Epiq logo Fair Work Commission logo






Fair Work Act 2009                                       1057462






s.156 - 4 yearly review of modern awards


Four yearly review of modern awards


Air Pilots Award 2010




9.06 AM, TUESDAY, 12 NOVEMBER 2019


VICE PRESIDENT CATANZARITI:  Thank you.  We'll have the appearances please.


MS L SAUNDERS:  Thank you. Saunders, initial L.  I appear for Aviair, Casair Pty Ltd, Chartair, Cobham Aviation Services, the General Aviation Maintenance Group, Hardy Aviation, Helicopter Film Services trading as HeliSpirit, Hinterland Aviation, Maroomba Airlines, Pacific Flight Services, Royal Flying Doctor Service, Sharp Airlines and Skippers Aviation Pty Ltd, being referring to the RAAA for convenience.




MR D CHIN:  May it please the Commission.  I seek permission to appear together with Mr Diggins for Alliance Airlines Pty Ltd.


VICE PRESIDENT CATANZARITI:  Thank you.  Permission has been previously granted Mr Chin, so permission will be granted.


MR CHIN:  Thank you.


MR A MOLNAR:  If it pleases the Commission, my name is Molnar, initial A and I appear for the AFAP.  Appearing with me is Lutton, initial S.




MS SAUNDERS:  One or two administrative - - -


VICE PRESIDENT CATANZARITI:  Sorry, there's other people.


MS SAUNDERS:  I'm sorry.


MR J TRINDADE:  Trindade, initial J appearing for Regional Express.




MS K SRDANOVIC:  May it please the Commission, Srdanovic, initial appearing for the Qantas Group and with me is Ms Gray.


VICE PRESIDENT CATANZARITI:  Thank you Ms Srdanovic.  That concludes the appearances.  Yes, Ms Saunders.


MS SAUNDERS:  Thank you.  Some administrative matters to deal with first.  Support books have been prepared which contain the material filed in the proceedings.  I hope copies have made their way to the Bench.




MS SAUNDERS:  Yes.  There's also been a witness timetable prepared for today.




MS SAUNDERS:  Yes, that does have a rather large gap in the middle of the day and may lead to the Commission sitting slightly late if practicable.  It's just a question of arranging the various witnesses to fit them all in today.


of arranging the various witnesses to fit them all in today.


VICE PRESIDENT CATANZARITI:  There is a slight difficulty.  I do have a matter at 4.15 today.  Let's just see how we go.


MS SAUNDERS:  Yes, I understand Ms Deegan can be made available tomorrow morning in any event.  One matter, the Alliance and the RAAA have filed applications in identical terms.  As the matter has been discussed between us and the parties, it's become clear that those amendments don't accurately reflect the intent of the proposals from the two airlines.  There's an alternative drafting being proposed.  If I can hand up a copy of that.  Thank you.  This has been provided to the other parties very very recently, last night.  Qantas and Rex are seeking instructions and Mr Molnar will explain the AFAP's position.


Mr Chin proposes to take the Bench through the details of the amendments, but as a general point, the intent is to capture what is being tried to be achieved by the Regional Airline Association operators and Alliance Airlines.


VICE PRESIDENT CATANZARITI:  So, this is the revised clause in relation to the training issue?


MS SAUNDERS:  Yes, your Honour.  There is a secondary issue in the proceedings, schedule C.


VICE PRESIDENT CATANZARITI:  Schedule C; where are we on that?


MS SAUNDERS:  Mr Molnar will provide an update.  Many items have been agreed; there are some outstanding airplanes, but we don't propose to have that dealt with at today's hearing.  There's still hope, as I understand it, that full agreement can be reached.


VICE PRESIDENT CATANZARITI:  You're hopeful that we won't be ruling on that.  Is that - - -


MS SAUNDERS:  That's what I understand is the position and I should note none of the parties have filed any evidence on that particular issue.  If I might give a brief overview before turning to my friend.  The remaining issue is to do with the proposed clause 13 of the current exposure draft which deals with training costs and the related question of training bonds in the industry.


There's a range of different types of training in the airline industry.  Principally, we're talking about instrument ratings, type endorsement - the things that allow a pilot to fly a particular type of plane.  That training is characterised by two things.  It is extremely expensive and it is extremely transferrable.  Once you have the plane rating, you can fly that plane for any airline.


The situation the employer case is concerned with is where a pilot elects - a person with a pilot's licence elects to voluntarily undergo such training.  Either they volunteer by in applying for a job to fly a plane for which they are not qualified or while currently employed, apply for a position where they don't have the certification.  They can also apply to upgrade training, where someone transitions from first officer to captain roles, for example.


The airlines do and historically have facilitated this training.  There's a longstanding industrial practice of entering into - of the airlines paying for it in large part.  Entering into loan agreements, as they're called now, and more historically known as training bonds.  That's the most common structure.  The airline pays for training; the pilot agrees to a certain period of service or return of service.  If that's not delivered, an obligation to pay an outstanding amount arises.  It's recoverable on a pro rata basis.


A different model is a staged reimbursement that requires the pilot to pay up-front and then they're reimbursed throughout their employment in stages to keep them there.  Obviously less than official for the employee at first instance.


In the context of the small regional operators that I represent, what these arrangements historically have done, and some difficulties have arisen recently, but it's enabled them to actually employ new pilots, very junior pilots or pilots who are just starting out, or upskill their existing workforce.  Makes that operationally feasible and financially viable.  Pilots don't stay with these operators their entire career; it's often an early career employment stage they get the endorsements and they move on to bigger and better things.


The operators have no difficulty with that, but they do need some benefit from providing this training.  It is an enormous cost to the business to train someone.  For example, a Dash 8 endorsement to have them immediately leave for a larger operator.  That's where training bonds come in.  You get that commitment that they will stay with you for a reasonable period of time.


This is not new; this has been in the industry for as long as anyone can remember and certainly it was around when the 1984 Pilots Award came into effect.  Recently, starting from around 2015 but certainly - starting in serious from around 2015, but certainly since the modern award came into operation, disputes have begun to arise where award relying operators, which is the majority of my clients, have attempted to either use or more significantly, enforce training bonds at the end of employment where they ask employees to make those payments back.


The union takes a position that this is not permissible under the award.  It is only permissible where you have an industrial agreement that allows it.  Our view is, and hence why the application is made in respect of correcting an ambiguity, is that it is in fact permitted by the award; it's never been excluded.  It's covered by - there's a limitation on the training that's actually required to be paid, but it is necessary to have some clarity as to what the award resolves to provide some certainty for the regional operators going forward, and some certainty for those young pilots seeking their first endorsement or to upskill.


