[2020] FWCA 4182

The attached document replaces the document previously issued with the above code on 6 August 2020.

The attached document wholly replaces the document previously issued with the code [2020] FWC 4148 on 6 August 2020 to correct document referencing.

Ashley Sherr

Associate to Commissioner Cirkovic

Dated 7 August 2020

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 16 - Application to terminate collective agreement-based transitional instrument

Mambourin Enterprises Ltd
(AG2019/3730)

Application to terminate collective agreement-based transitional instrument – union opposes termination – some employees oppose termination – financial impact of instrument on business – impact on bargaining – significance of change to industry funding - impact on productivity – significance of other enterprise agreements in the industry – significance of nominal expiry date being a decade prior to application – significance of undertaking provided to grandfather terms – application granted – agreement terminated - discretion as to date of termination.

[1] Mambourin Enterprises Ltd (the Applicant) has made an application pursuant to Sch. 3, Item 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the TPCA Act) with the Fair Work Commission (the Commission) to terminate the Mambourin Enterprise Inc Disability Services Victoria (Part 1) Collective Agreement 2008 (the Agreement) (the Application). The nominal expiry date of the Agreement was 30 June 2009.

[2] The Agreement is a collective agreement-based transitional instrument under the TPCA Act.

[3] Schedule 3, Item 16 of the TPCA Act provides that Subdivision C of Division 7 of Part 2-4 of the Fair Work Act 2009 (the Act) (which deals with termination of enterprise agreements by employers and employees) applies in relation a collective agreement-based transitional instrument as if a reference to an enterprise agreement included a reference to a collective agreement-based transitional instrument. I am satisfied that the Agreement is a collective agreement-based transitional instrument under the TPCA Act and, as stated above, that its nominal expiry date of 30 June 2009 has passed.

[4] The Application is opposed by the Australian Education Union (the AEU). The AEU represents a number of the Applicant’s employees, covered by the Agreement, who deliver “day services” as part of the Applicant’s business.¹

[5] The Application was initially opposed by an individual employee of the Applicant who had sought to remain anonymous in these proceedings and made an application under section 594 of the Act for their identity to be kept confidential in the proceedings.

[6] I dismissed the application for confidentiality.  2 Subsequently, the anonymous employee indicated that they no longer wished to be involved in these proceedings.

Background

[7] The Applicant is a disability services provider that operates in Victoria, offering a range of services for people living with disabilities. It receives funding through the NDIS and provides a Supported Employment Program and School Leaver Employment Support across seven locations in Western Melbourne.³

[8] The Application was lodged on 1 October 2019 together with a statutory declaration from Mr Rohan Braddy, Chief Executive Officer of the Applicant.

[9] On 8 October 2019, the Applicant was issued with initial directions to provide all employees and employee organisations covered by the Agreement with a copy of those directions along with a copy of the application (and supporting statutory declaration). Employees or employee organisations were invited to notify chambers of their opposition to the Application by close of business 22 October 2019.

[10] On 17 October 2019, my chambers received an email from the AEU indicating its opposition to the Application.

[11] On 25 October 2019, I issued directions inviting the parties to file witness statements, evidence and outlines of submissions.

[12] The Applicant relied on witness statements from the following individuals:

•  Mr Rohan Braddy, Chief Executive Officer of the Applicant;

•  Ms Linda Agius, a Hub Manager employed by the Applicant;

•  Ms Lumturije Taip, a Facilitator employed by the Applicant; and

•  Ms Meafou Aumau, a Hub Manager employed by the Applicant.

[13] The AEU relied on witness statements from the following individuals:

•  Ms Jessica Pinter, a Facilitator employed by the Applicant;

•  Ms Elaine Gillespie, Vice President (TAFE and Adult Provision Sector) of the Victorian Branch of the AEU;

•  Ms Matthew Burke, an Organiser with the AEU; and

•  Mr Mark Farthing, National Campaigns and Projects Officer with the Health Services Union.

[14] Mr Braddy, Ms Pinter and Ms Gillespie were cross-examined on their evidence.

[15] Both parties made lengthy written and oral submissions as well as adducing significant evidence in support of their respective positions. I have attempted to distil and summarise these submissions below. In making my decision, I have had regard to the full range and detail of the material provided by the parties.

Context

[16] As stated earlier, the Applicant operates in the disability services industry, employing approximately 300 employees, providing services across a number of sites in the western region of Melbourne. 4

[17] It contends that the industry landscape has shifted significantly since the Agreement was made and points principally to the implementation of the National Disability Insurance Scheme (NDIS) in 2013 as having had a “substantial” impact on the funding of disability services in Australia. 5

[18] By way of background, it is worth noting that there are a range of disability service providers across Australia. The NDIS is a national scheme providing funding to all disability service providers, not just the Applicant. Relevantly to this matter, the NDIS funding is calculated on the basis of labour costs referable to the Social, Community, Home Care and Disability Services Industry Award 2010 (the Award), a modern award that covers employers and employees in the social and community services sector in Australia. The coverage of the Award includes work performed in the provision of personal care and domestic and lifestyle support to a person with a disability (including respite and day services) in a community and/or residential setting. 6 It is uncontested that the Award is used as the base reference point for the determination of appropriate NDIS funding levels.7 Prior to the introduction of the NDIS, funding was provided at a state level using a different methodology. It is also uncontroversial that, following the introduction of the NDIS, the industry faced challenges, in particular with respect to funding gaps between actual costs and the funding provided by the NDIS.

[19] It is also worth noting that Fair Work Australia (as it was then) made an order pursuant to section 302 of the Act prescribing, in essence, increased rates of pay for employees across the “social, community and disability services industry”, which includes employees of the Applicant. 8 The Equal Remuneration Order (the ERO) came into effect on 1 July 2012 and is set to conclude on 1 December 2020. In broad terms, the effect of the order is that employees in the relevant industry are entitled to rates of pay set by the ERO. To the extent that rates of pay in agreements are less than those prescribed by those in the ERO, the latter prevails.9 On 1 December 2020, the rates prescribed by the Award will, largely, reflect those in the ERO at which point the ERO will conclude.10 In practical terms, therefore, the Agreement has application with respect to entitlements whereas rates of pay are set by the ERO.11

Relevant Legislation

[20] The relevant sections of the Act for an application of this kind state as follows:

“225 Application for termination of an enterprise agreement after its nominal expiry date

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.”

[21] The operation of section 225 was considered by a Full Bench of the Commission in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd (Aurizon) 12 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.13 I adopt those observations in my application of these provisions.

[22] The exercise of power under section 226 of the Act is an exercise in discretion by the decision maker. A Full Bench in AWX Pty Ltd referred to the following passage in Coal and Allied Operations Pty Ltd regarding the notion of discretion: 14

““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 might 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 judgement.”

[23] As noted in relevant authorities, 15 section 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 section 226(a) and (b) allow a degree of latitude on the part of the decision maker as to the conclusions to be reached.

[24] 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.

[25] Also relevant is the object of Part 2-4 of the Act, as set out in section 171 of the Act, which provides as follows:

“The objects of this Part are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) making bargaining orders; and

(ii) dealing with disputes where the bargaining representatives request assistance; and

(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.”

[26] I have also set out the objects of the Act in section 3:

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia's future economic prosperity and take into account Australia's international labour obligations; and

(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g) acknowledging the special circumstances of small and medium-sized businesses.”

[27] For completeness, I have outlined the following principles, which I consider appropriate, that have emerged from the case law:

•  there is no right or expectation that an enterprise agreement continues in perpetuity after its nominal expiry date; 16

•  there is nothing in the structure or content of the Act to suggest that its object (of providing a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians) is to be exclusively or primarily achieved by enterprise level collective bargaining; 17

•  there is nothing in sections 3 and 171 of the Act, when read harmoniously, that would suggest that the emphasis on promoting productivity (in section 3(a)) is primarily to be achieved through collective bargaining in good faith (in section 3(f) and section 171) rather than by other means, such as termination of an expired agreement; 18

•  the termination of an agreement that has passed its expiry date might better support good faith bargaining for an agreement that delivers productivity benefits at the enterprise level; 19

•  there is no presumption against terminating an enterprise agreement after the passing of its nominal expiry date; 20

•  there is no inherent inconsistency between terminating an enterprise agreement and bargaining subsequently in good faith; 21 and

•  the Act guarantees the continuation of the safety net, not the terms and conditions of employment contained in a nominally expired agreement. 22

[28] It is therefore salient, in the context of the Application, to bear in mind that the Act does not contemplate agreements operating in perpetuity. Parties to a nominally expired agreement may bargain for a new agreement using the various tools available under the Act. Alternatively, they may seek to bring an agreement to an end in accordance with the provisions of the Act. As was recognised in Aurizon, the context within which section 226 of the Act is to be construed includes:

•  the good faith bargaining requirements of the Act and the Commission’s capacity to make bargaining orders;

•  the capacity for employees to organise and engage in protected industrial action and an employer’s right to respond through employer response action; and

•  the process available under section 240 application. 23

[29] Having regard to section 226 of the Act, I must terminate the Agreement if it is not contrary to the public interest to do so and consider it appropriate to do so taking into account all the circumstances, including the views of the employees, the Applicant and the AEU and their circumstances, including the likely effect that termination will have on each of the parties.

