| [2019] FWCA 5235 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date
The University of Melbourne
(AG2019/1847)
UNIVERSITY OF MELBOURNE ENTERPRISE AGREEMENT 2013
Educational services | |
DEPUTY PRESIDENT MILLHOUSE |
MELBOURNE, 24 DECEMBER 2019 |
Application for termination of the University of Melbourne Enterprise Agreement 2013.
[1] The University of Melbourne (University) has applied under s.225 of the Fair Work Act 2009 (Cth) (Act) to terminate the University of Melbourne Enterprise Agreement 2013 (AG2013/12869) (2013 Agreement). The 2013 Agreement nominally expired on 30 June 2017. 1
[2] The application is opposed by the National Tertiary Education Industry Union (NTEU).
[3] For the reasons that follow, I have decided that it is appropriate to terminate the 2013 Agreement.
[4] The 2013 Agreement applied to all employees of the University, with the exception of the Vice-Chancellor, Provost, Deputy Vice-Chancellor, Pro Vice-Chancellor, Assistant Vice-Chancellor, Dean, Senior Vice-Principal Executive Directors and the University Secretary. 2
[5] It also covers the University and the NTEU, the Community and Public Sector Union (CPSU), the Communications, Electrical, Electronic, Information, Postal, Plumbing and Allied Services Union of Australia (Electrical and Plumbing Divisions) (CEPU), the Construction Forestry Maritime Mining and Energy Union (CFMMEU) and United Voice (UV), being bargaining representatives for the Agreement. 3
[6] The nominal expiry date of the 2013 Agreement passed on 30 June 2017. The University of Melbourne Enterprise Agreement 2018 (AG2018/6272) (2018 Agreement) commenced operation on 27 March 2019 and replaced the 2013 Agreement. The coverage clause of the 2018 Agreement is expressed in the same terms as the 2013 Agreement, except Professional, Administrative and Support Occupations employees, that is, Level 10 – Professional Staff 4 who earn a base salary of more than $144,048 per annum (Senior Managers) are excluded from coverage.5
[7] The effect of this is that the 2013 Agreement continues to cover and apply to Senior Managers of the University. 6 Senior Managers are employees engaged in highly specialised roles such as an Executive Director or Head, International House. There are approximately 280 to 290 Senior Managers, representing less than two per cent of the University’s workforce of around 15,900.7 The balance of employees to whom the 2013 Agreement applied are now covered by the 2018 Agreement.
[8] The CPSU, CEPU, CFMMEU and UV did not seek to be heard in respect of the University’s application to terminate the 2013 Agreement.
[9] From the commencement of bargaining for the 2018 Agreement, the University said it made clear its position that employees classified as Level 10 – Professional Staff would not be covered by it. The University’s position was communicated to employees in an email dated 14 December 2016 in which it said there were “compelling reasons to recognise and reward our individual senior managers (current Professional Staff Classification 10) in line with similar roles externally.” 8 The NTEU's position was that Senior Managers should be covered by the 2018 Agreement.
[10] Between June and August 2017, the University says that it held approximately 32 engagement and feedback sessions with Senior Managers. This was to provide information about why the University felt it appropriate that they be excluded from the 2018 Agreement. This included: 9
(1) discussing the proposed approach to determining remuneration for Senior Managers and for transitioning them to common law contracts; and
(2) delivery of a presentation titled “Senior Manager engagement and feedback session,” which included a slide stating:
It is time to reposition our Senior Managers in the organisation beyond an obsolete industry level 10 classification and single salary grade in a collective agreement…
A transition towards individual employment arrangements will open opportunities for tailored conditions and benefits where individuals are recognised and rewarded against the market. 10
[11] The University wrote to the NTEU on 4 August 2017 regarding the scope of the 2018 Agreement. It said:
The Level 10 classification is not included in the University's proposed agreement for
professional, administrative and support occupations (PASO). Level 10 employees are
considered to be Senior Managers within the University structure. Senior Managers are expected to focus on applying deep functional expertise in leading major components of the University's professional operations and require high-levels of expertise and judgment. Transitioning such employees off a collective agreement and onto individual employment agreements enables the University to have tailored arrangements which recognises and rewards Senior Managers and their particular skills. Such arrangements are not amenable to a multiparty collective agreement, but are better reflected in a common law employment agreement directly between the University and its Senior Managers. Accordingly, the University rejects the NTEU’s claim to include Senior Managers within the scope of the enterprise agreement. 11
(emphasis added)
[12] On 17 April 2018, the University sent an email to Senior Managers regarding its “proposed approach to transition Senior Managers from collective agreements” and attached a sample undertaking. 12
[13] In around July 2018, the University and the NTEU reached an in-principle agreement that Level 10 – Professional Staff earning in excess of $144,048 per annum at the commencement of the 2018 Agreement (i.e. the Senior Managers) would not be covered by it.
[14] On 1 August 2018, the University reissued a Notice of Employee Representational Rights (NERR) to relevant employees proposed to be covered by the 2018 Agreement. The email identified the amended coverage of the 2018 Agreement and was not sent to Senior Managers. 13
[15] In October 2018, four Senior Manager briefing sessions were held. The NTEU was not invited to and did not attend these sessions. The sessions were to inform Senior Managers that they would not be covered by the 2018 Agreement. This included advising them that the University intended to make an application for termination of the 2013 Agreement upon approval of the 2018 Agreement. 14 A presentation was delivered, which specified that:
Next steps
Finalise the 2018 Agreement…on approval we will:
● issue approximately 290 individual undertakings to senior managers; and
● apply to the FWC to terminate the 2013 enterprise agreement.