Relatedly, the AFAP claim to essentially include certain types of training within that which is required in clause 13 to be paid for by the employer.  We say that's a departure from industry practice, in that it captures training that employees have put their hand up that they want to do, as opposed to training that is required by the employer, where someone says you must learn to fly this particular plane, or you must get this particular certification.  That's separate to the situation where the pilot is entering into an agreement with the employer to advance their own career.


That's all I wish to say by way of opening.


VICE PRESIDENT CATANZARITI:  Can I just ask you this?  In relation to the draft clause you've submitted.




VICE PRESIDENT CATANZARITI:  And I confess, I only read it once.  As I understand, the practice with the enterprise agreements at the moment is say the real cost is $90 000.




VICE PRESIDENT CATANZARITI:  If the employee left on an enterprise agreement, they don't pay back $90 000, it's quite a significantly - they set a different amount.




VICE PRESIDENT CATANZARITI:  I've seen quite a few where the amount is much lower.  Your draft clause, how would that operate?  Is it going to be actual costs, or is it - I mean, on the face of it, it looks like it's actual cost?


MS SAUNDERS:  Yes, your Honour will observe in the RAAA's evidence that indeed, our operators don't charge actual cost; it tends to be a nominal amount for the course fees, is one way to put it, but not the time lost.


VICE PRESIDENT CATANZARITI:  Yes, so just focussing on the actual drafting of the clause, which is - I want to make sure I - - -


MS SAUNDERS:  It's not intended to be actual costs, but the drafting doesn't encapsulate that.  There may need to be some further work to 13.6.


VICE PRESIDENT CATANZARITI:  I think before we finish the case, we should see what is the clause you actually propose to take account of that observation I've made.


MS SAUNDERS:  Yes.  Thank you.




MR CHIN:  Thank you Mr Vice President.  May I briefly assume two tasks; firstly to outline the controversy as we see it between the parties, and then to take your Honour's through the proposed amended clause to explain the way in which we propose to or request the Commission to resolve that controversy.


Firstly, as we apprehend it, the controversy - the position of the AFAP is that, if I can trouble your Honour's to take up the proposed clause.  It shows the amendments and the face of the existing clause together.  We understand that the AFAP's position is that clauses 13.2 and 13.5 require an employer to bear the costs of all CASA-mandated training of all prospective and current employees to obtain minimum qualifications necessary to complete or to operate any type of aircraft as required by the employer, including aircraft for which they were initially employed at the commencement of employment.


Secondly, their position is that any training bond for any such training, that is the breadth of the training they assert is covered by 13.2 and 13.5.  Any training bond is inconsistent with the provisions of those clauses, that is the requirement for the employer to bear the cost and can only be sanctioned by an allowance for such bonds in a collective agreement - a registered enterprise agreement.  That's as we understand the position of the AFAP.


The affect of that position is that the employer is required to bear all the costs of all CASA or Civil Aviation Authority mandated endorsement training, that is training of a new pilot or any pilot to be able to operate a particular type of aircraft.  Whether or not that employee volunteers or elects to do so, such as when they apply for a job to fly a particular aircraft for which they're not qualified.  Also, all training of an employee who undertakes to do training while they're employed, or volunteers to do so, such as in order to progress in rank, as my learned friend said from, for instance, first officer to captain.


The employer cannot enter into a training bond arrangement for this training, other than through the express terms of registered collective agreement.  Now, the position doesn't end there, because as I apprehend it, further constraints, according to the AFAP would apply in the process of the approval of such an agreement which in my respectful submission, ultimately negates the purpose of any - or any efficacy of any training bond.  The net effect of the position put by the AFAP, and this will be a matter for final submissions, but I merely flag it at this point, is that the availability of training bonds is ultimately one in theory only and that in practice, my client, Ms Saunders' clients, airline operators who rely upon the award would effectively be prevented from entering into effective training bonds.


Now the position as put by my client and those members of the RAAA, is that clause 16.2 and 16.5 in the existing award only require the employer to bear the cost of training that they unilaterally direct must be undertaken by the pilot.  They don't necessarily extend to training that is independently mandated by regulatory body such as CASA.  The line we seek to draw is the important critical distinction, we submit, between training that is voluntarily assumed by the employee for the mutual benefit of both parties on the one side.  On the other, training that is unilaterally directed or mandated by the employer such that the employee is required - or in other words, forced to undertake that training.


DEPUTY PRESIDENT ASBURY:  But assume the employer, employs a pilot on the basis that the pilot can operate a particular aircraft.  So, the pilot is qualified, licensed to operate a particular type of aircraft and CASA changes the regulations.  So, the employer needs the pilot to operate that aircraft because that's the type of aircraft the employer uses to provide its services.  CASA changes the licensing requirements and requires some additional training; do you say that the employer doesn't require that but CASA does and therefore the employer wouldn't be obliged to pay for it?


MR CHIN:  No, we don't say the employer wouldn't require it.  In a sense, the employer requires it.


DEPUTY PRESIDENT ASBURY:  Because you can't operate without it.


MR CHIN:  Indeed.




MR CHIN:  That scenario operates in the same way, we say, as an employee who makes application for employment to operate a particular type of aircraft for which they're not employed.  They need a requirement; they need a qualification of training mandated by CASA in order to fulfil that job.  By making application for employment without a qualification, the employee is in a very real sense undertaking, electing to undertake the training necessary to enable them to operate that aircraft.  They've volunteered to do so; they are freely electing to do so.  They get the benefit of employment and the employer gets the benefit of their service.


In those circumstances, we say, there is no - it is distinguishable from a situation in which the training requirement is imposed unilaterally, by direction on the employee by the employer.


DEPUTY PRESIDENT ASBURY:  Because the original variations that were proposed sought to distinguish between when the training was directed by an external body and when it was not.  I'm just trying to understand what the change in the proposal is, because it seems to me - so you're trying to carve out circumstances where the pilot is not yet employed and applies for a position that requires the pilot to operate a type of aircraft that the pilot is not qualified to operate.


MR CHIN:  Yes.


DEPUTY PRESIDENT ASBURY:  And the employer offer employment to that pilot.  So, you say the pilot is essentially volunteering to undergo the training at his or her expense by offering him or herself for that position.


MR CHIN:  They're volunteering to undertake the training at the employer's expense, subject to entering into a bond.  There is a slight modification to the - this is the reason for the clarification.  There is a modification to the blanket distinction between CASA imposed training and employer directed training that was implicit at least, in the original amendments proposed by the parties.