Is termination contrary to the public interest?

[30] I will first address the question of whether I am satisfied that termination of the Agreement is ‘not contrary to the public interest’ (section 226(a)).

[31] The ‘public interest’ refers to matters that might affect the public as a whole, such as the achievement or otherwise of the object of the Act, employment levels, inflation and the maintenance of proper industrial standards.²⁴ The public interest is distinct in nature from the interests of the parties, though those interests may be simultaneously affected. The object of the Act, set out in section 3, is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians. The object is to be achieved, among other things, by ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions, and by achieving productivity and fairness through an emphasis on enterprise-level collective bargaining. Section 578 requires that in performing functions or exercising powers, the Commission must take this object into account.

[32] The Applicant submits that it is not contrary to the public interest to terminate the Agreement. It submits that following termination, any employees engaged to perform work by the Applicant previously covered by the Agreement would be covered by the Social, Community, Home Care and Disability Services Industry Award 2010 (the Award) and the National Employment Standards (NES), which constitute a guaranteed safety net of fair, relevant and enforceable minimum conditions of employment. 25

[33] Initially, the AEU made submissions that any reduction in quality of services would be contrary to the public interest.²⁶ This submission was not fully developed and was not pressed at the hearing. In its closing submissions, the AEU advances the position that the public interest is a “neutral” consideration. 27

[34] Section 226(a) does not require the Commission to be satisfied that the termination of an enterprise agreement is in the public interest. Instead it sets a lower requirement. The Commission must be satisfied that it is not contrary to the public interest to terminate the agreement. Having regard to all the circumstances, I cannot identify any considerations that would support a conclusion that terminating the Agreement would be contrary to the public interest. I am satisfied in the present case that it is not contrary to the public interest to terminate the Agreement. The first limb of section 226 is therefore satisfied.

Is it “appropriate” to terminate the Agreement?

[35] The second limb of section 226 requires me to consider whether it is “appropriate” to terminate the Agreement, taking into account all the circumstances, including the views of the employees, each employer and each employee organisation covered by the Agreement, and the circumstances of those employees, employers and organisations, including the likely effect that the termination will have on each of them.

[36] In coming to my decision, I have had regard to a joint document filed by the parties identifying 12 issues (the Issues) that the Commission ought consider in making its decision. The items identified are not presented in any particular order of importance and I have not attached any significance to the order in which they appear. These are as follows:²⁸

1. The views of the Applicant;

2. The views of the AEU;

3. The views of the employees;

4. The “likely effect” the termination of the Agreement will have on the Applicant;

5. Whether barriers to productivity favour the Agreement’s termination;

6. The likely effect of termination of the Agreement on the employees;

7. The significance (or not) of the emphasis on enterprise bargaining in section 3(f) of the Act;

8. The significance (or not) of the MEA being agreed to by other employers in the sector;

9. The significance of the fact that the nominal expiry date of the Agreement was on 30 June 2009 (a decade ago) and before the Award was made;

10. The significance of changed industry practices from the date the Agreement was made to the date the application is determined, particularly in relation to the shift in government funding;

11. The significance of the Applicant’s undertaking to grandfather entitlements until the end of 2020; and

12. If the Commission considers it appropriate to terminate the Agreement is terminated, whether the Commission should exercise its discretion under section 227 of the Act as to the date on which any termination comes into effect.

[37] For ease of reference, I have considered each matter in the context of the statutory requirements. It is worth noting the significant duplication and overlap of arguments advanced by each of the parties across the Issues. This is not intended to be a criticism of the parties but rather a contextual observation as to the complexity of the matter and the volume of the material that has been filed, which constituted hundreds of pages. Where appropriate, I have avoided duplicating arguments that are advanced in respect of multiple Issues. In coming to my overall conclusion, I have considered the submissions advanced by the parties, weighted them appropriately and balanced their significance as they apply to the Issues and my overall conclusion on whether to terminate the Agreement.

Section 226(b)(i) – the views of the employees, employer and each of the employee organisations covered by the agreement

Issue 1: the views of the Applicant which supports the application

[38] The Applicant, being the employer covered by the Agreement, is of the view that the Agreement should be terminated.²⁹ The Applicant submits that the Agreement is “antiquated” (referring in particular to a number of obsolete references in the Agreement to legislative bodies and statutory provisions ), was made at a time when the industry was vastly different from what it is today (referring in particular to the funding arrangements and the Applicant’s client base which it states is no longer limited to individuals with high level needs), contains ongoing requirements that mean it is simply not financially viable for the Applicant to keep trading and is “inflexible and prohibitive of productivity” (referring in particular to the differences between the Agreement and the Award).³⁰

[39] The AEU reject the Applicant’s submissions on this issue, disputing the suggestion that the Agreement’s age is in and of itself a relevant factor, that there are any significant differences between the Agreement and Award and that the Applicant is in a financially healthy position such that the making of the termination agreement is “pre-emptory”.

[40] To avoid repetition, I have discussed in detail the substance of the parties’ submissions as to this issue later in the decision.

Issue 2: the views of the AEU which opposes the application

[41] The AEU, being the only employee organisation covered by the Agreement,³¹ opposes the termination of the Agreement.³² It advances a number of propositions as justification for its opposition to the termination of the Agreement. Broadly, these include a petition of members showing that of a purported workforce of 150 to whom the agreement applies, 78 have signed a petition indicating opposition to the termination of the Agreement , the majority support determination application made by the AEU (the MSD), the bargaining dynamic (which it contends favours the maintenance of the “status quo”), the multi-enterprise agreement negotiated between the AEU and a number of disability service providers in Victoria (the MEA), the viable financial position of the Applicant and the loss of entitlements to employees which will flow from the termination of the Agreement.

[42] The Applicant rejects the AEU’s submissions on this issue.

[43] To avoid repetition, I have discussed in detail the substance of the parties’ submissions in relation to this issue later in the decision.

Issue 3: Views of the Employees

[44] There were four witness statements from employees covered by the Agreement expressing their view on the Application:

Three employees who support the Application

(1) Ms Meafou Aumau, a Hub Manager for the Applicant, stated that she “understand[s] the reasons why the application has been submitted” and considers the impact of the NDIS on the Applicant “unfortunate”. Ms Aumau notes that if the Agreement is not terminated the Applicant may need to consider redundancies and she is “keen” to retain her job with the Applicant. Ms Aumau has worked for the Applicant since 1999; 33

(2) Ms Lumtirije Taip, a Facilitator with the Applicant, said she was “grateful for the Applicant” supporting her and enabling her to be an “on and off worker” due to her family circumstances. Ms Taip is “happy” to be in line with “everyone else” regarding annual leave and personal leave entitlements. Ms Taip has worked for the Applicant since 1997; 34

(3) Ms Linda Agius, a Hub Manager for the Applicant, said that she fully understands the need for the termination of the Agreement and accepts it, noting that the reduction in annual leave and personal leave entitlements brings the Applicant in line with “most other industries” and is happy to support the Applicant moving forward. Ms Agius notes that if the Agreement is not terminated the Applicant may need to consider redundancies and she is “keen” to retain her job with the Applicant. Ms Agius has worked for the Applicant since 2007; 35 and

One employee who opposes the Application

(4) Ms Jessica Pinter, a Facilitator, said she opposes the termination of the Agreement. Ms Pinter expresses concerns over the potential impact of the loss of entitlements on staff and clients, a likely decrease in the quality of services brought on by the removal of the requirement on the Applicant to employ Certificate IV qualified Facilitators and the potential departure of staff in the event the Agreement is terminated. Ms Pinter works four days a week at the Applicant’s Altona centre and has been employed by the Applicant since 2010. 36

Applicant response to employee statements

[45] The Applicant advances the following contentions in respect of the witness statements of the employees:

(1) Ms Aumau, Ms Agius, and Ms Taip are all employees of the Applicant covered by the Agreement that gave “unequivocal, unchallenged, and supportive” evidence supporting the termination of the Agreement which must be taken into account and given its full weight; 37 and

(2) Ms Pinter is not a spokesperson for other employees, rightly conceding that she can only give evidence as to what she does or will do.³⁸ Therefore, her opinion about what other staff may have felt or done “cannot be taken into account” and there can be no finding that terminating the Agreement may result in staff resignations. 39

[46] I make the following observations as to the evidence of the employees in support referred to above. Ms Aumau, Ms Agius, and Ms Taip were not cross-examined at the hearing and as such their evidence is unchallenged. Having said that, it is difficult to draw a clear connection between the evidence that the employees are “keen” to retain their jobs and their view that the Agreement should be terminated. As such I afford the evidence limited weight.

