Therefore it is open to the Commission to approach the Unions to negotiate a variation to the Partnership Agreement and/or the three Agreements.

The Tribunal is not satisfied on the evidence before it that the parties have engaged in good faith negotiations in order to resolve the impasse that has arisen as a result of the economic downturn in Fiji.

Under section 153 (1) of the Promulgation, bargaining for a variation of an existing agreement may be "initiated by one or more of the unions or by the employer", in this case, the Commission. There is a detailed set of procedures that the parties should follow and these are contained in sections 153-157 of the Promulgations.

It should be noted that under section 3 (1), the Promulgation applies to all workers and employers including the Government. It does not, however, apply to the Fiji Police Force, the Prisons Service nor the RFMF.

The parties should note in the course of their negotiations the duty of good faith and the matters that are listed in section 149 (12) of the Promulgation.

In view of the scope of the Partnership Agreement and the three Agreements, the Tribunal is not satisfied that it was or is the intention of the Commission to shelve the Agreements. The issue is more concerned with the capacity of the Government to meet the schedule of payments that was initially proposed and accepted in August 2006.

This is a matter that should be the subject of full and genuine good faith negotiations conducted with a view to arriving at an agreed revised arrangement that retains all the other obligations that are imposed on the parties by the Partnership Agreement. The Tribunal does not propose to say anything further concerning the alleged shelving of the Partnership Agreement.

In view of the significance of this Dispute, the Tribunal considers it appropriate to comment briefly on the manner in which the proceedings were conducted by the parties.

In this dispute, the evidence given by the Union was presented by way of a prepared written statement. The written statement replicated the Union's written preliminary submission. There was no objection to the Union's evidence being presented in that form. The Union's witness was not cross-examined except for one question.

The Tribunal accepted into evidence that material in the statement that was relevant to the issues and otherwise admissible as a matter of fairness.

In its written closing submissions the Commission referred to facts that would otherwise have been helpful, relevant and admissible. However submissions are not evidence. None of those facts were adduced by the Commission as evidence and nor was the Union's witness cross examined on those facts. As a result the Tribunal can place no weight on any material that is not properly before it. It would be unfair to do so as the Union did not have the opportunity to cross-examine witnesses who might otherwise have been called to give the evidence of those relevant facts. This meant that the union's evidence was essentially uncontradicted.

However the Union did not attempt to lead any evidence that would have contradicted the Commission's evidence on the state of the Fiji economy. The Union did manage to squeeze some minor concessions from the Commission's witnesses on certain aspects of the state of the economy. 

Neither party provided in their final submissions any assistance to the Tribunal concerning the law as it applied to the issues in dispute.

The decision of the Tribunal is that those public servants who are members of the three Unions represented in the consolidated Dispute are to have their pay restored to the date of implementation of the pay reduction in the manner described in this decision. It is a matter for the Commission to determine whether it will implement this decision across the board for all public servants. The decision does not apply to the various disciplined forces that come under the umbrella of the Disciplined Forces Commission.

In relation to the Partnership Agreement, the parties are required to embark on the process of collective bargaining that is prescribed by the Employment Relations Promulgation. The Tribunal is not satisfied that the Commission has shelved the Partnership Agreement or the three Agreements.

MR S KURUDUADUA : Although I took part in the hearing of the Dispute together with the Chief Tribunal, I am compelled to disqualify myself from delivering a decision or deliberating with the Chief Tribunal due to a conflict of interest. I stand to benefit from any decision that is made in favour of the Union in this Dispute as a result of my employment contract. I was also involved in the Dispute when it was first reported to the Ministry.

DATED at Suva this 9th day of March 2009.

W. D. Calanchini	S. Kuruduadua	
……………………………………… 	…………………………..….	
 CHIEF TRIBUNAL 	LEGAL MEMBER