The present proposal refines it by clearly delineating between - excepting that in a sense, an employer may also require training that is required by CASA.  This amendment accepts that coincidence.


DEPUTY PRESIDENT ASBURY:  What I'm trying to understand though, is whether the addition of the words "or where the employee volunteers or elects to undertake training to obtain additional qualifications".  Is that intended to cover a person who is seeking to be employed who does not hold qualifications?  Or is it seeking to cover - is it where the pilot wants to undergo some training in a type of aircraft that the employer doesn't require the pilot to operate.


So, the pilot's already employed; they're employed to operate a particular - are you going to call volunteers, people who are applying for employment?


MR CHIN:  Yes.  In a sense, in a relevant sense - so, 13.2 would apply to current employees who, in a real substantive sense, volunteer or elect to undertake training, freely.  Now, in that category would fall the following.  Applicants for employment to operate a type of aircraft for which they're not currently qualified.  They are applying for a job in the knowledge that they will undertake training, they agree to do so, in order to obtain that employment.  That is not something that the current employer is directing to those - or unilaterally requiring the employee to do.  They don't have to make the application for the employment.


I'm talking about employment - training that occurs during the currency of the employment relationship or the employment contract in 13.2.  So, someone gets a job on the basis that they need to get training in order to qualify to operate their aircraft type.  That's covered by 13.2.  They become employed, they agree voluntarily in that sense to undergo the training to become qualified to operate the type of aircraft for which they're initially employed.


DEPUTY PRESIDENT ASBURY:  All right.  And that clause says then the employer is not required to pay for the training and then the bond would operate so that the employer could agree to pay for the training, subject to the bond.


MR CHIN:  Correct.


DEPUTY PRESIDENT ASBURY:  That's essentially what you're proposing?


MR CHIN:  Correct.  But the scenario - the alternative scenario that the Deputy President put to me is, let's say an employee, a current employee who is qualified to operate the type of aircraft for which they were initially employed, then wishes to obtain a qualification to fly a different type of aircraft.  That would also be covered by 13.2.  There would be no requirement of the employer to pay for that training, but they could pay for the training and subject to the entering into of a bond.


DEPUTY PRESIDENT ASBURY:  I understand.  Thank you.


MR CHIN:  The distinction there is, if the employer for a current employee, who holds a qualification for a particular type of aircraft, directs the employee to get training to be able to operate a different type of aircraft.  Then, that would fall outside 13.2, the requirement to pay.


DEPUTY PRESIDENT ASBURY:  Or an employer who says great, you can now operate that type of aircraft, I'm going to put you on it.  That employer is then requiring the employee to operate the aircraft.  Isn't the employer?


MR CHIN:  Well, the relevant distinction is the requirement as to training.  If the employer doesn't unilaterally require direct, in other words, an employee, that they must fly aircraft type X when their only qualified to fly aircraft type Y.  Then, on our construction that falls into a scenario where the employee is in a sense, voluntarily electing - freely electing, to undertake that qualification, that training.  It's not the subject of a unilateral direction by the employer.


DEPUTY PRESIDENT ASBURY:  Except, it's always been the case since we put in skills required versus skills used into awards, that if an employee holds a skill and the employer acquiesces in the employee using the skill, then the employer is requiring the skill to be used and can't avoid paying for it.  So, for an employer to be able to say well, I don't require - go off and get the - you know, we have a few aircraft that meet that - that you're not qualified, off you go and volunteer to get the qualification, but then we're going to put you on the aircraft.  The employer is requiring the employee to have the qualification, surely?


MR CHIN:  But the element of compulsion is absent in that scenario.  If the employer is quite content to have the employee remain in employment, operating the type of aircraft for which they were initially qualified and employed, then there is no element of compulsion for the employee to undertake the type of training which ought to attract an obligation to pay.


DEPUTY PRESIDENT ASBURY:  No, but if the employer wants the ability to use that employee to operate a kind of aircraft that they're now qualified to operate, then the employer is - if they want the ability to direct the employee subsequently, or to utilise the employee on a type of aircraft that the employee has volunteered to be trained for, then why don't they have to pay?


MR CHIN:  Well, that's a requirement; that conflates two aspects of the requirement we're addressing.  Once an employee who voluntarily undertakes training and obtains qualifications voluntarily, or elects to do so, becomes qualified.  Then the employer can, by agreement with the employee, permit the employee - employ the employee as operating a different type of aircraft for which they are now qualified.  That does not constitute a requirement by the employer that they embarked upon that process in the first place.  There's no requirement by the employer to have undergone the training that the employee ultimately did.


Take the example of upgrade training.  Upgrade training is training required by a pilot in order to - CASA mandated in order to progress from one rank to another; first officer to captain.  Ordinarily, universally even, that occurs on application by the employee.  The employee applies for the promotion.  That employee, in order to obtain the promotion knows that he or she requires to undergo training mandated by CASA.


Even if the employer acquiesces to that, there is in no sense - and even if the employer, once the employee is promoted, employs the employee in the position of captain, in no sense has the employer compelled the employee to undertake the training that they did in that scenario.  And that's an analogous position to the scenario Deputy President, you put to me.  The defining feature, the critical distinction is what is the motivating force behind the need for undertaking the training for which the employer may or may not have to pay?  What's that motivating factor?


On our construction that distinction fairly and relevantly in accordance with widespread and long-standing industry practice arises from this notion of compulsion.  The employer may obtain the benefit of the employee's new qualification, sure.  But that is a benefit on one side of the ledger; it is a mutual benefit on the other.  The employee, for instance, can earn higher pay, has higher status, has more responsibility, has a promoted higher level position as a result of the training undertaken.


The training undertaken by mutual consent, in this sense voluntarily by the employee and not under the compulsion of the employer's unilateral direction.  In our submission, that's a fair distinction between the types of training that ought to be amenable to the imposition of a bond.


DEPUTY PRESIDENT ASBURY:  Except, what an employer could do, is say I have two types of aircraft and putting it simplistically.  What an employer could do, on your construction is, I have two types of aircraft.  I'm only going to employee pilots to operate one or the other; not both.  So, once I've got them employed, then if they want to volunteer and I'm doing inverted commas, to train to operate the other aircraft, they can pay for it and then I will get the benefit of that by essentially rostering them because they volunteered.  I'm not paying for the training, but what I'm going to do is then get the benefit of utilising them on the other type of aircraft.


MR CHIN:  The evidence will reveal that in a practical sense, that situation doesn't arise.  Alliance Airlines pays for all training.  The critical issue is - and we wish to continue to do so - the critical issue is, contrary to the AFAP's position, the circumstances in which we can ensure that we receive a fair return on training investment by use of a training bond.