[47] I have taken into account the evidence of Ms Pinter who was cross-examined at the hearing. I have considered Ms Pinter’s evidence further below and have given weight to Ms Pinter’s view that she opposes termination of the Agreement.

AEU response to employee statements – union petition

[48] While the AEU made no direct submissions as to the evidence summarised at paragraphs [44](1) to (3) above, it does submit the following:

(1) the majority of employees oppose the Agreement’s termination, with 78 of 150 employees covered by the Agreement signing a petition in opposition to the termination. There is no reason to conclude that the petition does not genuinely represent the majority of employees views and it would be an “error” to conclude the signatories acted on information that “lacked clarity” or did not fully understand the effect of the termination, as the Applicant suggested, when there was no challenge to the petition evidence. If the Applicant wished to challenge the petition evidence, these allegations ought to have been put to Mr Burke; 40

(2) the employees chose to sign the petition following a detailed explanation by the Applicant to the employees of the reasons for the making of the Application; 41

(3) the views of the “overwhelming majority” (being the 78 petition signatories) should be given greater weight than the “tiny minority” of the views of three employees; 42 and

(4) the reduction in entitlements for employees in “an environment of present financial security…[and] when Mambourin will not bargain for a replacement agreement” provides justification for the views of the employees. 43

Applicant’s submission – union petition

[49] The Applicant submits that there is no evidence before the Commission as to specific discussions had with staff, details of the information provided to them or the questions put to them when the petition was collated. The evidence only rises to the level of what is noted on the document, being “I am aware that Mambourin are currently applying to the Fair Work Commission (FWC) to terminate our current agreement” and that “by signing this position, [sic] I am indicating that I oppose the termination of our Collective Agreement by Mambourin Enterprises Ltd”.

[50] The Applicant states that given the relevance of the reason for the employees’ objection to the consideration as to the appropriateness of termination, in the absence of such knowledge the Commission may “harbour significant concerns that these views are premised upon information that may have lacked clarity, or may not have elucidated the extent of the likely effect the termination”. 44

[51] I accept the AEU’s contention that of a purported workforce of 150 employees to whom the Agreement applies, 78 have signed a petition indicating opposition to the termination of the Agreement. However, in my view that is not the end of the matter. In the absence of any detailed evidence from employees as to what information was given to the relevant employees at the time petition was signed and given that the question of appropriateness under section 226(b) involves not only a consideration of the views of the parties but also the reason for those views, 45 I attribute limited weight to the petition in my overall consideration as to the appropriateness of terminating the Agreement.

[52] Aside from the employee evidence referred to at paragraph [44] (1) to (3) above, there is no evidence before me as to the remaining 72 employees and I cannot assume that they support termination.

[53] On the basis of the above, the petition of employees and the views of Ms Pinter weigh against termination of the Agreement.

Section 226(b)(ii) – the circumstances of the employees, employers and employee organisations and the likely effect of the termination on them

Issue 4: the “likely effect” the termination will have on the Applicant

[54] At this juncture, it is worth noting that both parties sought to rely on submissions and documents which they referred to as “modelling”, comparing NDIS funding against the Applicant’s costs on a per hour, per employee basis with respect to “providing a day service program with a group of 4 clients with ‘standard needs’”. The “modelling” was intended to substantiate the respective position of the parties as to the “likely” effect of the termination of the Agreement. It is worth noting that the AEU initially recorded a surplus of $30.50 per hour for an employee assuming four participants with standard needs. The Applicant produced its own modelling showing a loss of $1.72. 46

[55] The parties spent a significant amount of their written and oral submissions disputing each other’s “modelling”. It appears the essence of the dispute relates to two matters. First, the actual rather than speculative overheads and operational costs of the Applicant. Ultimately, the AEU acknowledged that it was “still difficult to respond to overheads”. In that regard, it pointed to issues such as transport expenses which it claimed were “grossly exaggerated” and failed to take into account a recent Ministerial announcement relating to NDIS funding for transport costs. Secondly, the Applicant claims that it is “running at a loss of $530,258 per year” and will “cease trading within 5 years” unless the Agreement is terminated. I deal with this second contention further at paragraphs [57] to [59] below. I note that the AEU ultimately conceded that “the modelling exchanged” was of less significance on the basis of “2 important pieces of evidence:

(a) first, Mr Braddy’s evidence that Mambourin did not use the NDIS Cost Model for budgeting; and

(b) secondly, in actuality (whatever the hypothetical models) Mambourin was operating at a substantial surplus within its Board’s KPI range. In 2018- 2019 Mambourin achieved a surplus which approximated $395,000. In 2019 – 2020 Mambourin achieved a surplus of $334,000 (“of that order”) in the 7 months to January 2020. Mambourin only disclosed its actual 2019 – 2020 budgetary performance on day one of the hearing.” 47

[56] The Applicant described the surplus as “simply a positive position relative to budget YTD and is highly subject to timing issues( e.g. income received in advance of providing services) and unexpected circumstances occurring before year-end. There can be little doubt that the impact of the COVID-19 pandemic has significantly hit this moving “surplus” such that if Mr Braddy were being cross-examined today he would give a very different answer”. 48

[57] Two further matters warrant mentioning at this juncture. First, it is conceded by the AEU that the Applicant would gain a degree of cost savings from the termination of the Agreement. 49 Second, I note that the Applicant’s case has shifted from the position outlined at [55]. Mr Braddy concedes that, at least in part, some of his evidence as it relates to the Applicant’s financial position, refers to the NDIS component of the Applicant’s business rather than the business as a whole.50

[58] It is also worth noting that, despite claiming a loss of $530,258 annually, based on “high level analysis of the financial impact resulting from changes to funding” and claiming it will cease trading within 5 years unless the Agreement is terminated, Mr Braddy concedes that the Applicant is “currently in a secure and stable financial position”. 51

[59] Whilst the Applicant did not abandon its position as to the financial imperative of terminating the Agreement, as noted above, it did significantly shift its position and it did not adequately address Mr Braddy’s concession above.

[60] I have considered the submissions of the parties as to the effects of the Agreement and the NDIS funding model on the Applicant’s financial position later in the decision.

Applicant’s further submissions as to “likely” effect

[61] The Applicant makes the following further submissions as to the “likely” effect that termination of the Agreement will have on it:

(1) 97% of the Applicant’s funding is derived from the NDIS and as such any funding gap is an amount the Applicant is required to cover; 52

(2) the Agreement was negotiated and approved in “very different circumstances to how Mambourin operates today”; 53

(3) the NDIS funds leave entitlements based on the Award whereas the Agreement provides leave entitlements in excess of the Award such that the Applicant’s annual expenditure on leave entitlements alone is currently $1,392,936; 54

(4) the Agreement requires each employee receive four paid training days each year which is not funded by the NDIS, resulting in a total cost of $113,000 per year; 55

(5) each permanent employee spends approximately 1.5 hours per day performing paperwork (also known as non-contact hours) which is not funded by the NDIS, equating to $798,000 of unfunded time (later evidence appears to have revised this figure to $806,347) 56; 57

(6) the NDIS does not provide funding, in the case of customer absences, to the same degree as the previous state-based system, resulting in a gap in funding for 2018/2019 of $577,000;  58

(7) it is anticipated that termination of the Agreement will result in an immediate per annum saving of about $341,000 ($228,000 in relation to leave entitlements and $113,000 in mandatory training days). The anticipated savings ensure the Applicant’s “viability…into the future”; 59

(8) although employees use an average of 10 days of personal leave per year, the Applicant is obligated to accrue 15 days per year for those covered by the Agreement regardless of the leave used and it must remain on the Applicant’s balance sheet; 60 and

(9) having the Applicant operate in accordance with the Award will greatly simplify the currently complex formulae by which it is to pay its staff and allow for greater flexibility in its workforce, in furtherance of the objects of the Act. 61

AEU’s response

[62] The AEU advanced the following submissions:

(1) the AEU concedes the following cost savings to the Applicant in the event that the Agreement is terminated: 62

•  $230,000 approximately annually due to a reduction in annual leave;

•  $85,000 approximately due to the absence of professional training day obligations;

•  $806,347, based on the Applicant’s costing of non-face-to-face time, if, operationally, the services can be provided with less non-contact time;

(2) however, it also notes: 63

•  that providing quality service requires non-contact time;

•  the Applicant currently makes available, with respect to non-contact hours, “more time than the Agreement mandates: 1.5 hours versus 1 hour”, which “appears” to be potential saving of 33% and any barrier to productivity emerging from this issue is not linked to the Agreement;

•  the Applicant is in the early stages of development of its plans to increase facilitators’ contact hours and reduce non-contact time; and

•  the MEA which makes no prescription as to minimum non-contact hours.

(3) the reduction in personal leave entitlements, from 15 days under the Agreement to 10 days under the NES, results in a limited cost saving given Mr Braddy’s concession that employees used, on average, 10 days personal leave per year.

[63] I have taken into account the submissions of the parties and noted, in particular, the concession of the AEU that the Applicant will achieve cost savings as a consequence of the termination of the Agreement. I have given weight to the Applicant’s submission that it will receive an immediate, annual financial benefit and anticipated savings into the future.