Terminate the Agreement
Technically Senior Managers will still be covered by the 2013 Agreement,
Once the Fair Work Commission (FWC) approves the 2018 agreement we will seek to have the 2013 agreement terminated. 15
[16] On 26 October 2018, the 2018 Agreement was approved by a majority of employees covered by it. 16
[17] Between December 2018 and May 2019, the University advised its Senior Managers that if the 2013 Agreement is terminated its terms would continue to operate as implied terms of each Senior Manager’s employment contract. 17 It also confirmed its commitment to preserve any more favourable employment conditions under the 2018 Agreement by way of an undertaking, individually tailored to them through one-on-one briefings.18
[18] The University also committed to ensuring that Senior Managers would not be worse off, even where the undertaking lapsed. Its stated position was that it “has no desire or intention to arbitrarily reduce entitlements in the future. Further, any new offers replacing an undertaking would need to remain competitive.” 19
[19] Subdivision D of Division 7 of the Act provides for the termination of an enterprise agreement after its nominal expiry date. The subdivision consists of the following provisions:
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.
[20] The operation of these provisions was considered by a Full Bench of the Commission in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd 20 (Aurizon) and by a Full Court of the Federal Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd.21 I adopt those observations in my application of these provisions.
[21] The exercise of power under s.226 of the Act is an exercise in discretion by the decision maker. 22 A Full Bench in AWX Pty Ltd23 referred to the following passage in Coal and Allied Operations Pty Ltd24 regarding the notion of discretion:
"Discretion" is a notion that "signifies a number of different legal concepts". In general terms, it refers to a decision-making process in which "no one [consideration] and no combination of [considerations] is necessarily determinative of the result." Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion. On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment.
[Footnotes omitted]
[22] As noted in Peabody Energy Australia PCI Mine Management Pty Ltd, 25 s.226 involves the exercise of a “narrow” discretion of the type described in the final sentence of the above passage. However, it remains the case that the evaluative assessments required by s.226(a) and (b) allow a degree of latitude on the part of the decision-maker as to the conclusions to be reached.
[23] The Commission is to take into account “all the circumstances,” including the matters prescribed by s.226(b)(i) and (ii) in its evaluative assessment. Each matter must be given due weight. 26
[24] The 2013 Agreement reached its nominal expiry date on 30 June 2017. Pursuant to s.225(a) of the Act, the University has standing to make the application. Accordingly, the jurisdictional prerequisites for the making of an application are satisfied.
[25] The notion of public interest refers to matters that might affect the public as a whole, as distinct from the interests of the parties. 27 In the context of s.226 of the Act, public interest considerations are directed to the consequences of terminating the 2013 Agreement and particularly those consequences which are likely foreseeable.28 The question is whether the Commission is satisfied that termination of the 2013 Agreement is not contrary to the public interest.
[26] The University submits that it is not contrary to the public interest to terminate the 2013 Agreement. It accepts that agreed and statutorily approved instruments ought not be set aside lightly and, where they are no longer to apply, the interests of the relevant employees be safeguarded. To this end, the University says that it:
(1) consulted with the NTEU and affected employees on the proposal that Senior Managers not be covered by the 2018 Agreement, and the NTEU endorsed this approach; and
(2) has taken steps to ensure that the affected employees will not be disadvantaged by a decision to terminate the 2013 Agreement. 29 These matters are addressed later in the decision
[27] The NTEU contends that termination of the 2013 Agreement would be contrary to the public interest. In support of this position, it raises a number of matters which are summarised below.
[28] The NTEU says that the Commission “must assess whether the likely consequences of terminating the 2013 Agreement would be more or less likely to promote good faith bargaining…for a replacement collective agreement for the affected staff, and thus whether termination or continuation of the 2013 Agreement would be a more effective means by which the object in section 171 is to be achieved.” 30
[29] The NTEU says that the University’s proposal for individual common law contracts would result in a “significant shift in the balance of forces in bargaining,” preventing access to collective bargaining and collective agreements. 31 It contends that replacing the 2013 Agreement with individual arrangements which are not statutory instruments can never be part of a fair workplace relations system.32
[30] The NTEU submits that the application to terminate the 2013 Agreement is premature because the University has not sought to negotiate its concerns regarding the 2013 Agreement. 33
[31] Whilst the NTEU accepts that the University advised Senior Managers of its intention to file an application in the Commission to terminate the 2013 Agreement, it says that the University did not expressly communicate this position to the NTEU. 34 The NTEU understood that the 2013 Agreement would continue to apply until replaced.35 It contends that the University’s silence on this matter was misleading, unfair, and undermined collective bargaining in relation to the 2018 Agreement. It says the University failed to meet the good faith bargaining requirements under s.228(1)(b) and (e) of the Act.36
[32] The NTEU submits that where bargaining has not commenced for a replacement enterprise agreement, it is against the public interest for the Commission to remove existing collective agreement provisions which the parties have previously negotiated in good faith. 37 It submits that the termination of the 2013 Agreement would result in a positive bargaining power shift to the University.38
[33] The NTEU says that if the 2013 Agreement were terminated, Senior Managers would continue to be covered by the Higher Education Industry – General Staff Award 2010 (Award) and the National Employment Standards (NES). 39 However, it says that in light of s.47(2) of the Act, some Senior Managers may not be covered by Award because their earnings exceed the (current) high income threshold of $148,700 per annum.40 It follows that such employees would be entitled only to the NES and other legislated entitlements.41
[34] As to the balance of Senior Managers that earn between $144,048 and $148,700 per annum, it is the NTEU’s submission that on its comparison of the Award entitlements against the 2013 Agreement, reverting to the Award “would be oppressive and have deleterious effects on Senior Managers.” 42 More is said about these matters below. For present purposes, the NTEU contends that these matters raise a public interest concern by undermining industry standards and encouraging competitors to act in similar manner.43
[35] There are no matters advanced by the NTEU that establish that termination of the 2013 Agreement is contrary to the public interest, or which weigh against a conclusion that termination is not contrary to the public interest. My reasons for reaching this conclusion follow.