DEPUTY PRESIDENT ASBURY:  So, the central issue really is the bond.


MR CHIN:  It is.


DEPUTY PRESIDENT ASBURY:  Yes, I understand, thank you.


MR CHIN:  It is, it is.  The carve out, the carve out of the type of training that attracts a compulsion to pay on the part of the employer, answers the AFAP's contention that if you've got an obligation to pay under the award, then you can't have a bond.  But the principle - the critical matter, the matter of principle concern for my client is the ability to enter into a bond.  That's apparent in 13.6 in the draft.  We say there are two critical types of training for which Alliance contends the award leaves open its ability to enter into a training bond, or should do so.


Namely one, the scenario I previously addressed, where a pilot voluntarily seeks, obtains and commences employment but doesn't have type endorsement to operate the aircraft for which they're being employed; that's one.  The second is where a pilot voluntarily seeks a promotion in rank, as I've referred to previously.  Those are the two types of critical training for which we commend a bond is appropriate, relevant and fair.


There are two types of training which Alliance concedes the award presently drafted and in accordance with the amendments, require it to bear the costs and where no bond is or would be entered into.  Firstly, where Alliance requires a pilot to also undertake pre-employment, non-CASA mandated airline-specific training in company policies and procedures - that's one.  Secondly, where a pilot who is currently employed with a particular type endorsement for an aircraft, for which they were initially employed is unilaterally required by the employer to operate a different type of aircraft.


That addresses the scenario that the Deputy President has raised with me.  A current employee who is qualified to operate the type of aircraft for which they're originally employed, but is required by the employer to be qualified for another type of aircraft.  That would fall out on the other side of the line, on our contention.




MR CHIN:  I don't wish to delay proceedings unduly, I only wish to wrap up the brief opening by addressing the nature of the relief sought, in particular, a question of the exercise of the Commission's discretion in this regard.  We understand that the Commission is engaged in the four yearly review of the Air Pilots Award 2010 under the now repealed section 156 of the Act.


Clause 26.2 of schedule 1 of part 5 of the Act preserves the operation of the repeal provisions to do with four yearly review in respect of reviews commenced before 1 January 2018.  We understand that the present four yearly review commenced before then.  Thus, this review under the repeal provisions is at - thus the Commission, in these proceedings - - -


VICE PRESIDENT CATANZARITI:  We could assume we've got jurisdiction; you don't have to address that.


MR CHIN:  Yes, but the relevant consideration is this; we've filed applications under sections 157 and 160.  But our primary position, Vice President is that the Commission can review the award by reference - under 156.  There is a material difference there, as the Commission would be aware, I just touch on it.  That the Commission under 156, the repeal provision which remains operative, can review the award by reference to the modern award's objective and any other consideration consistent with the purpose of the objective and come to an evaluative judgment about what terms should be included to achieve a fair and relevant safety net.


It's not necessary to be bound by the strictures of section 157, for instance, that prior determination that a particular provision is necessary to achieve those objections must be determined before any variation can be made.  That's all I wish to say.


If it please the Commission.


VICE PRESIDENT CATANZARITI:  Mr Trindade, do you need to say anything in opening?


MR TRINDADE:  Very briefly, thank you Vice President.  If the Commission pleases, I'm not going to traverse any matters that have already been addressed in the opening by the other parties.  Of critical importance to Regional Express in this matter is the ability to have training bonds.  The position that my friend Mr Chin put, I think as summarising the AFAP position, was that they say that training bonds are permissible provided that they're part of an enterprise agreement.


It goes further than that though, because the position as we understand it of the AFAP and I'm sure they'll correct me if I'm wrong, is that the value of the training bond has to be taken into consideration when the Commission adopts the better off overall test.  Because the award doesn't say anything about training bonds, the position is that essentially that the Commission, when it undertakes the BOOT, when it proves the agreement, it needs to accommodate the situation where someone might be called upon to pay a bond that's set out in the agreement.


If we take that to its logical conclusion and in fact, the only conclusion that can be taken given the way the Commission addresses BOOT now, it is that the employer must therefore pay to the employee, the entire amount of the bond that might be recovered during the course of the employment, over the award.  So, the amount of salary under the agreement would have to be sufficiently over the award to accommodate every circumstance where a bond might be called upon.


That includes an employee who leaves after one day, who therefore has the full amount of the bond payable.  That would mean that the salary that the employer would have to pay for under the agreement or would have to mandate under the agreement, would need to be sufficient to pay for one day's salary under the award, plus the entirety of the bond amount.  It would render that provision of bonds in an agreement useless, negatory, because you would have to pay so much more in advance, you would almost have to prepay to the employee in advance of the employment, the full amount of the bond to enable you to recover the bond.


This is a change of position and that's why the Regional Express is concerned because the change of position is such that we've had training bonds in our enterprise agreement since 2005.  We've put evidence from Mr Hyme, that will be before the Commission, that shows that these are matters that have been in enterprise agreements with the AFAP since 2005.  It has never been the position that the amount of the training bond or the fact that the training bond needs to be assessed as to the BOOT.


It's not a matter that was ever put before the Commission by either Regional Express or the AFAP in the statutory declarations that were filed with the Commission for the approval of enterprise agreements.  It's a new position that's been adopted by the AFAP.  We say that's critically important because if that position that's been put is because there's no reference to training bonds in the award, then that would render the whole system of training bonds in enterprise agreements, and I'll leave it for others to talk more broadly about training bonds not in enterprise agreements.


But certainly in enterprise agreements, it would render those useless.  It would mean that the cost burden of having a provision for training bonds would mean that you would have to pay so far above the award, including for someone who is employed for one day, one week, one month, three months, that it would mean that the whole purpose of training bonds would be undermined.  We say the evidence that we put shows that the training bonds serve a significant important purpose in regional aviation.  They provide for a mechanism that incentivises employees to stay in employment for a period of time which means that the employer can recoup valuable service for the investment that he puts into the training of the employees.


It can recoup some of the cost if the employee leaves within a period of time and it can use those funds to apply to train other employees.  It's well acknowledged in the industry that Regional Aviation is the training ground for the aviation industry.  It's where most pilots get their start.  They start through Regional Aviation; they get trained by people like Regional Express.  The knock-on effect of Regional Express, for example, not being able to afford to train people because they leave straight away, and that was the situation that Regional Express face; that's in the evidence of Mr Hyme, you know, extremely high attrition rates.


Those are the matters that concern us and they concern us because - and we say it's necessary to have the award varied in the manners being proposed by Alliance and the RAAA because the position in respect of the BOOT has changed.  The position that is being undertaken in respect of the BOOT has changed and that is a circumstance that we say the Commission needs to take into account.