[64] I have taken into account the AEU’s submission that the Applicant is currently under utilising its opportunity in relation to non-contact hours amounting to approximately 30 minutes per day. I accept that the Applicant may be currently under utilising its opportunity in relation to this issue but ultimately, I am not persuaded this detracts from cost savings and the opportunity for future cost savings which will result by virtue of termination of the Agreement.

[65] I accept that there is a cost saving to the Applicant in the event that the Agreement is terminated of $806,000 on account of removal of the obligation for non-face to face to services, $230,000 on account of annual leave reduction and $85,000 on account of removal professional training days. Further, I accept that personal leave remains an item on the Applicant’s balance sheet regardless of the amount used by employees. I note that on any view these savings are substantial. This weighs in favour of termination.

Issue 5: Whether barriers to productivity favour the Agreement’s termination

[66] The Applicant submits that the Agreement is “inflexible” and an “impediment to productivity”, particularly when compared to the flexibility provided under the Award. 64 The Applicant advances two main points in support of the submission. First, that the Agreement prohibits it from employing any individual to work without “close supervision” unless they hold a Certificate IV qualification and second, that the Agreement requires it to shut down its business four times per year for training and program development purposes.65 The Applicant states that the obligation causes significant impediment as it results in “enterprise-wide shut-downs four times per year for training and program development purposes”.66

[67] The AEU rejects the Applicant’s contention and submits as follows:

(1) reducing costs is not synonymous with increasing productivity; 67

(2) there is no material flexibility and/or productivity difference between the classification structure in the Agreement and the Award as they both mandate “supervision” at the relevant classification;  68

(3) the NDIS Cost Model is appropriately premised on an Award base pay rate, assuming a Level 2 classification and s suitably qualified employee. The NDIS Cost Model does not intend that unqualified individuals be employed to provide these “important services”;  69

(4) the Agreement’s scope extends only to instructors/facilitators as such those employees who are not facilitators are not covered by the Agreement and the Applicant can pursue a “whole gamut of new, potential customers” under the NDIS and consequently productivity is not impeded; 70 and

(5) a modest cost saving can be gained on professional development if the Agreement is terminated but this cost saving is not synonymous with productivity. The removal of a requirement to provide four days professional development to employees is not a persuasive productivity/flexibility argument, it is a mere cost saving, and a step which must reduce the quality of services the Applicant provides. 71

[68] I have considered the submissions of the parties and find the following:

(1) I am satisfied that the funding for services provided by the Applicant has changed since the Agreement was created. I note in particular that funding is no longer limited to those with “high-needs”. Both Mr Braddy and Ms Pinter have given evidence that “those living with disabilities who qualified for funded care, at least in some instances, do not always require high level assistance”. In other words, the landscape has changed such that individuals living with disabilities who qualify for funding are not always “high-needs”. Consequently, these individuals can be appropriately cared for by a “competent adult”. The change in industry landscape means that the Applicant can now pursue a range of services that were previously unfunded;

(2) the Applicant points to restrictions in the Agreement as an impediment to the pursuit of a “whole gamut of new potential customers”. The AEU disagrees and submits that there is no material “productivity/flexibility” difference between the terms of the Agreement and the Award. I agree with the Applicant that Schedule B of the Award contains classification definitions, more akin to descriptors of indicative tasks or characteristics for a Level 1 employee. In contrast, the Agreement terms mandate the requirement for a Band I instructor who undertakes duties that require “very limited skills” to perform that work “under close supervision”. That said, even if the distinction between the Agreement and the Award is not quite at the level contended by the Applicant, I am satisfied that the specific wording of the Award is less restrictive than the Agreement;

(3) I have considered the AEU’s submission that the Applicant is able to employ unqualified “staff” outside of the Agreement. I do not accept the merit of this submission. I agree with the Applicant that the definition of Instructor under the Agreement is very broad, ranging from those who “provide ongoing program support and skills training to assist persons with a disability in a day program…through to Assistant Program Managers”; 72 and

(4) as to the AEU’s proposition that the NDIS model assumes suitably qualified employees be employed to provide these “important services”, it is unclear to me how this submission relates to the Applicant’s position that the Agreement imposes productivity or flexibility barriers that weigh in favour of the termination of the Agreement. To the extent that the AEU submits that the removal of the professional development days “must” reduce the quality of the services provided by the Applicant, I do not agree that this outcome necessarily follows. As such, I have given the submission little weight.

[69] I have given weight to the second aspect of productivity improvement posited by the Applicant in support of termination of the Agreement relating to the removal of the requirement to provide employees with four days of paid professional development. I note that the undertaking to provide one day of training partially ameliorates the AEU’s concerns.

[70] I have given significant weight to the evidence of Mr Braddy and Ms Pinter that those living with disabilities who qualify for funded care, at least in some instances, do not require a high level of assistance and can be appropriately cared for by “any competent adult”. 73 In this regard, Mr Braddy states that “there is a whole new gamut of customers that can be attracted to the service if we have the flexibility to do so”.

[71] On the basis of the above, I consider that termination of the Agreement will result in greater flexibility and productivity for the Applicant. I have given significant weight to these matters in coming to this decision. This weighs in favour of finding that it is appropriate to terminate the Agreement.

Issue 6: Circumstances and likely effect on employees

[72] During the course of the proceedings, the Applicant offered an undertaking the effect of which is to preserve the entitlements of the employees with respect to annual leave, personal leave and professional development days (to a limited degree) until 1 December 2020 only. Post termination of the Agreement, the employees will be covered by the NES and the Award. The Applicant urges the Commission to consider the undertaking and give it significant weight. 74

[73] The AEU acknowledges the undertaking “ameliorates the reduction in conditions by at least delaying the operative date of the reduction”. 75 That said, it maintains that that low-paid workers will experience a “real and substantial negative impact” in the form of losing entitlements superior to the Award if the Agreement is terminated, most significantly losing “over and above” conditions as to annual leave, personal leave, paid parental leave and professional development.76 In addition to those specific entitlements, Ms Gillespie for the AEU provided a table outlining the differences between the Agreement and the Award and the purported impact of those differences on employees.77 Further, the AEU points to the comments of Gostencnik DP in Esso that the potential loss of employees’ conditions had to be given “not insignificant weight”.78

[74] I accept that termination of Agreement will adversely impact the entitlements of the employees and I agree with the comments of Gostencnik DP in Esso that the “potential effect on employees must be given some not insignificant weight. Not every termination… has an adverse impact on employees… many cases…have the opposite effect…” and the amount of weight to be given “will depend upon the circumstances of a given case”. 79

[75] I have considered the submissions of the parties and given weight to the undertaking provided by the Applicant. I have also taken into account loss of entitlements to employees that will result from termination of the Agreement. I have considered all of the matters in the table referred to above and find that the material impact on employee entitlements relates to annual leave, personal leave, parental leave and professional development. I agree with the AEU that these represent a detrimental change in conditions of employment and entitlements, such that this weighs against termination, however given the other matters considered elsewhere in my decision, this does not necessarily preclude the termination of the Agreement.

Circumstances and likely impact on AEU

[76] As to the likely impact on the AEU, the Applicant submitted that the termination of the Agreement will have no impact on the AEU. 80 The AEU make no specific submissions on this issue. On the basis of the material before me, it is my view that the termination of the Agreement is not likely to have any significant impact on the AEU. I consider this a neutral factor

Issue 7: The significance (or not) of the emphasis on enterprise-level bargaining set out in section 3(f) of the Act

[77] The Applicant advances the following with respect to this issue:

(1) that the various objects of the Act are to be given equal weight; 81

(2) there is “no bargaining dynamic between the parties to consider”; 82

(3) the “hypothetical” bargaining dynamic should not render it inappropriate to terminate the Agreement and it would be “novel” to hold that filing of a majority support determination application in response to an application under section 225 of the Act would be sufficient to render termination inappropriate. To adopt such a position would “readjust the jurisprudence on this area” and, undoubtedly, result in every union wishing to oppose a termination application immediately filing an MSD application which is not appropriate; 83

(4) the “uncontroversial” chronology shows that the AEU was aware that the Agreement expired in June 2009, but did not seek to bargain a replacement agreement with the Applicant prior to this expiry, or even over the following decade, only requesting to bargain in response to the Applicant notifying its staff of its intention to terminate the Agreement on 13 August 2019; 84

(5) there is no evidentiary basis (or authority) that the ‘status quo’ would create an emphasis on collective bargaining and, in these circumstances, the ‘status quo’ has resulted in the Agreement remaining in operation for more than a decade after its nominal expiry during which time the existence of the Agreement has provided no incentive for either party to bargain. Therefore, allowing the Agreement to remain in force would have a negative effect on bargaining; 85

(6) the AEU has been “happy” to allow the “current arrangement” to remain in place for over a decade while the ERO applied; and