[36] Firstly, I do not accept the proposition that termination of the 2013 Agreement would run counter to the purpose and objects of the Act. The NTEU submits that the Commission must assess whether termination of the 2013 Agreement would more effectively achieve the object in s.171 of the Act. It appears to approach the analysis on the basis that the promotion of good faith bargaining is inconsistent with termination of the 2013 Agreement. This submission reflects the position in Tahmoor Coal Pty Ltd, 44 but was rejected by a Full Bench in Aurizon:
As we have already observed, s. 226 forms part of a scheme in Part 2 – 4 of the Act to which the object in s. 171 is directed. Self evidently s. 226 is then a part of a scheme of provisions through which the parliament intended that the object might be achieved. There is no basis for concluding, at a level of generality, that continuing the operation of an agreement that has passed its nominal expiry date (whether bargaining is continuing or not) will be any more an effective means by which the object in s. 171 is to be achieved than terminating that agreement. 45
[37] The Full Bench also noted:
Section 226 of the Act is part of the simple, flexible and fair framework, established by Part 2–4 to which the objects in s. 171 relate. There is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and collective bargaining in good faith. 46
[38] The NTEU’s submission places too much weight on the object in s.171 without having regard to the broader object of the Act in s.3. As Aurizon makes clear, it is possible to achieve the objects in ss. 3 and 171 through the termination of an expired agreement. 47 In this respect, the object of the Act is not met exclusively or primarily through enterprise level collective bargaining.48
[39] I also do not accept the NTEU’s submission that the University’s preference for individual common law contracts prevents access to collective bargaining. If the 2013 Agreement is terminated, the NTEU and Senior Managers will still have recourse to the full array of mechanisms under the Act to exert legitimate industrial pressure on the University to bargain.
[40] Further, there is no predisposition in the Act for employment arrangements to be enshrined in an enterprise agreement for there to be a fair workplace relations system. The object of the Act to provide a balanced framework for cooperative and productive workplace relations is achieved, inter alia, by ensuring a guaranteed safety net through the NES, modern awards and national minimum wage orders. 49 Senior Managers retain these protections even if the 2013 Agreement is terminated. More is said about award coverage below.
[41] Secondly, it is not in dispute that the parties have not engaged in negotiations for a successor enterprise agreement for Senior Managers. I do not accept the NTEU’s submissions 50 that there is a requirement to do so in order to satisfy the Commission that it is not contrary to the public interest to terminate the 2013 Agreement.
[42] It is unsurprising that the University has not sought to bargain with the NTEU for a collective agreement for this cohort. The University has been clear that it does not wish to do so. Since June 2017, this position has included notification to Senior Managers about a transition towards individual employment arrangements. 51 The University’s in principle agreement with the NTEU in July 2018 was not a commitment on the part of the University to agree to bargain for a separate enterprise agreement exclusively for Senior Managers.
[43] Thirdly, the NTEU says that the University deliberately engaged in misleading tactics during negotiations for the 2018 Agreement in breach of the good faith bargaining requirements under s.228(1)(b) and (e) of the Act. It therefore contends that terminating the 2013 Agreement would be contrary to the public interest.
[44] I do not accept that good faith bargaining concerns regarding the 2018 Agreement have any bearing upon the public interest considerations relevant to this application. In any case, it is apparent from the correspondence to the NTEU dated 4 August 2017 that the University advised it that the University intended to transition Senior Managers “off a collective agreement and onto individual employment agreements,” (later referred to as “common law employment agreements”). 52 The high-water mark of the NTEU’s submission is that the University’s conduct assisted it to achieve its preferred outcome in respect of the 2018 Agreement. This is said to have led to the undermining of the rights and entitlements of Senior Managers. However, this submission ignores the evidence, which I accept, that the University openly consulted with its Senior Managers regarding its intention to apply to terminate the 2013 Agreement. The University did so both orally and in writing. In this respect, there is no apparent injustice that is occasioned by the University’s decision to engage with Senior Managers directly.
[45] Fourthly, the NTEU’s argument that termination of the 2013 Agreement would shift the balance in bargaining in favour of the University is misplaced in the context of this matter. This is not an application where bargaining is ongoing for Senior Managers, such that termination of the 2013 Agreement may alter the respective positions of the parties or shift bargaining power to the University. There is no current bargaining, and no intention by the University to do so. Accordingly, termination of the 2013 Agreement would not alter the status quo.
[46] In the context of s.226 of the Act, public interest considerations are directed to the consequences of terminating the 2013 Agreement that are likely foreseeable. Yet, the basis for the NTEU’s argument lies in its speculative view as to the negative effect that termination would have on any future (unplanned) bargaining.
[47] Further, as to the NTEU’s case for preserving negotiated employment conditions in the 2013 Agreement, the Full Bench explained in Aurizon that enterprise agreements have a finite nominal life. It cannot be expected that the terms and conditions of an expired enterprise agreement will continue unaltered in perpetuity. The Act contemplates the terms and conditions may be altered by making a new agreement or by terminating the existing agreement. 53 In the present case, the University has chosen the latter.