Those are the matters that we will address during the course of this matter.  If the Commission pleases.




MS SRDANOVIC:  Thank you, your Honour.  Our written submissions in this matter have been relatively brief, so I'll keep the oral submissions similarly brief.  When it comes to what the Qantas Group is in a position to support today, we recognise the importance of training bonds in the industry and recognise the importance of the modern award reflecting the existence of those arrangements, more broadly across the industry.  That's generally the position with which we have advanced some support for, when it comes to adopting the submissions of Alliance and the RAAA and Rex in this regard and the submissions of Mr Trindade just now, when it comes to the application of the better off overall test.


I think importantly, we also refer back to the decision of Watson VP in 2012 in dealing with the application of China Southern to vary the modern award as part of the two yearly review.  That application was of a different type which has now been proposed, but importantly, in not accepting that application, his Honour did acknowledge the existence of training bonds within the industry and say it is a matter for enterprise bargaining.  That's a position with which the Qantas Group has support for, recognising also however that there are other operators on the award where this needs to be resolved and others at the table will be better placed to advance submissions in support of that.


We have not otherwise filed or proposed to deliver any submissions in relation to costs and who bears the costs of particular training.  We did receive the proposal overnight and it is fair to say we are still working through that and need to obtain instructions.  At a preliminary level, we have identified some issues with it, which we will need to work through at the appropriate time, however these proceedings may transpire.  But importantly, we don't want to necessarily disturb what may be the status quo with respect to who bears the costs in what seems to be many operators in the industry, different arrangements will apply.


So, just to foreshadow, we will just need to deal with any modifications if we think that they do disturb what is the existing practice as appropriately reflected in the modern award, but propose to leave it there.


VICE PRESIDENT CATANZARITI:  Yes, well I'm sure the current document tabled this morning will not be the final document.


MS SRDANOVIC:  Indeed.  Thank you, your Honour.




MR MOLNAR:  I'll just be very brief, thank you, your Honour.  I listened to what Mr Chin has said about the varied clause that he's presented.  The first observation I make is that there's an awful lot of new words into it to explain what is meant to be the accepted meaning of what that clause means.  But put that to one side, all I'll say is that the evidence that the AFAP will put forward in this matter will show that the AFAP's interpretation is correct and that will be by reference to industry custom and the history as it's been interpreted by the courts.


Insofar as the substantive change is sought, as part of the modern award review, all I'll say about that is that we don't think that it will meet the modern award's objective, that it will be detrimental to the employee to an impermissible extent and will have real problems getting over the deduction provisions - - -


VICE PRESIDENT CATANZARITI:  Well, maybe; that depends on the drafting because on one view, you can draft it where it's not a deduction from the entitlements; it's a contractual point.


MR MOLNAR:  Yes, and it may be a requirement - - -


VICE PRESIDENT CATANZARITI:  And certainly speaking for myself, there is a way around that Mr Molnar, so do not assume your position is absolutely water-tight on that point.


MR MOLNAR:  Thank you, your Honour.


VICE PRESIDENT CATANZARITI:  Because I have had a look at it.


MR MOLNAR:  That's all I have to say at this point.


VICE PRESIDENT CATANZARITI:  What do you want to say about this BOOT issue, because the BOOT issue as Mr Trindade has raised, given that there are some agreements in the pipeline at the moment.  If the Commission adopted the approach that Mr Trindade suggested, there would be a problem.


MR MOLNAR:  Well, it may be a problem; it depends on the agreement that's put forward.  We would say that the BOOT - - -


DEPUTY PRESIDENT ASBURY:  It would absolutely be a problem.  If an employee can work one day and has to - if that's the absolute interpretation; if that's right and how the BOOT applies with respect to bonds, then that's absolutely right.  The Commission would have to have regard for the fact because it has to be what's possible.  So, it is possible that an employee could work for one day and in order for the bond clause to pass the BOOT, would have to earn the award rate plus the bond for that day before it could be deducted.  Or actually, in excess of the award rate plus the bond.


MR MOLNAR:  Well, that depends on how much the bond rate is set at.


VICE PRESIDENT CATANZARITI:  Realistically, Mr Molnar, let's cut to the real world.  We know what the bonds are in these agreements, right, and they vary - let's put a figure of $30 000.  You're not going to find an enterprise agreement that's going to pay you in one day $30 000 above the modern award for that analysis.


MR MOLNAR:  Well, that may be the case.


VICE PRESIDENT CATANZARITI:  Well, isn't that a big problem?


MR MOLNAR:  Well, I mean there are some agreements that have bonds for $5000.  I mean - - -


DEPUTY PRESIDENT ASBURY:  But is that your interpretation that the employee would have to have earned what they would have earned under the award plus something to be better off overall plus the bond before the bond could be deducted.  Is that your interpretation?


MR MOLNAR:  That is certainly the interpretation that is put forward more often.  I can't express it now, but I could envisage a situation where there might be other sorts of benefits that the employee receives.


DEPUTY PRESIDENT ASBURY:  But all I'm asking is, is that your interpretation of how the BOOT would apply with respect to a bond in an agreement?


MR MOLNAR:  In a monetary sense, yes.




VICE PRESIDENT CATANZARITI:  Well, that obviously is going to loom large in our deliberations in that we are concerned about the impact ultimately on enterprise agreements.  There's no point having enterprise agreements that aren't going to work.  I would invite, during the course of the hearing, for the AFAP to seriously consider that issue as to what is ultimately the best outcome.


I know your party has spent many months already on this matter, but we're now at the end of the game and there will be a winner and a loser if that is not otherwise resolved.


DEPUTY PRESIDENT ASBURY:  And arguably, if it really is a BOOT issue, no amount of concession on the part of the AFAP can resolve it and the only way to resolve it is to have an enabling provision in the award.






MR MOLNAR:  Yes, that may well be the case.


VICE PRESIDENT CATANZARITI:  Yes, well, I think you need to give consideration to the very point that Asbury DP just mentioned.


All right, are we ready then for the witness Mr Lutton?


MS SAUNDERS:  Just while Mr Lutton's getting in the box, there's another witness in the room.  If Mr Trout can step outside.

<SIMON JOHN LUTTON, AFFIRMED                                             [9.53 AM]

EXAMINATION-IN-CHIEF BY MR MOLNAR                               [9.53 AM]


MR CHIN:  Yes, I'm sorry, Vice President, Deputy President, Commissioner, there is my instructing witness Ms Deegan who is present in the court room.  I'd seek leave to enable Ms Deegan to remain for instructions.  I do intend to have some short questions for Mr Lutton.