(7) the termination of the Agreement will not impact on the bargaining position of the AEU or its members as they still have the full suite of options under the Act available to them (some of which the AEU has already exercised) and terminating the Agreement will not change this. 86

[78] The AEU submits that:

(1) the status quo should remain while the parties first pursue, by way of good faith bargaining, whether a replacement agreement can be achieved. 87 To that end, section 3(f) must “be given work to do”, it is an aid to construction not an “exercise in apologetics” and helps give “practical content” to an abstract concept such as “appropriate”;88

(2) until that good faith bargaining process is pursued any application is “pre-emptory” and that is the “cooperative” process envisaged in section 3 with its emphasis on enterprise level collective bargaining; 89

(3) a significant aspect of whether it is appropriate to terminate the Agreement is whether termination will better support good faith bargaining in the replacement of an agreement; 90

(4) notwithstanding the Applicant’s refusal to bargain there can be (and is) a bargaining dynamic. It is a one-sided bargaining dynamic, the AEU wishes to bargain; 91

(5) a replacement agreement was sought as soon as the Applicant opted out of the MEA process, which the Applicant was involved in until September 2019. The AEU acted promptly and consistently after the Applicant’s August 2019 slideshow indicated it was not going to be part of the MEA and sought a standalone replacement agreement. 92

(6) the modern award “safety net” is a baseline protection if, by good faith bargaining, the parties cannot achieve a replacement agreement but the parties are not yet at that point; 93

(7) an employer’s concern as to its future financial position is part of the balancing exercise and is not everything, particularly when it is operating at surpluses and wants to see a significant reduction of long-standing employee entitlements; 94

(8) it is less appropriate to terminate the Agreement when one party refuses even to start collective bargaining at the enterprise level, than in those cases where bargaining has been pursued and become bogged down; 95

(9) the authorities, such as Aurizon, Peabody and Esso, looked not only at the existing Agreement in isolation but, as the statute requires, took into account “all the circumstances” and “looked forward”. The “appropriateness of terminating the Agreement cannot be separated from what termination means for the prospects of facilitating a replacement agreement”; 96

(10) the MSD is not made to stymie an otherwise valid application but rather because the AEU’s members want to bargain for a replacement agreement and the MSD is the legislative mechanism available to employees confronted with an employer who refuses to bargain; 97 and

(11) it has a strong contemporaneous record of industrially realistic bargaining in the sector and the natural inference is that it will act in accordance with the petitioners who support the MSD and that it has an incentive to bargain by reason of the end of the ERO.  98 The Applicant is explicit that if the Agreement is terminated it does not intend to bargain, wanting the safety net to apply. Therefore, dismissing the Application (maintaining the status quo) will better support good faith bargaining and is more likely to facilitate a replacement agreement as if the Award applies, low paid employees will have nothing to bargain and bargaining will be one-sided.99

[79] I have considered the submission of the parties. In my view, it does not follow that termination of the Agreement will undermine collective bargaining. In fact, the continued operation of the Agreement has not promoted bargaining for many years. I accept that the termination of the Agreement might remove one incentive to bargain. That said, I am satisfied that the AEU has at its disposal the “remedial and coercive weaponry that the scheme allows” 100 (some of which they have already begun to utilise in the MSD). On the basis of the above, I am satisfied that good faith collective bargaining between the parties will not be undermined. I find this a neutral factor.

Issue 8: The significance (or not) of the Disability MEA being agreed to by other employers in the sector

[80] Broadly, the AEU advances the following positions as to the relevance of the MEA to the Application: 101

(1) it is an external marker of the AEU achieving a new collective agreement via good faith bargaining; 102

(2) the Applicant’s case is that the inadequacy of NDIS funding necessitates its application but each of the 27 employers party to the MEA operate in the same sector and rely on NDIS funding in the same way. It points to the position of 27 entities who can provide conditions in accordance with the MEA; 103 and

(3) at least two of the Applicant’s major concerns (non-face-to-face hours and professional training days) are addressed by the MEA which makes no prescription as to those issues. 104

[81] In support of its position, the Applicant points to the following:

(1) it is impossible to rely on the MEA as evidence of the financial position of the 27 entities that are party to the MEA. It follows that the MEA’s existence cannot be relied on as to the Applicant’s financial position; 105

(2) the MEA highlights the “unsatisfactory” NDIS funding, which the Applicant states is evidenced by Ms Gillespie’s concession that the AEU was at least partially motivated to commence negotiations for the MEA because of the impending rollout of the NDIS in Victoria; 106

(3) clause 3.1(c) of the MEA states “We acknowledge that the challenges posed by the NDIS include the failure of funding levels to reflect realistic costs for quality service and employment conditions and the potential to fragment work and undermine predictability of hours”; 107

(4) the inconsistent position of the AEU as to the significance of the MEA to both the Application and future bargaining with the Applicant. To that end, it points to the inconsistent evidence of Ms Gillespie on this point; 108 and

(5) the existence of the MEA is irrelevant to finding whether it is appropriate to terminate the Agreement. 109

[82] The submissions that the MEA serves as an “external marker” of the AEU’s ability to achieve a new agreement via good faith bargaining and that the MEA addresses two of the Applicant’s major concerns does, in my view, little to advance the AEU’s position as to the appropriateness of the termination of the Agreement. In my view, the limited evidence before me as to the circumstances of the 27 entities and the negotiations between them and the AEU make any meaningful comparisons with the Applicant’s position unreliable. In any event, what the other employers agreed to is irrelevant to the issue of whether it is appropriate to terminate the Agreement. It does not follow, in my view, that just because other employers agreed to such terms that the Applicant should also agree. As such I have given little weight to the submissions of the AEU as to the relevance of the MEA to the appropriateness of the termination of the Agreement. Ultimately, I consider it a neutral factor.

Issue 9: the significance of the nominal expiry date of the Agreement being on 30 June 2009 and before the Award was made

[83] The Applicant contends that the Commission should attach “significant weight” to the fact that the Agreement expired almost 11 years ago and that there is no policy or statutory purpose served by allowing agreements to remain in operation for such a long period after expiry. The Applicant further contends that the “antiquity” of the Agreement is demonstrated by references within it to bodies and statutes that no longer exist and the only thing preventing the Agreement from being a “zombie” agreement is the operation of the ERO. Once this expires, the Agreement will cease having any relevance. 110

[84] The AEU contends that:

(1) the Agreement is not a “zombie” agreement as it has operative terms (such as in relation to annual and personal leave); 111 and

(2) the Agreement’s age does not mean it must be terminated urgently and cannot appropriately remain as the “status quo” whilst the parties’ bargain in good faith for a replacement agreement.¹¹²

[85] I accept the AEU’s submission that the age of the Agreement does not, in and of itself, mean that the Agreement must be “urgently” terminated. That said, there is no meaningful dispute that the Agreement is almost 11 years passed its nominal expiry. Nor is it in dispute that it contains references to outdated legislation such as the Workplace Relations Act 1996 (Cth), bodies that do not exist such as the Australian Industrial Relations Commission and clauses that are no longer operative such as the Rates of Pay contained in clause 15 of the Agreement. 113 It is also uncontroversial that upon expiration of the ERO the Agreement will have limited significance and that the Agreement expired before the Award was made.

[86] It is worth noting that a further difference between the Applicant’s current practices and the terms of the Agreement relates to the Applicant’s annual shutdown. I note that Ms Gillespie concedes that the more beneficial annual leave entitlements in the Agreement were intended to ensure that staff did not forego pay during the Applicant’s annual six week shut down and that this shutdown no longer occurs. 114

[87] In those circumstances I give weight to the significance of the nominal expiry date of the Agreement being 30 June 2009. This weighs in favour of terminating the Agreement.

Issue 10: the significance of changed industry practices from the date the agreement was made to the date the application is determined

[88] The Applicant relies the following:

(1) at the time the Agreement was made, the disability services industry operated in a manner that is fundamentally different to today; 115

(2) funding for disability support services at the time the Agreement was made was a matter for that states, but has since been replaced by the NDIS which does not provide the same level of funding despite funding a broader range of services; 116

(3) the Agreement provides for “no increase in [the Applicant’s] productivity”; 117

(4) the contents of the Award are made in accordance with the modern award objective in the Act and the leave entitlements under the Award are those provided by the NES. These are the minimum standards that have been enacted by Parliament to apply to all national system employees in Australia; 118 and

(5) the Agreement is a “union collective agreement” within the meaning of section 328 of the Workplace Relations Act 1996 (Cth) which involved a system of approval, including the no disadvantage test, that was “complex”, “heavily bureaucratic” and employed methodology criticised as “inherently inaccurate”. This approach was deliberately removed via the enactment of the Act which introduced a new mechanism for collective bargaining. 119

[89] In response, the AEU submits the following:

(1) the Applicant’s reliance on Peabody for the proposition that industry changes should be given significant weight be viewed in light of Hamberger SDP’s comments as to the importance of ongoing attempts at good faith bargaining and the facilitation of a new enterprise agreement as significant factors in reaching his decision; 120

(2) the Applicant refers to work, funding and statutory changes but there has not been a change in the substance of the work performed by instructors despite being “re-badged” facilitators; 121

(3) the change in funding source (state government to NDIS) seems less significant than any change in funding level. Further, any financial challenges created by the level of NDIS funding are insufficient to mean that this pre-emptory application ought to be granted in circumstances of the Applicant’s current surpluses;  122 and

(4) as to statutory changes, many agreements made under predecessor legislation continue to apply under the Act by operation of transitional statutory provisions and the parties ought to now bargain for a replacement agreement. 123

[90] I have given significant weight to the Applicant’s submission that the Agreement was made at a time when the disability services industry operated in a fundamentally different manner. In particular, I note that the introduction of the NDIS has led to a change in funding as it relates to the services provided by the Applicant. I have discussed those changes earlier in my decision, in particular as they relate to the Applicant providing services to a new market of potential customers. I have concluded previously that the termination of the Agreement will facilitate the Applicant providing service this new market of potential clients.