[48] Finally, the NTEU contends that termination of the 2013 Agreement would undermine industrial standards. In developing the proposed framework for its Senior Managers, it is understood that the University engaged a consultancy firm to assess senior management positions across the market. The University said that this informed its approach to the remuneration framework. 54 A review of the materials discloses that:55
(1) Senior Managers are paid at a minimum of $144,048 annually, although the median remuneration is $192,449 per annum. 56
(2) While not required, the University has passed on two pay increases of 2.1% each for Senior Managers, reflecting the increase under the 2018 Agreement. 57
(3) The University has finalised a Senior Manager Performance and Reward Scheme (Reward Scheme). 58 Senior Managers may become entitled to a salary increase of up to 10% of their fixed annual remuneration based upon their performance against key performance indicators.59
(4) Remuneration progression is proposed to reflect individual performance, movement in the market and other economic indicators. As at May 2017, the remuneration scale proposed for the SM1 Senior Manager classification was $140,000 to $195,000 per annum, and for the more senior SM2 classification, it was $186,000 to $235,000 per annum, inclusive of superannuation and loadings. 60 Subject to general performance outcomes required of the role, Senior Managers will become entitled annual adjustments within the salary scale.61
(5) Senior Managers will be covered by their individual employment contract, supplemented by a tailored undertaking under the common seal of the University, the Award and the NES. 62
(6) The University has provided each Senior Manager with an undertaking which provides that the:
a. terms of the 2013 Agreement that apply to the Senior Manager will continue to apply as contractual terms of their employment irrespective of whether the 2013 Agreement is terminated; and
b. provisions in the 2018 Agreement that are updated or more favourable than the equivalent provisions in the 2013 Agreement, or new provisions not previously set out in the 2013 Agreement, will be applied as contractual terms. 63
[49] The NTEU says that that the Award may not apply to a Senior Manager while the Senior Manager is a high income employee. 64 However, the University contends that none of its Senior Managers are “high income employees” within the meaning of s.328 of the Act. This is because the University has not entered into a guarantee of annual earnings with any of its Senior Managers within the meaning of s.330(1) of the Act.65 The effect of this is that the Award would continue to apply to those Senior Managers who are currently covered by it.66
[50] The NTEU’s public interest submissions do not engage with the matters set out at [48] above. On any reasonable view of these entitlements, the termination of the 2013 Agreement would not leave the Senior Manager cohort without an adequate safety net of terms and conditions. The NTEU has not made out any shortfall in the industry standard for Senior Managers. Termination of the 2013 Agreement will, of course, lead to some alteration in the terms and conditions of employment. The extent of this is considered in more detail later in this decision. However, an alteration in terms and conditions for Senior Managers is insufficient, of itself, to establish that termination of the 2013 Agreement is contrary to the public interest.
[51] There are no other matters raised that suggest that termination is contrary to the public interest or which might weigh against a conclusion that termination is not contrary to the public interest.
[52] Accordingly, I am satisfied that termination of the 2013 Agreement is not contrary to the public interest.
[53] The University, as the applicant, supports the termination of the 2013 Agreement. It contends that to position itself as a competitive employer for individuals classified as Senior Managers, it wishes to be able to remunerate them in line with market salaries. 67 This was explained to Senior Managers in the following way:
It's timely to reposition our senior managers in the organisation beyond an obsolete industry level 10 classification and single salary grade in a collective agreement. Unlike the higher education sector, senior managers, are not typically covered by a collective agreement in either the private or public sectors. We need to build our competitive advantage in the market through agile and responsive employment arrangements. Existing hybrid approach to performance based contracts is not consistent with the minimum expectations. 68
[54] The NTEU opposes the application. It says that there is no tenable argument supporting termination and notes that there are no submissions before the Commission from employees in support of the application. 69
[55] As to the views of employees covered by the 2013 Agreement, Directions were issued by my chambers inviting any party covered by the 2013 Agreement to file material in response to the application. Submissions were received on 6 July 2019, 12 July 2019 and 15 July 2019 70 from 12 Senior Managers, in which views were provided.
[56] The 6 July 2019 and 12 July 2019 submissions from one de-identified Senior Manager contended that:
(1) Senior Managers were excluded from negotiating over and voting on the 2018 Agreement, which is unfair given that some of the terms of the 2018 Agreement apply through the undertaking.
(2) The employee contended that he/she had not been given an ability to negotiate terms and conditions as part of the individual arrangements.
(3) The terms and conditions are not clear given they are drawn from the 2013 Agreement and some from the 2018 Agreement.
(4) Annual wage increases were guaranteed under the 2013 Agreement but the arrangements for future wage increases are unclear.
(5) The wage increases that have been passed on reflect the rate agreed under the 2018 Agreement, but Senior Managers were not able to vote for or against that agreement.
(6) Upon a promotion or transfer to a new role within the University, the protections afforded to Senior Managers will be lost.
(7) There may be access to a performance related bonus structure, but no details have been provided about how this will work.
(8) Female employees will be worse off under individual employment arrangements when compared to collective agreements.
[57] The 15 July 2019 submissions were signed by 11 de-identified Senior Managers. It was contended that the decision to exclude Senior Managers from the 2018 Agreement was made without appropriate consultation. The University’s submission that it regularly communicated with Senior Managers in or about December 2016 was also rejected. It is said that only two briefing sessions were held, 14 months apart:
(1) The first of these sessions in June - August 2017 did not make it clear that the University’s proposal to exclude employees classified as Level 10 – Professional Staff from the 2018 Agreement would proceed. No further consultation or communication took place until April 2018 when a sample undertaking was received. 71 Senior Managers did not receive the email from the University dated 1 August 2018, which confirmed the revised scope of the 2018 Agreement and advised that the NERR would be reissued.72
(2) The second of these sessions took place between 16 and 26 October 2018. 73 Information was shared about the undertakings, the new remuneration arrangements and the operation of the 2013 Agreement and 2018 Agreement in respect of Senior Managers. Further information was to follow through a communication channel called “Slack,” which was not implemented until December 2018.