VICE PRESIDENT CATANZARITI:  Mr Molnar, do you have a view on that?


MR MOLNAR:  The instructing solicitor is here, Ms Sydness.  I don't see any reason why Ms Deegan should remain in the room.


VICE PRESIDENT CATANZARITI:  Yes, we think the witness should leave the room.


MR CHIN:  If it please the Commission.



***        SIMON JOHN LUTTON                                                                                                             XN MR MOLNAR


MR MOLNAR:  Mr Lutton, have you prepared two witness statements for this proceeding?‑‑‑I have.


Is the first one dated 13 February 2019?‑‑‑Yes, it is.


It has 23 paragraphs?‑‑‑Yes, it does.


And two attachments?‑‑‑Yes.


The second one is dated 26 July 2019?‑‑‑Yes.


And has six paragraphs?‑‑‑It does.


Do you wish to correct anything in those statements?‑‑‑No, I don't.


I seek to tender those.


VICE PRESIDENT CATANZARITI:  That will be exhibit 1 and exhibit 2.




Are there any objections to those statements?


MR CHIN:  No objection.


VICE PRESIDENT CATANZARITI:  Mr Chin, are you cross-examining?


MR CHIN:  Yes, if I may.

CROSS-EXAMINATION BY MR CHIN                                            [9.55 AM]

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


Mr Lutton, in January 2006 the AFAP supported a draft policy developed at that stage by the Office of Employment Advocate in relation to training bonds, did it not?‑‑‑It did.


Can I ask you to - I think it's an attachment to your first statement.  Can I ask you to turn to the training bond policy that is to be found at page 256 of the court book, your Honours?‑‑‑I think I've got the first attachment, but I don't have the correspondence.


I'm looking at attachment B to your statement.  It begins with a letter dated 9 January 2006 and then it's followed by a document headed Training Bonds in the Aviation Industry?‑‑‑I've only got attachment A to this witness statement.  I don't have the correspondence between the REA.


We have a copy; I can hand you a copy?‑‑‑Thank you.


Can I hand you this document.  It's court book at 254, your Honours?‑‑‑Thank you.


Mr Lutton, do you have that document?‑‑‑I do, yes.


That's attachment B to your first statement?‑‑‑It is, yes.


It begins with a letter dated 9 January 2006 from Mr Higgins, President of the AFAP at that time?‑‑‑It does, yes.


Now, it refers to an OEA's draft policy regarding training bonds on the first line?‑‑‑Yes.


If you go over to page 256, that's the bottom number of each page of the document you have.  It's a document headed Training Bonds in the Aviation Industry.  Do you see that?‑‑‑Yes, I do.


That's the draft policy that you refer to - that is referred to in the letter, is it not?‑‑‑It is the one, yes.


As to that policy - that is a policy as indicated in the letter that the AFAP accepted at that time, correct?‑‑‑Yes, and I still think that's our view.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


I see.  Okay, just pausing there.  Can I just take you through some aspects of that policy.  First of all, on page 256 under the heading Features of a Training Bond Clause, you see that in paragraphs 2 and 3 the policy drafted by the OEA distinguished between voluntary training and directed training.  Do you see that?‑‑‑Yes, I do.


The bond, or return of service obligation referred to, applied only to voluntary training.  Do you see that?‑‑‑Yes, I do.


You thought that was appropriate, or the AFAP's position was that that distinction was appropriate.  You can have a bond for voluntary training?‑‑‑Yes.


And that remains your position?‑‑‑Yes, in the circumstance of an agreement that's going through a no disadvantage test in that instance.


You see under paragraph 3 there's a maximum return of service obligation period of two years?‑‑‑For the turbo prop equipment, yes.


For the turbo prop and three years for jet endorsements?‑‑‑Yes.


That's endorsements for operating jet aircraft?‑‑‑That's correct.


Under A and B on page 256 and then over the page, it sets out the schedule of repayment obligations should the employee under this bond leave employment within certain periods of time after the completion of training.  Do you see that?‑‑‑Yes, I do.


The maximum, if they left within six months of the commencement of training, the maximum would be 50 per cent of the actual costs of the training?‑‑‑Yes.


You thought that was an appropriate standard?‑‑‑We didn't have a problem with that pro rataing amount.  Obviously, that was beneficial.  At the time, we were negotiating agreements that just pro rataed smoothly over the period.  But the REA's policy was to actually cut it in half within the first six months.  Most of our agreements which we negotiated simply pro rataed the amount to be paid back over the period.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


Starting at 100 per cent?‑‑‑Starting at 100 per cent and moving down.  So if someone did a two year bond and they left after one year, they would owe 50 per cent of the training bond.  If they left three quarters through, they would owe a quarter of the bond.


I see.  If you just go over the page, two pages, to page 259, you'll see an example clause there which fleshes out the broader policy that I've just taken you to, correct?‑‑‑Yes.


As developed by the OEA and as agreed to by the AFAP?‑‑‑Yes, so they consulted with us and we supported their policy in the application.  As stated in that letter, we thought that it struck a fair balance between the employer leading the term on investment and to meet the no disadvantage test and compensatory benefit of employees.


I'll come to that in a moment.  Just - thank you.  Can I ask you to look at the example clause?‑‑‑Yes.


You see in paragraphs 2 and 3, the ad enshrines a distinction between directed training, that is, training that is imposed on the employee, where the employer bears the cost.  Then training that is voluntarily undertaken by the employee for the mutual benefit of the employee and employer.  Do you see that?‑‑‑Yes, I do.


That's the distinction that you thought was appropriate for a typical or model training bond clause?‑‑‑Yes.


In clause 4, that sets out the same limitations on the scale of repayment, the schedule of repayments beginning at 50 per cent of the actual cost of the training?‑‑‑Yes.


Then the maximum period of return of service was 24 months in this two years in this example clause.  You considered that that was appropriate?‑‑‑Yes, we did.


Now, you're aware that my client, the Alliance Airlines enters into individual bonds with its pilots?‑‑‑Yes, I am.


The bonds entered into are for endorsement training to operate aircraft for which the pilot is initially employed?‑‑‑Yes.


And that's the same type of endorsement training to which the OEA policy would have applied?‑‑‑Yes.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


My client's bonds also apply to upgrade training if a promotion is sought by the pilot?‑‑‑Yes.


In other words, my client's bonds relate to the same type of voluntary undertaking or training to which the OEA's policy also applies?‑‑‑Yes.