[91] The Applicant points to the funding gap as justification for the termination of the Agreement which it says will provide substantial cost savings. The AEU points to the surplus of the Applicant for the 2019/20 period and submits in essence that given that surplus, any funding gap is insufficient to justify the termination of the Agreement.

[92] I am satisfied that there appears to be a gap between the actual costs of the Applicant in providing services and the funding provided by the NDIS. On the material before me, I am unable to make a specific finding as to the exact value of that gap. In my view, as discussed later in this decision, the amount of any NDIS funding gap is not necessarily determinative of the matter. I discuss this aspect of of the Applicant’s submission elsewhere in my decision.

[93] I have given little weight to the fact the Agreement was created under the previous statutory regime, as this aspect of the Applicant’s submission is not fully developed and it is unclear to me how a change in statutory regime, in it of itself, renders it “appropriate” (or not) to terminate the Agreement.

[94] Overall on the basis of the above, I am satisfied that the change in industry practices weighs in favour of terminating the Agreement.

Issue 11: the significance of the Applicant’s undertaking to grandfather entitlements until the end of 2020 Undertaking

[95] As mentioned at paragraph [72] above, during the course of these proceedings the Applicant offered an undertaking as follows:¹²⁴

(1) all current wages will be maintained for existing staff (and relevantly increased pursuant to the ERO);

(2) all leave entitlements (annual leave, personal leave, long service leave and parental leave) for existing employees will be grandfathered at the date of termination of the Agreement until the final ERO payment in December 2020; and

(3) all staff will be required to participate in one professional development/training day each calendar year.

[96] The Applicant contends that the undertaking should be given “significant weight” as it alleviates any immediate negative impact on existing staff and was one of the five “limbs of objection” raised by the AEU in opposition to the Application; 125

[97] The AEU “welcomes” the undertaking which “ameliorates” the reduction in conditions by at least delaying the operative date of reduction but restates its primary position that the Application is premature. 126

[98] On the basis of the submissions of the parties, I have given the Applicant’s undertaking weight. This weighs in favour of terminating the Agreement.

Impact of COVID-19

[99] The parties filed submissions in this matter between April and May 2020, and made very brief submissions as to the impact of COVID-19 on the Application. In summary, the Applicant submitted that the level of absenteeism from the Applicant’s participants will be significantly higher than in previous years which will have a direct economic impact on the Applicant. 127 The AEU conceded that, at the time of filling the submissions, the Applicant had closes all of its hubs and pointed to the good faith bargaining object of the Act contained in section 3(f) as a way of resolving the issues between the parties at an enterprise level.128

[100] Given the limited material before me, I am unable to make a specific finding as to the link between the COVID-19 crisis and the termination of the Agreement. I accept that, given the current climate in Victoria, it is not unreasonable to assume the hubs remain closed as at the time of the writing of this decision and that the pandemic “casts a large shadow over the current economic environment”. 129 On the basis of the narrow material before me, I have given the impact of COVID-19 limited weight.

Issue 12: If termination should occur, should the discretion under section 227 as to the date of effect

[101] If the Commission is inclined to terminate the Agreement, the AEU contends that it is appropriate, pursuant to section 227 of the Act, that the Commission’s discretion as to the date of termination be exercised such that the termination operates from 31 December 2020. 130 The AEU submits that such a delay is justified in order to support good faith bargaining by permitting the parties time to negotiate a replacement agreement addressing concerns from all parties and alleviate the negative impact of a loss of conditions on employees.131

[102] In relation to this issue, the Applicant contends that there is “no reason to delay termination”. The Applicant advances the followings positions in support of this contention:

(1) while section 227 allows the Commission to specify a date when such termination is to operate, the statutory default is that termination should take place immediately, particularly in times of severe health and economic uncertainty; 132 and

(2) terminating the Agreement will provide “immediate release” for the Applicant against barriers to productivity and flexibility, whilst the undertaking “eliminates” any immediate negative impact on employees. 133

[103] I deal with this issue later in my decision.

Consideration

Views of the parties

[104] The view of the Applicant, is that the Agreement should be terminated. I have taken into account the circumstances of the Applicant outlined in its submissions and the witness statements of Mr Braddy.

[105] As to the views and circumstances of the employees, three employees gave evidence in support of the Application and I have taken their views into account but given them limited weight as discussed at paragraph [46] above. One employee, Ms Pinter, gives evidence opposing the termination of the Agreement. She does so principally on the basis of concerns over the potential impact of loss of entitlements and what she described as a “likely decrease in the quality of services” which she says may result in the event that the Agreement is terminated. As stated at paragraph [47] above, I have given weight to Ms Pinter’s objection to the termination of the Agreement but am not prepared to draw the inference that a termination would necessarily result in a decrease in the quality of services provide by the Applicant.

[106] I have considered the potential impact of the loss of entitlements on employees and have given them “not insignificant weight”. However, in the circumstances of this case, I consider that the loss of employee entitlements does not render it inappropriate to terminate the Agreement.

[107] As to the views and circumstances of the AEU, I refer to my comments at paragraph [76] that there is no significant impact on the AEU. As to the AEU’s contention that it would be inappropriate to terminate the Agreement because 78 of 150 employees of the Applicant signed a petition in opposition to the termination of the Agreement, I refer to my observations at paragraph [51] above and note that I attribute limited weight to the petition in determining the “appropriateness” of the termination of the Agreement.

Financial Position

[108] The Applicant’s case is that it is necessary to terminate the Agreement to safeguard its financial viability. In coming to my conclusion, I have considered the shift in the Applicant’s submission during the course of the proceeding, as referred to at paragraphs [55] to [59] above. I have taken into account the evidence of Mr Braddy who during cross-examination conceded that the Applicant was on track to produce a surplus and to meet the board’s budgetary targets, and that the Applicant is currently “in a secure and stable financial position” The AEU submits that the Applicant is not currently experiencing financial distress and is merely seeking to improve its current financial position. 134

[109] As to the Applicant’s projection that it will “cease trading in the next 5 years”, in addition to those matters referred to at paragraphs [55] to [61], the AEU submits that “the unknowns over such a long horizon are too numerous” to form a judgment that the Applicant “may cease trading within 5 years”. 135

[110] The Applicant also points to the challenges that the NDIS has posed to businesses in the industry, including the Applicant, and notes that clause 3.1(c) of the MEA appears to acknowledge these challenges, including “the failure of funding levels to reflect realistic costs…”. Further, the Applicant points to comments from the NDIA itself that “any additional benefits offered by EBAs over the Award have been voluntarily agreed to by providers and are often offset by productivity gains” and in those circumstances the Applicant submits that “the NDIS is providing insufficient funding for an unproductive agreement”. 136

[111] The AEU sought to advance a proposition that “significant changes to NDIS prices and policies…should improve Mambourin’s financial outlook”. 137 Mr Farthing, for the AEU, stated that “It is difficult to predict what will happen in relations to NDIS pricing in the next five years...” and “the NDIS remains a dynamic scheme with continuous changes to its operating rules and structures”.138

[112] I have considered the submissions of the parties, including those matters discussed at [54] and [64] above earlier in the decision. As to the Applicant’s current financial position, I have given significant weight to the concession of Mr Braddy noted paragraph [57] above.

[113] With respect to the Applicant’s projection that it will cease to exist in five years, I agree with the AEU that the uncertainties over such a long period are “too numerous” to form such a judgment. It is uncontroversial that the NDIS funding arrangements have resulted in challenges and uncertainties to the industry, including the Applicant. Further, I find that any predictions as to future increases or reductions in NDIS funding are speculative.

[114] That said, I do not consider the Applicant’s current profitability should weigh against termination of the Agreement and do not see this as a determinative barrier to the termination of the Agreement, nor do I think it necessary that the Applicant illustrate to the Commission that it will cease trading within the next five years in order to justify the termination of the Agreement.