[58] The submissions also reject the University’s contention that Senior Managers were given an opportunity to provide feedback on the proposal. It is said that all subsequent communication by the University focused on finalising the undertakings. To this end, it was submitted that:
(1) During October 2018, Senior Managers were sent an individualised draft undertaking, but it did not include any remuneration information or a comparison between the draft undertaking and the 2013 Agreement or the 2018 Agreement.
(2) On 19 December 2018, the University provided Senior Managers with advice that the “Slack” channel was operational, but because of the time of year, many Senior Managers did not subscribe to it. Attempts to subscribe in January 2019 were unsuccessful. Consequently, many Senior Managers did not receive the FAQ document posted on 19 December 2018 74 or the “Senior Manager FAQ’s” sent on 10 April 2019.75
(3) In January 2019, a further individualised draft undertaking was provided, which detailed clauses of the 2013 Agreement and 2018 Agreement that would apply (although, incompletely) but did not include any remuneration details.
(4) On 7 May 2019, the Senior Managers were advised by email that one on one briefings would be held to finalise the individual undertakings. 76
(5) In June 2019, final individual undertakings were provided to Senior Managers. These included the fixed annual remuneration but no information concerning remuneration increases or the application of bonuses. Many also included outdated position titles or descriptions.
[59] The submissions also contend that:
(1) While the University has said that terms and conditions for Senior Managers will not be eroded, this is insufficient security. If the 2013 Agreement is terminated, Senior Managers will suffer a significant loss of entitlements as compared to other staff of the University, including Academic staff. For instance, redundancy payments and parental leave entitlements are substantially more favourable under the 2013 Agreement and 2018 Agreement when compared to the NES and leave Senior Managers at a disadvantage.
(2) The undertakings are silent on the matter of annual remuneration increases or bonuses and there is no University policy that sets out the terms that may apply. Further, it is understood that performance bonuses will be available but annual CPI salary increases will no longer apply, placing Senior Manager’s at a disadvantage when compared to University staff covered by the 2018 Agreement.
[60] The view of the University must be balanced against the opposing views expressed by certain Senior Managers and the NTEU. In order to understand the basis for these views, it is necessary to consider the submissions advanced concerning s.226(b)(ii) of the Act.
[61] The NTEU advanced a number of arguments relevant to the circumstances of and the likely effect of the termination of the 2013 Agreement on Senior Managers. These matters are summarised below.
[62] The NTEU acknowledged that the University had offered Senior Managers an undertaking to limit the possible detriments arising from any termination of the 2013 Agreement. However, it said that the undertaking operates for a finite period, until the Senior Manager is offered and accepts a new role within the University (at which time, the Senior Manager will be offered a new contract of employment). 77 It contends that:
(1) A “large portion” of Senior Managers are currently employed on fixed term contracts and speculates that “between one third and one quarter of Senior Managers would have the benefit of the University’s ‘undertaking’ or guarantee for no longer than a year.” 78 No evidence was led in support of this proposition.
(2) New employees would not have the safety net of collectively negotiated terms and conditions underpinning their individual contracts of employment. 79
[63] The NTEU submitted that Senior Managers affected by a termination of the 2013 Agreement fall into the following groups: 80
(1) Senior Managers currently employed on more than $144,048 per annum, but less than $148,700 per annum (the high income threshold). It said this cohort would lose the benefit of all aspects of the 2013 Agreement if it is terminated but retain coverage under the Award.
(2) Senior Managers currently employed on more than the high income threshold, but less than $203,500 per annum. It said this cohort would lose the benefit of all aspects of the 2013 Agreement if it is terminated and, because they may be high income employees, they may not be entitled to the benefits of the Award.
(3) Senior Managers currently employed on $203,500 per annum or more. This cohort would lose the benefit of those parts of the 2013 Agreement that have not already been waived pursuant to a performance-based contract entered into under clause 40 of the 2013 Agreement. It said that because they may be high income employees, they may not be entitled to the benefits of the Award.
(4) Future employees may also be affected, such as any current employee presently covered by the 2018 Agreement who is promoted to a Senior Manager position. Such employees would not have the benefit of the undertaking.
[64] In support of its contention that the termination of the 2013 Agreement would be “oppressive and have deleterious effects on Senior Managers” 81 the NTEU pointed to the removal of:82
(1) The Award consultation clause, which is inferior to that contained in the 2013 Agreement, including by reference to when consultation commences and obligations upon the University when “contracting out.” 83
(2) The Award dispute resolution procedure, which enables the NTEU to raise a dispute in its own right and further, the supplementary grievance resolution procedure for disputes that are not about the operation of the Agreement and the NES. 84
(3) An entitlement to access accident make up pay. 85
(4) Processes relating to the assessment of performance, including the impact of ill health or disability. 86
(5) Protections concerning the termination of fixed term contracts and the occasions giving rise to a notice payment. 87
(6) An entitlement to notice prior to the expiry of a fixed term contract, including notice of a contract extension or conversion to permanent employment. 88
(7) The distinction between misconduct and serious misconduct. 89
(8) An entitlement to time off in lieu, including for any ordinary hours performed on the weekend. 90
(9) An unsatisfactory performance process. 91
(10) Paid parental leave. 92
(11) A redundancy scheme providing pay of up to 52 weeks. 93
(12) Increased employer superannuation contributions. 94
[65] Other variances between the 2013 Agreement, the Award and the NES identified by the NTEU include conditions of probation, fixed term contract limits, severance payments for some fixed term contracts, the option of performance-based contracts, salary packaging, flexible working arrangements, workload management, annual leave loading, and leave entitlements. 95
[66] The NTEU submitted that in the absence of these more beneficial terms and conditions of employment, the minimum safety net “prescribed in the NES” constitutes an apparent reduction to Senior Managers’ entitlements. 96
[67] The NTEU has not advanced any matters concerning its circumstances including the likely effect of any termination upon it.