In respect of endorsement training, our training bonds, the repayment amount is not capped at 50 per cent of the actual training costs, but even lower, at a third of the training costs?‑‑‑The bonds that Alliance enter into, the ones that I was involved in the negotiation were $30 000 over three years for a F100 endorsement.  So it was nominated as $30 000 but training may well have been more than that, but it was nominated and the upgrade going from first officer on the F100 to captain was $15 000 over, I think a two year period.


Yes, and for endorsement training, you'd accept - you'd have no reason to believe that the actual costs of the training is far more substantial than $30 000?‑‑‑We would be reluctant to negotiate a bond where the bond amount was higher than the actual training.  We will always negotiate a bond that is less than the cost of the actual training.  So we would need to be satisfied that the cost of the training was more than $30 000.


I want to suggest to you that the actual cost of training is about three times more?‑‑‑It's very difficult to calculate that.  It will vary depending on the pilot, how much training they need, where the actual training is undertaken - a whole lot of variables.  That's why a nominal figure is chosen, because it will vary from case to case.  There'll be different amounts of training, they'll be in different locations.  There will be a whole lot of variables for what the market rate for a particular type rating is.  So yes, I accept it will be more, but to say that it's three times; it may be.  It may be less; it may be more.  It certainly would be more than $30 000.


Thank you.  In relation to endorsement training, the return of service obligation, my client's training bonds is limited to 24 months, generally.  Are you aware of that?‑‑‑Yes, I am.


And for upgrade training service, less a period of 12 months?‑‑‑12 months, okay.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


All of those features that I've just recounted to you, is at least as - I'll withdraw that.  Is consistent with the OEA's draft policy elements that I've just taken you through?‑‑‑Yes, it is consistent.  I don't know if it's getting lost, but I want to be clear.  We support training bonds being negotiated into enterprise agreements.  We have for many many years.


Can you just confine yourself to the questions I ask?  We'll be done a bit quicker I think, and Mr Molnar can ask you any questions after I've finished.  Can I take you to the letter that we'd initially referred to at page 254?  You consider, or the AFAP's position was then that it recognises that an employer in the industry has a legitimate need for a return on its training investment.  The AFAP still recognizes that, I take it?‑‑‑Yes, that's correct.


That it's legitimate for them to procure that return on its training investment by imposing a minimum requirement of service?‑‑‑We will look at each bond in its circumstances and if it's reasonable, we will agree with it, yes.


The AFAP supported this policy because, as you have recognised, it "Finds a fair and reasonable balance between employer's need for a return on training investment and pilot's fair expectation that there is at least some compensatory benefit under the global no disadvantage test, where the existing right to training and freedom of movement is restricted via a training bond".  Do you see that?‑‑‑Yes, I do.


Your concerns were addressed, can I suggest, by the OEA's provision of a repayment schedule that did not require or start with an obligation to pay 100 per cent of the training costs, but rather, started at half that amount.  Is that correct?‑‑‑That's correct.


That was the trade-off, that was the benefit to the employee that you considered struck that fair balance, correct?‑‑‑Yes, in that element, yes.


You did so because if you go to pages 264 to 265, this is a prior letter, this is prior correspondence between the AFAP and the OEA, leading to your ultimate acceptance of their policy?‑‑‑Yes.


You did that because the AFAP was concerned about the disadvantage to employees where bonds required the employee to pay 100 per cent of the actual training cost, that this might constitute a penalty.  You accept that?‑‑‑Where is it referring to that?


If you look at the bottom of page 264, over to 265?‑‑‑Yes.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


In this letter you were expressing your concerns about training bond provisions as they had existed to that time, from time to time and you were in essence, trying to influence the OEA quite properly, as to what you thought an appropriate training bond clause should be, correct?‑‑‑Yes.


Your chief concern was with the requirement to pay 100 per cent of the actual costs of training, that that might amount to a penalty and that might be unfair?‑‑‑That would be one of the concerns.  But the primary concern we had when we wrote this letter was we wanted a framework.  It was out belief that the award quite correctly said that all training is the responsibility of the employer and it had certain wages attached to it.  If the employer wanted to alter that obligation such that they could enter into training bonds with the employee, we believed that there needed to be a framework on which that was done and some compensatory benefits on the flip-side of that.


Yes?‑‑‑If an employer wants to pay the bare award, or provide benefits on the bare award, then they're not going to meet the disadvantaged test by imposing large penalties if they're to leave within short periods of time.  If they want to enter into a bond, they can provide some compensatory benefits and we're very happy to negotiate those as in AWAs and enterprise agreements.


In regard to the model training bond clause, proffered by the OEA ultimately, that adequate compensatory benefit was furnished by reducing the repayment amount from 100 per cent to 50 per cent, correct?‑‑‑That was one of the elements, but the structure of what was in there was broader than that.  It set the amounts, it set the periods and it set the reduction, the pro rataing down, and they're important elements of the training bond.


Yes, can I put this to you.  It didn't include one thing; it didn't include a requirement of some sort of reconciliation of requiring the employee to have been paid a minimum amount of their award entitlements for the period they were employed, did it?‑‑‑I think it didn't specify an exact amount, but that was - - -


I'm sorry, can I just stop you there?‑‑‑That's what the purpose of the no disadvantage test is and that's the job for the OEA to make sure on balance that if on the global no disadvantage test they're not disadvantaged.  Now if you're taking away on one side, you need some compensatory benefits on the other.


I think we may be at cross purposes.  You understand as you've referred to in your second statement the concept of a reconciliation clause?‑‑‑Hm-mm.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


You see in your second statement that you talk about a reconciliation clause such that in paragraph 4 on page 269 of the court book, "anyone that breaks a training bond has a reconciliation conducted such that it does not result in them earning less remuneration than they would have if employed under the award".  You see that?‑‑‑In number four, yes.  I think that needs to be read in context of the paragraph above it.


Just listen to my question; I'm going to put this to you.  The policy proffered by the OEA and accepted by the AFAP, did not include any such provision, did it?‑‑‑No, it did not.


It did not.  Thank you.  That was my question?‑‑‑Yes, okay.


The compensatory benefit that you saw as adequately creating a balance - even a fair balance of interest between the employee and the employer was principally the accommodation of repayment sum being reduced from 100 per cent to 50 per cent according to a schedule, correct?‑‑‑Yes.


Yes.  And you accept that the training bonds entered into by Alliance that you're familiar with, achieved that purpose.  They require at least payments of at least - less than 50 per cent or less of the actual training costs?‑‑‑They nominate an amount and my understanding is that they pro rata down evenly.  That amount is less than the actual cost of the training, but my understanding is that the training bonds at Alliance, like most of the training bonds we have in the various agreement that we do, they actually pro rata down proportionally on a monthly basis, rather than - - -


Yes, from less than 50 per cent of the training costs?‑‑‑Well, from an agreed amount that may or may not be 50 per cent of the training costs.  If $30 000 was not struck as a reasonable amount - it wasn't struck in reference to that was half the training cost.