[115] I acknowledge that the specific link between the Agreement and the NDIS arrangements and any specific provisions in the agreement that are ill-suited to the NDIS’s new framework have not been particularised with a great deal of specificity and in that sense are somewhat illusive. Despite there being no clear provisions antithetical to the NDIS there are provisions in the Agreement that are more restrictive and that the employer points to as an impost on efficiency.

[116] I have concluded that there is a difference between the entry level employee requirements in the Agreement and the Award. I note that the difference may not be substantial and that the changes may ultimately provide small efficiency gains. That said, I am satisfied that the wording of the Award allows the Applicant greater flexibility in conducting its business.

[117] As pointed out by the AEU, it may well be that some of the Applicant’s contentions as to productivity gains are more akin to cost savings. If so, that does not alter the position as it relates to the termination of the Agreement. An employer is permitted to seek cost savings and in so doing is not automatically precluded from terminating an agreement.

[118] As stated above, given the narrow material before me, I have also given limited weight to the impact on the parties of the ongoing serious community crisis stemming from COVID-19.

[119] I am not swayed by the AEU’s submission that, in essence, bargaining will provide relief from the ongoing effect of the COVID-19 crisis.

[120] As stated above, there is no requirement on the Applicant to show a dire and parlous financial position. The Applicant has established that it is operating in a generally challenging environment and that it has undergone a serious degree of change since the Agreement came into force. It has established that some cost savings will be made in the form of leave and professional development days. As stated earlier, I am unable to make a specific finding as to the value of the NDIS funding gap. In my view, that does not necessarily bear on the point that the Applicant is seeking to do what it can to improve its position and that there is nothing inherently wrong with it taking that approach.

[121] The Applicant points to a potential saving of approximately $1.1 million dollars annually, the restrictive practices in the Agreement that I have referred to earlier and the removal of the requirement for four professional development days under the Agreement. These matters all favour the termination of the Agreement.

Age of Agreement

[122] The Agreement certainly has the characteristics of being outdated given the many references within it to legislation that no longer exits and terms that have been replaced or are no longer operative. The AEU is correct to point out that the age of the Agreement is not in and of itself reason for its termination. It is correct to point out that there are other agreements that exist and continue to be relevant despite being many years past their nominal expiry date. In this case the age of the Agreement is but one factor to weigh in the balancing exercise.

Productivity

[123] The Applicant submits that productivity and efficiency gains would flow from the termination of the Agreement by the removal of restrictive practices. I have considered at paragraphs [66] and [67] the parties’ submissions as to this issue. I disagree with the AEU that there will be “no productivity benefits by terminating the Agreement, merely some cost savings”. 139 On the material before me, I am satisfied that the termination of the Agreement will result in productivity and efficiency gains for the Applicant. I consider that this matter carries significant weight in favour of termination of the Agreement.

Bargaining Position

[124] The respective bargaining position of the parties has featured prominently in the material before me. In essence, the Applicant submits that there is currently “no bargaining dynamic for the parties to consider”. 140 In those circumstances it submits that the case before the Commission is to be distinguished from cases referred to by the AEU such as Aurizon, Peabody and Esso where the parties had engaged in “difficult” and “stagnated” bargaining over a long period of time prior to an application to terminate being made to the Commission. In the case where the parties have never bargained, it contends that the Commission should consider the impact on collective bargaining as a neutral consideration.141

[125] The AEU points to particular objects of the Act as supporting its submission that the Application has been made on a “pre-emptory basis” and that the “status quo is more likely to facilitate the making of a replacement agreement than the granting of the application”. 142 I understand the AEU to also contend that terminating the Agreement may adversely affect its members bargaining position by reason of the changing base line from which negotiations commence.143

[126] It is not in contest that effective bargaining between the parties has been virtually non-existent. The only evidence before me relates to limited participation by the Applicant in the early stages of the MEA negotiation process and an exchange of correspondence between the parties subsequent to the announcement of the Applicant’s intention to terminate the Agreement. It is fair to say that exchanges of correspondence amount to no more than an indication by the AEU that it wished to bargain and the Applicant’s refusal to do so.

[127] I have taken into account the submissions of the parties, the granting of the MSD 144 and have considered the various objects of the Act. In the circumstances, it is difficult to see how the maintenance of the “status quo” is more likely to facilitate the making of a new agreement and align with the objects of the Act.

[128] It is indisputable that the Agreement has been in place for over 11 years and that there has been limited bargaining between the parties for the making of a replacement agreement. The notion that the Application is “pre-emptory” appears to rest, in essence, on the foundation that good faith bargaining must take place prior to such an application being made. There is no evidentiary or legal basis to conclude that such a requirement exists. I also note that the AEU posits the view that an extensive history of unsuccessful bargaining weighs in favour of terminating an agreement and that is not the case in the matter before me. In my view, it does not follow that the absence of such an extensive history would necessarily weigh against terminating an agreement. In coming to my decision I have also taken into account the submissions of the parties as to the MEA, referred to earlier at paragraphs [80] and [82], and do not accept the proposition that the negotiations between the AEU and 27 entities has any bearing as to the bargaining dynamic as between the Applicant and the AEU.

[129] I have also given weight to the submission that effected employees will, as the Applicant contends, “have the full suite of options under the FW Act available to them” 145 some of which they have already begun to utilise in the form of the MSD. In the circumstances before me, I adopt the observations of Gostencnik DP in Esso that “In the normal course of events, the termination of an enterprise agreement after its nominal expiry date will leave the bargaining parties with all of the available remedial and coercive weaponry that the scheme allows”.146

[130] The AEU certainly raises some points of significance that I have considered. As in many cases, the termination of the Agreement is going to have an adverse effect on employees. This case is no exception and the employees are going to lose entitlements, particularly in the form of annual leave, personal leave, parental leave and entitlement to four professional development days per year. The AEU is correct to point out the seriousness of those matters. That said, the Agreement is 11 years old and has limited operative components. The undertaking provided by the employer, at least in part ameliorates the adverse effects of the termination in the short term. The Applicant has evidenced a clear intention to conduct its business without the constraints imposed by the terms of the Agreement. It has to this point refused to bargain for a new agreement. To the extent that the AEU suggests that the status quo be preserved as the employer will otherwise have no incentive to bargain, I do not accept the proposition advanced. It is not inconsistent with the objects of the Act and in any event in this case, given the recent majority support determination, the Applicant is now required to bargain in good faith.

[131] For the reasons above, in the circumstances before me, the bargaining between the parties is a neutral consideration.

When should the termination come into effect?

[132] The AEU, in my view, understandably requests that the termination of the Agreement be delayed until 31 December 2020. I agree that some time is reasonable in the present circumstances. I recognise that the termination of the Agreement will have an adverse impact on the working world of the employees. It is not uncommon for an employer to seek to delay the operation of a termination of an agreement to enable it to make plans for and make adjustments for working under an Award. In this case the employer asks that the Agreement is terminated with immediate effect. In my view, the employees need time to adjust to the new arrangements, particularly in light of the changes that will apply to annual leave. In those circumstances, I consider it appropriate to exercise my discretion under section 227 of the Act to give effect to decision to the terminate the agreement from 6 November 2020, some 3 months from the date of this decision.

Conclusion

[133] For these reasons set out above, I have found that there are circumstances that weigh for and against it being appropriate to terminate the Agreement. For completeness, I note there two neutral considerations.

[134] For the reasons set out above, I have found that it is not contrary to the public interest to terminate the Agreement. Taking into account the views of employees, the Applicant and the AEU, their respective circumstances and “likely impact” of terminating the Agreement, I consider that it is appropriate to terminate the Agreement.

[135] Given my findings with respect to section 226(a) and (b) above, I must terminate the Agreement.

[136] As stated above, the termination is to take effect from 6 November 2020.

COMMISSIONER

Appearances:

Mr A. Denton of Counsel instructed by Ms P. Tolich of HR Legal for the Applicant

Mr M. Champion of Counsel instructed by Ms R. Mooney for the AEU

Hearing details:

17 February 2020 and 6 March 2020

1 Respondent’s Closing Submissions dated 7 May 2020 (AEU’s Closing Submissions) at [3].

 2   [2019] FWC 8147.

3 Witness Statement of Mr Rohan Braddy dated 8 November 2019 (First Braddy Statement) at [7] – [9], [11].

 4   First Braddy Statement at [13].

 5   Applicant’s Outline of Submissions dated 8 November 2019 (Applicant’s Submissions) at [3].

 6   Clause 4 of the Award.

 7   This is noted in the NDIS Cost Model: See First Braddy Statement at RB4.

 8   PR525485.

 9   Section 306 of the Act.

 10   Respondent’s Outline of Submissions dated 6 December 2019 (AEU’s Submissions) at [17].

 11   Transcript PN76; AEU’s Submissions at [1].

 12   Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd [2015] FWCFB 540 (Aurizon).

 13   Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126.

 14   [2013] FWCFB 8726 at [7].

 15   See for example Esso v the Australian Workers’ Union & Ors [2019] FWC 6143; CFMEU v Peabody Energy Australia PCI Mine Management Pty Ltd [2016] FWCFB 3591.