[68] As to the circumstances of the University, its primary interest in the matter is concerned with ensuring that it is able to remunerate Senior Managers in line market salaries in order to be a competitive employer.
[69] It also contended that the continued operation of the 2013 Agreement would result in the maintenance of a distinct and disparate employment system for approximately 280 to 290 employees covered by the 2013 Agreement, out of a workforce of approximately 15,900. It says that this gives rise to operational inefficiencies. 97 The NTEU says that this argument ignores the proposition that absent the 2013 Agreement, the University would have to observe between 280 and 290 individual contracts, which also includes applying the terms of 2013 Agreement and more favourable provisions of the 2018 Agreement for the duration of the guarantee.98 It says that the continued operation of the 2013 Agreement is less onerous, weighing against the University’s application.99
[70] I am satisfied that the University supports the termination of the 2013 Agreement, while the submissions received from certain Senior Managers and those advanced by the NTEU oppose termination.
[71] Senior Managers are highly paid employees with a median remuneration of approximately $192,449 per annum. The context for the application is that the University desires greater flexibility in the terms and conditions offered to this cohort. Its rationale is to ensure that it is a competitive employer for senior appointments against all sectors of the employment market.
[72] The University has taken steps to transition Senior Managers onto individual employment contracts in addition to:
(1) providing individual undertakings to Senior Managers which maintain the terms and conditions of the 2013 Agreement and a contractual obligation to the more beneficial entitlements in the 2018 Agreement; and
(2) implementing a Reward Scheme, which provides for remuneration increases and reward payments. 100
[73] Notwithstanding these matters, the NTEU and the Senior Manager submissions focus on the terms and conditions contained within the 2013 Agreement that they consider will be lost upon termination. However, I do not accept on the evidence before the Commission, that this concern comes to pass. The undertakings provided by the University to each Senior Manager maintain entitlements under the 2013 Agreement (or the 2018 Agreement where it is more beneficial). A review of finalised undertakings before the Commission evidences that:
(1) the preservation of entitlements varies between the undertakings, commensurate with the different categories of employment; 101 and
(2) the entitlements identified by the NTEU at [64] above are:
a. preserved by the undertakings in manner that is consistent with (1) above (with the exception of superannuation arrangements which are contained in the employment contract); 102 or
b. enhanced by incorporation of the corresponding entitlement in the 2018 Agreement (including entitlements to paid parental leave and accident make-up pay). 103
[74] Furthermore, a review of the additional matters identified by the NTEU in its table of comparison (set out at [65] above) does not disclose that any deficiency as between the 2013 Agreement and the undertakings. 104 The terms are contained in the undertakings, where appropriate to that category of employment. This supports the University’s submission that the undertakings are tailored to the individual circumstances of each Senior Manager.
[75] The NTEU highlights two issues with the undertakings; that they operate only for a fixed period and will not apply to any new employees. However, the circumstances relating to new employees or individuals not covered by the 2013 Agreement are not a relevant consideration in the application before me. Section 226(b) of the Act specifically deals with the views and circumstances of employees covered by the agreement proposed to be terminated.
[76] As to the fixed term nature of the undertakings, I accept that they will continue to apply until a Senior Manager is offered and accepts a new role (including a new maximum term appointment in the same role). 105 However, there is no evidence before me that gives weight to the NTEU’s concern that many Senior Managers are employed on short fixed term contracts, thereby limiting the operation of the undertaking.
[77] In any case, there is no obligation on the University to maintain greater entitlements through an undertaking. The University’s rationale for doing so is to provide reassurance to the Senior Manager cohort that there will not be a reduction in their conditions of employment. I am satisfied that the undertakings protect key terms and conditions for the Senior Managers, being entitlements in addition to the safety net of the Award and the NES. There is no demonstrable immediate impact on Senior Managers from the termination of the 2013 Agreement. 106 Consistent with the approach in Aurizon, the provision of an undertaking is a matter that is relevant in my assessment as to whether it is appropriate to terminate the 2013 Agreement. In these circumstances, I regard it to weigh in favour of a finding of appropriateness.
[78] Even absent any undertakings, there remains an adequate safety net of terms and conditions of employment for Senior Managers. This includes the Award, noting that a guarantee of annual earnings has not been agreed to. As noted in AGL Loy Yang Pty Ltd:
As was recognised in Aurizon, s.226 of the Act is not limited to circumstances in which an agreement no longer applies to any employee. The Act prescribes a safety net upon termination in such circumstances. It is not the previous agreement and nor are undertakings mandatory. The prescribed safety net is the Award, which is the relevant modern award created during the Award Modernisation process, and the NES. 107
[79] These observations are apposite here. I am satisfied that this is a matter that weighs in favour of a finding of appropriateness.
[80] The balance of concerns raised by the Senior Manager submissions focus on:
(1) a perceived lack of consultation regarding the introduction of individual employment arrangements;
(2) an inability to negotiate the terms of the undertakings, including a concern that they do not address remuneration increases; and
(3) the decision to exclude them from coverage of the 2018 Agreement.
[81] The Senior Managers reject the University’s submission that it held approximately 32 engagement and feedback sessions between June and August 2017. However, whether there were 32 sessions, or something significantly less during this period is not a matter that is necessary for me to determine in the context of this application. The evidence before me otherwise discloses a lengthy and detailed communication process between the University and Senior Managers between at least April 2018 to May 2019.
[82] I accept that Senior Managers did not receive the email from the University of 1 August 2018 in which the revised scope of the 2018 Agreement was confirmed and this caused a degree of uncertainty for some of them. However, the email was only sent to relevant employees proposed to be covered by the 2018 Agreement. The NTEU had, by this time, agreed with the University to exclude Senior Managers from scope. Therefore, the fact that Senior Managers were not provided with this email is not unexpected.
[83] The concern raised by the Senior Manager submissions that they have not been given an ability to negotiate their individual arrangements is not borne out upon a review of the sample finalised undertakings before me, the terms of which differ between employment types. The evidence is that as at 24 July 2019 (which post-dated the Senior Manager submissions):
(1) 201 individual undertakings were finalised with Senior Managers;
(2) a further 37 undertakings were agreed and in the process of being finalised; and
(3) 39 undertakings remained outstanding. 108
[84] The NTEU contends that the undertakings have not been signed by Senior Managers and the fact that 201 have been issued ought not be viewed as evidence of an agreement between the parties. 109 However, the undertaking is a contractual commitment given by the University to the Senior Managers; the signature of the Senior Manager is not required (and nor was it sought, on review of the undertakings). I am not persuaded that the absence of a Senior Manager’s signature means that the undertakings are not specifically tailored to individual circumstances, having regard to their content.
[85] Further, while it is apparent that remuneration increases are not addressed in the undertaking, this submission does not account for the Reward Scheme, which is managed by executive committee members of the University. The committee members are responsible for reviewing and approving changes to Senior Manager annual remuneration scales, increases to the annual salary framework and variable reward percentages. The governance framework is intended to ensure that the scheme is managed fairly across the Senior Manager cohort.
[86] Finally, the contention by Senior Managers that they did not have input into the terms of the 2018 Agreement is a moot point. Whether the Senior Managers ought to have been covered by the 2018 Agreement is not relevant to the present application. In any case, the more favourable entitlements from the 2018 Agreement that are preserved in the undertaking relate specifically to each Senior Manager such that there is no identified detriment.
[87] The above concerns expressed by the NTEU and Senior Managers, taken together or individually, do not weigh against a conclusion that it is appropriate to terminate the 2013 Agreement.
[88] Finally, with respect to the circumstances and likely effect on the University, it says that the continued operation of the 2013 Agreement would give rise to operational inefficiencies. This is because it would need to maintain the instrument for approximately 280 Senior Managers. The NTEU challenges this position. It says that the effect of the undertaking is to contractually preserve and apply the terms of the 2013 Agreement for the duration of the undertaking anyway. I accept the NTEU’s argument in this respect. Indeed, it is accepted by the University that there is some initial administrative burden associated with the implementation of the undertakings and common law contracts. However, this is an immediate (and largely resolved) consequence of the University’s primary objective to position itself as a competitive employer for senior employees. I therefore regard the issue of operational inefficiencies as a neutral consideration.
[89] For the reasons set out above, I have found that:
(1) there are no circumstances that weigh against a conclusion that it is appropriate to terminate the 2013 Agreement;
(2) there are circumstances which support a conclusion that it is appropriate to terminate the 2013 Agreement; and
(3) there is a neutral consideration.
[90] Taking into account the views of Senior Managers, the University and the NTEU, their respective circumstances and the impact of termination of the 2013 Agreement, I consider that it is appropriate to terminate the 2013 Agreement.
[91] Given my findings in respect of ss. 225 and 226(a) and (b) of the Act, I must terminate the Agreement. The termination will operate from 24 December 2019.
DEPUTY PRESIDENT
Appearances:
D Proietto of Lander & Rodgers for the applicant.
A Arian for the National Tertiary Education Industry Union-Victorian Division.
Hearing details:
2019.
Melbourne:
September 17.
1 2013 Agreement, clause 3.2; [2014] FWCA 1133 [73]
2 2013 Agreement, clause 2.2
3 2013 Agreement, clause 2.2; [2014] FWCA 1133 [2], [72]
4 2018 Agreement Clause 3.4
5 2018 Agreement Clause 1.4.2 and Division 3, Clause 3.2.1.2
6 2013 Agreement Clauses 2.2; Exhibit 5 at [3]
7 Exhibit 1 Q.2.3 at [4]
8 Exhibit 1 Annexure SE-1
9 Exhibit 1 Q2.3 at [7]; Annexure SE-2
10 Exhibit 1 Annexure SE-2, slide 4
11 Exhibit 1 Q.2.3 at [9]; Annexure SE-3
12 Exhibit 1 Q2.3 at [12]; Annexure SE-5
13 Exhibit 1 Q.2.3 at [10] and [11]; Annexure SE-4
14 Exhibit 1 Q2.3 at [13]
15 Exhibit 1, Annexure SE-6, slide 7
16 Exhibit 1 Q2.3 at [14]
17 Exhibit 1, Annexures SE-7 and SE-8