 16   Aurizon at [126], [176]; Re AGL Loy Yang Pty Ltd [2017] FWCA 226 at [73], [74], [104]; Re Remondis Australia Pty Ltd [2017] FWCA 254 at [13], [14]; Re Viterra Operations Pty Ltd [2018] FWCA 1161 at [55].

 17   Aurizon at [143].

 18   Aurizon at [143].

 19   Aurizon at [151].

 20   Aurizon at [142].

 21   Aurizon at [158]; AMWU v The Griffin Coal Mining Company Pty Ltd (2016) 260 IR 265 at [69]; Re AGL Loy Yang Pty Ltd [2017] FWCA 226 at [73], [103]; Re Remondis Australia Pty Ltd [2017] FWCA 254 at [13]; Re Murdoch University [2017] FWCA 447 at [455]; CEPU v Aurizon Operations Ltd (2015) 233 FCR 301 at [18].

 22   Aurizon at [176].

 23   Aurizon at [142].

24 Hays Specialist Recruitment (Australia) Pty Ltd [2020] FWCA 404 at [6] citing Aurizon at [129].

 25   Applicant’s Submissions at [32] – [34].

26 AEU’s Submissions at [38].

 27   AEU’s Closing Submissions at [29].

28 Joint List of Issues for Decision dated 5 March 2020.

29 Applicant’s Submissions at [42].

30 Applicant’s Closing Submissions dated 9 April 2020 (Applicant’s Closing Submissions) at [11] – [13].

31 Applicant’s Submissions at [44].

32 AEU’s Closing Submissions at [66]; AEU’s Submissions at [5].

 33   Witness Statement of Meafou Aumau dated 16 December 2019.

 34   Witness Statement of Lumturije Taip dated 16 December 2019.

 35   Witness Statement of Linda Agius dated 16 December 2019.

 36   Witness Statement of Jessica Pinter dated 6 December 2019 at [26] – [38], [44] – [48].

 37   Applicant’s Closing Submissions at [41].

38 Ms Pinter also confirmed that she has not given any notice of resignation, or any conditional statement that if the Agreement were to be terminated then she would resign.

 39   Applicant’s Closing Submissions at [43].

 40   AEU’s Closing Submissions at [82].

 41   AEU’s Closing Submissions at [82].

 42   AEU’s Closing Submissions at [83].

 43   AEU’s Closing Submissions at [84].

 44   Applicant’s Closing Submissions at [44] – [45].

 45   Greg Rogowsky; Nigel Willis; Donald Hill; Bradley Quick [2020] FWC 1116 at [72] citing ERA v LHMU [2010] FWA 2434 at [15]; Re Project Coordination (Australia) Pty Ltd [2016] FWCA 5465 at [19].

 46   Witness Statement of Elaine Gillespie dated 6 December 2019 at [63], EG-20; Reply Witness Statement of Rohan Braddy dated 10 January 2020 at [64], RB26; Further Witness Statement of Elaine Gillespie dated 12 February 2020 at [27], EG-28.

 47   AEU’s Closing Submissions at [78].

 48   Applicant’s Final Reply Submissions dated 15 May 2020 (Applicant’s Closing Reply Submissions) at [13].

 49   AEU’s Closing Submissions at [89] – [90].

 50   Transcript PN785 – PN790.

 51   First Braddy Witness Statement [49] – [50].

 52   Applicant’s Submissions at [45].

 53   Applicant’s Submissions at [47].

 54   Applicant’s Submissions at [50].

 55   Applicant’s Submissions at [51].

 56   Witness Statement of Rohan Braddy in reply dated 10 January 2020 at RB17.

 57   Applicant’s Submissions at [52].

 58   Applicant’s Submissions at [52].

 59   Applicant’s Submissions at [55] – [56].

 60   Witness Statement of Rohan Braddy in reply dated 10 January 2020 at [51]

 61   Applicant’s Submissions at [57].

 62   AEU’s Closing Submissions at [89] – [90]

 63   AEU’s Closing Submissions at [91] – [92].

 64   Applicant’s Closing Submissions at [53].

 65   Applicant’s Closing Submissions at [54] – [56].

 66   Applicant’s Closing Submissions at [54].

 67   AEU’s Closing Submissions at [55].

 68   AEU’s Closing Submissions at [57] – [59].

 69   AEU’s Closing Submissions at [60].

 70   AEU’s Closing Submissions at [61].

 71   AEU’s Closing Submissions at [63].

 72   Applicant’s Closing Reply Submissions at [16].

 73   Witness Statement in reply of Rohan Braddy dated 10 January 2020 at [43].

 74   Applicant’s Closing Submissions at [60].

 75   AEU’s Closing Submissions [109].

 76   AEU’s Closing Submissions at [94].

 77   Witness Statement Elaine Gillespie dated 6 December 2019 at EG14.

 78   AEU’s Closing Submissions at [94].

 79   Esso at [184].

 80   Applicant’s Submissions at [63].

 81   Applicant’s Closing Submissions at [62].

 82   Applicant’s Submissions in Reply dated 10 January 2020 (Applicant’s Reply Submissions) at [12].

 83   Applicant’s Closing Submissions at [15] – [16].

 84   Applicant’s Closing Submissions at [18].

 85   Applicant’s Closing Submissions at [21] – [23].

 86   Applicant’s Closing Submissions at [26].

 87   AEU’s Closing Submissions at [97].

 88   AEU’s Closing Submissions at [97].

 89   AEU’s Closing Submissions at [97].

 90   AEU’s Closing Submissions at [97].

 91   AEU’s Closing Submissions at [72].

 92   AEU’s Closing Submissions at [75].

 93   AEU’s Closing Submissions at [97].

 94   AEU’s Closing Submissions at [97].

 95   AEU’s Closing Submissions at [73].

 96   AEU’s Closing Submissions at [73].

 97   AEU’s Closing Submissions at [76].

 98   Equal Remuneration Case [2012] FWAFB 5184.

 99   AEU’s Closing Submissions at [77].

 100   Esso at [195].

 101   AEU’s Closing Submissions at [98].

 102   AEU’s Closing Submissions at [99].

 103   AEU’s Closing Submissions at [100] – [101].

 104   AEU’s Closing Submissions at [101].

 105   Applicant’s Closing Submissions at [68].

 106   Applicant’s Closing Submissions at [69]. At [70] the Applicant notes that Ms Gillespie’s evidence was that the AEU initially had formal negotiations with 35 employers but only 27 of those participated in the MEA. Although Ms Gillespie says that the inability to afford MEA conditions was not “the feedback” she received, it is “obvious” that this must be the case given her earlier concession that after the state government confirmed it would not provide additional funding, a number of employers stopped participating in the negotiation process

 107   Applicant’s Closing Submissions at [71].

 108   Applicant’s Closing Submissions at [72].

 109   Applicant’s Closing Submissions at [73].

 110   Applicant’s Closing Submissions at [74] – [75].

 111   AEU’s Closing Submissions at [43].

112 AEU’s Closing Submissions at [44].

 113   Transcript PN1097, PN1136.

 114   Witness Statement of Elaine Gillespie dated 6 December 2019 at [54(a)]; Transcript PN1136.

 115   Applicant’s Submissions at [21].

 116   Applicant’s Submissions at [22] – [29].

 117   Applicant’s Submissions at [30].

 118   Applicant’s Submissions at [32].

 119   Applicant’s Submissions at [37] – [39].

 120   AEU’s Closing Submissions at [104].

 121   AEU’s Closing Submissions at [106].

 122   AEU’s Closing Submissions at [107].

 123   AEU’s Closing Submissions at [108].

124 Witness Statement in reply for Rohan Braddy dated 10 January 2020 at [37].

 125   Applicant’s Closing Submissions at [78] – [79].

 126   AEU’s Closing Submissions at [109] – [110].

 127   Applicant’s Closing Submissions at [85].

 128   AEU’s Closing Submissions at [115].

 129   Annual Wage Review 2019 – 20 FWCFB 25000 at [23].

 130   AEU’s Closing Submissions at [114].

 131   AEU’s Closings Submissions at [112] – [113].

 132   Applicant’s Closing Submissions at [80], [83].

 133   Applicant’s Closing Submissions at [81].

 134   See for example AEU’s Closing Submissions at [79]

 135   AEU’s Closing Submissions at [96].

 136   Applicant’s Closing Submissions at [51].

 137   Witness Statement of Elaine Gillespie dated 6 December 2019 at [61].

 138   Farthing Statement at [46] – [47].

 139   AEU’s Closing Submissions at [64].

 140   Applicant’s Reply Submissions at [12]

 141   Applicant’s Reply Submissions at [12].

 142   AEU’s Submissions at [47].

 143   AEU’s Submissions at [52].

 144   It should be noted that on 17 July 2020, the AEU succeeded in its application for a majority support determination: Australian Education Union v Mambourin Enterprises Ltd t/a Mambourin [2020] FWC 3760.

 145   Applicant’s Closing Submissions at [26].

 146   Esso at [195].

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