18 Ibid Annexure SE-8 and SE-10
19 Ibid Annexure SE-8
20 Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd [2015] FWCFB 540 (Aurizon) at [118]-[152]
21 [2015] FCAC 126 at [9]-[25]
22 AWX Pty Ltd [2013] FWCFB 8726 at [18]
23 Ibid at [7]
24 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194 per Gleeson CJ and Gaudron and Hayne JJ at [19]
25 Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd [2016] FWCFB 3591 at [18]. See also Gangell, Mr Steven Harold v Lobethal Abattoirs Pty Ltd T/A Thomas Foods International [2018] FWCFB 4344 at [17]
26 Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others [1986] HCA 40; (1986) 162 CLR 24; Nestle Australia Ltd v Deputy Federal Commissioner of Taxation (1987) 16 FCR 167 cited in Esso Australia Pty Ltd v The Australian Workers’ Union and Ors [2019] FWC 6143 at [94]-[95]
27 Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 (Kellogg Brown) at 40; Aurizon at [153]
28 Kellogg Brown at 41
29 Exhibit 1 Q.2.1
30 Exhibit 5 at [23]; Transcript of proceedings dated 17 September 2019 (Transcript) at [224]
31 Exhibit 5 at [25]
32 Ibid at [26]
33 Ibid at [31]
34 Exhibit 5 at [34] – [36]; Witness Statement of Steve Adams (Exhibit 6) at [7]
35 Exhibit 5 at [37]
36 Ibid at [39]
37 Ibid at [42]
38 Ibid at [44]
39 Ibid at [45]
40 Fair Work Regulation 2009, reg 2.13
41 Exhibit 5 at [46] and [48]
42 Exhibit 5 at [50]; Exhibit 7
43 Exhibit 5 at [52]
45 Aurizon at [141]
46 Ibid at [151]
47 Ibid at [149]
48 Ibid at [144]
49 Section 3(b) of the Act
50 Exhibit 5 at [30]; see also Wollongong Coal Limited t/a Wollongong Coal [2019] FWCFB 3306 at [22]
51 Exhibit 1 Q2.3 at [7]; Annexure SE-2, slide 4
52 Exhibit 1 Q.2.3 at [9]; Annexure SE-3
53 Aurizon at [126]
54 Exhibit 1, Annexure SE-2, slide 6
55 See also Exhibit 1, Annexure SE-10
56 Exhibit 3 at [5]; Exhibit 2 at [10]
57 Exhibit 1 Q2.3 at [32]; Annexures SE-7 and SE-10
58 Exhibit 2 at [12] and [13]; Annexure SE-15
59 Exhibit 1, Annexures SE-2, slides 12 and 13; Annexure SE-6 at p.5; Exhibit 2 at [12]
60 Exhibit 1, Annexure SE-2, slide 9 and 10
61 Ibid Annexures SE-2, slide 11 and SE-6 at p.4
62 Ibid Annexure SE-8
63 Exhibit 1 at [34] and Annexure SE-9
64 Section 47(2) of the Act
65 Exhibit 3 at [57]
66 Exhibit 2 at [18]
67 Exhibit 1 Q.2.3 at [19]
68 Exhibit 1, Annexure SE-2, slide 4
69 Exhibit 5 at [88] and [93]
70 Exhibit 8
71 Exhibit 1, Annexure SE-5
72 Ibid Annexure SE-4
73 Ibid Annexure SE-6
74 Ibid Annexure SE-7
75 Ibid Annexure SE-8
76 Ibid Annexure SE-10
77 Exhibit 5 at [80]
78 Ibid at [81]
79 Ibid
80 Ibid at [92]-[95]
81 Exhibit 5 at [50]; Exhibit 7
82 Exhibit 7; Exhibit 5 at [99]
83 Exhibit 5 at [99](ii); 2013 Agreement Clause 78.1; Exhibit 7 p.1
84 Exhibit 5 at [99](i); 2013 Agreement Clauses 79.7 – 79.8, 79.10 – 79.16, 80.1 and 80.9
85 Exhibit 5 at [99](iii); 2013 Agreement Clause 48; Exhibit 7 p.8
86 2013 Agreement Clause 73
87 Agreement Clauses 18.1 and 18.3
88 Exhibit 5 at [99](x); Exhibit 7 p.8; 2013 Agreement Clause 23; Exhibit 5 [99](vii); Exhibit 7 p.7; 2013 Agreement Clause 22
89 Exhibit 5 at [99](viii); Exhibit 7 p.4; 2013 Agreement Clauses 61.6 and 61.7
90 Exhibit 5 at [99](ix); Exhibit 7 p.10; 2013 Agreement Clause 55.5; Exhibit 7 p.10; 2013 Agreement Clause 57.4
91 Exhibit 5 at [99] (xi); Exhibit 7 p.3; 2013 Agreement Clause 60
92 Exhibit 5 at [99] (xii); Exhibit 7 p. 10; 2013 Agreement Clause 67
93 Exhibit 5 at [99](xiii); Exhibit 7 p.6; 2013 Agreement Clause 75.13(a)
94 Exhibit 5 at [99](xiv); Exhibit 7 p.8; 2013 Agreement Clause 47
95 Exhibit 7
96 Exhibit 5 at [100]
97 Exhibit 1 Q.2.3 at [29] (a) and (c)
98 Exhibit 5 at [61] and [62]
99 Ibid at [63]-[67]
100 Exhibit 2, Annexure SE-12
101 See for example Exhibit 2, Annexures SE-11 and SE-12, Schedule 3, Clause 18 – 25, 40.4 and 75
102 See for example, the entitlement to consultation at Exhibit 2, Annexures SE-11, SE-12, SE-13 and SE-14, Schedule 3, Clause 78 which is preserved by each undertaking; compare this to the entitlement to a dispute resolution procedure at Exhibit 2, Annexures SE-11, SE-12, SE-13 and SE-14, Schedule 3, Part N which applies to ongoing and fixed term employees but not to employees on a performance based contract pursuant to the 2013 Agreement, Clause 40.4
103 See for example Exhibit 2, Annexures SE-11, SE-12, SE-13 and SE-14, Schedule 3, Clauses 48 and 68; see also the leave entitlements at Clauses 63-67 of Exhibit 2, Annexures SE-11, SE-12, SE-13 and SE-14
104 See for example the entitlement to salary packaging at Exhibit 2, Annexures SE-11, SE-12, SE-13 and SE-14, Schedule 4, Clause 46 which is preserved by each undertaking
105 See for example Exhibit 2, Annexure SE-11 at [2.3]
106 See Australia and New Zealand Banking Group Limited [2015] FWCA 8422
107 [2017] FWCA 226 [107]
108 Exhibit 2 at [6]
109 Transcript [259]
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