I see.  Is the position that you're not in a position to know whether or not it is - the $30 000 figure for instance, is less than 50 per cent or not of the actual training?‑‑‑No, I'm not and it will change on each circumstance.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


If it was, if you accept that it was less than 50 per cent of the actual training cost, that position would accord with the adequate compensatory benefit that you determined was given to employees in accordance with the OEA draft policy, correct?‑‑‑It would comply with that element that the compensatory - when I'm using the words compensatory elements, there are other benefits within the award that justify having a training agreement.  It's not a compensatory by discounting it by half when the award says it's all provided by the employer.  There needs to be some compensatory element elsewhere in the agreement to have a bond at all.  Because the award, the baseline, says all training is the responsibility of the employer.  We're prepared to negotiate a training bond, a return of service, in exchange for other benefits.


You accepted the OEA draft policy as setting out those adequate compensatory benefits, didn't you?‑‑‑It talked about the no disadvantage test which we'll look at in each case.  It didn't stipulate exactly what the benefits amounts have to be.  It just said that it would go through that process in doing the global no disadvantage test.


Well, look at your letter at page 254 of the court book?‑‑‑Yes.


We've gone through the OEA's draft policy; that's referred to in the third paragraph of the AFAP's letter, correct?‑‑‑Yes.


That's the policy that you're talking about, and that's the policy to which you say, or your president at the time says, finds a fair and reasonable balance between the interests of employee and employer, essentially, right?‑‑‑Yes.


That policy, no other compensatory benefits identified, but rather, the compensatory benefits that you refer to as you've previously accepted, was the accommodation of reducing the repayment amount from 100 per cent to 50 per cent of the training costs?‑‑‑Yes, but you need to read the policy in full to understand why we say it strikes a reasonable balance.  It does talk about needing to do a comparison against the underlying award with the agreement to make sure on an overall basis the pilots are not disadvantaged.  If you look at page 265 at the top of that, the present regulatory framework, it refers to that.  When does an agreement pass the no disadvantage test?  Now, if the baseline is that under the award you get this salary, you get all training provided and you have to give this notice.  If you're going to trade away the notice you have to give because of the training agreement, you trade away the provision of potentially having to pay for training, then there needs to be some other benefits within the agreement which is an assessment case by case.  Those benefits may be wages, they may be leave, they may be other things.  It's difficult to stipulate in a policy, but the policy itself, very clearly was about grabbing a framework upon which you could then do an assessment of the global no disadvantage test, which we fully support.


But you are broadly happy with the draft clause proposed by the OEA.  You told them that in your letter?‑‑‑Yes.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


The only identifiable compensatory benefit that you identified - that could be referred to in that policy, as referred to in your letter, is the 100 per cent to 50 per cent cap on the repayment?‑‑‑Well, I think I've already answered that.  I don't believe that was the only compensatory benefit.  The framework read in its entirety, inferred that there was other compensatory benefits that the Commission or the OEA would have to do on assessing each individual agreement.


What part of the policy are you referring to?‑‑‑I just referred to it then.  The legislation - - -


No, not the legislation, the policy that you approved from page 256?‑‑‑256.  I can't find it.


That's because there are no other compensatory benefits that were relevant in your consideration or assessment of the adequacy of this proposed training bond clause, I put to you?‑‑‑That's not how we understood our communications with the OEA at that time.  It was about making sure that these bonds were properly assessed in accordance with the global no disadvantage test and it was about grabbing a defensible, reliable, understandable framework upon which they would be assessed and we believe that that struck the right balance.


In any event, your position now, is that any - although you do profess to concede the need for a legitimacy of training bonds in certain circumstances?‑‑‑Yes.


In the industry?‑‑‑Yes.


Your position is that the only way in which they can be effective is by an explicit or express provision in a negotiated enterprise agreement?‑‑‑Yes, exactly.  You can't contract out of the award.


And, your position is that in order to achieve registration that with training bond clauses in an enterprise agreement, there needs to be a compensatory benefit in the nature of a reconciliation clause or some such?‑‑‑What do you mean by a reconciliation clause?

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


What you refer to in your statement?‑‑‑I think - there's two issues that have arisen here and it is contained in my witness statement.  Historically, we've looked at training agreements as on a global basis.  We'll look at the award and we'll look at the agreement and we'll say overall, if we believe it's a better document, we'll support that.  That's how we've negotiated training bonds.  Internally, we've got a more formalised arrangement where we use, as a rule of thumb, a one third of the annualised amount.  So, if we take an example of a $20 000 training bond over two years, we would say that the annualised amount is $10 000 per year.  We would say one third of that is about $3 333, so we would look for compensatory benefits in that agreement in the vicinity of $3 300 and we would say that was a fair trade off for the imposition of these training bonds.  That's how we've applied it and it's been global.  What has happened more recently, and again, it's in my witness statements, is there's been some decisions that have created a little bit of confusion for us.  We don't support those decisions, but we're aware of them, and they are what they are in terms of the BOOT.  The BOOT seems to have become a far more individual assessment.  So, if an individual - - -


Can I just ask you to pause there, rather than an opportunity to make a speech, as if were, if I may?‑‑‑Sorry?


Again, Mr Molnar will be able to ask you questions afterwards.  If you could just focus on my question.  In your second statement, page 269, you say because of the introduction of the BOOT, parties, including the AFAP have been looking at reconciliation clauses as a compensatory benefit that would justify the approval of a training bond clause in an enterprise agreement correct?‑‑‑That is correct.


The effect of the reconciliation clause that you describe is that you undertake an exercise of comparing the net financial position of an employee if they broke a bond and left prematurely, by comparing what under the bond, what amount they owed as compared to the overall net financial position in terms of the remuneration received for the period they were employed.  And, if there was any - there would be no bond repayable unless the net position was that the employee would have retained the minimum remuneration payable under the award for that period of employment?‑‑‑That would be the case with the agreements that have what I referred to as a reconciliation clause.


Yes, that's my question?‑‑‑Yes, those agreements that have a reconciliation clause, that's what that clause is saying.  It's basically doing an assessment that if you'd been employed under the award, how much would you have received.  You can't receive less than for your period of employment.


Yes, thank you.  You'd accept that if an employee, a pilot is paid in accordance with the minimum rates in the award, then under such a clause, they would never be required to repay any outstanding compensation amount under a training bond?‑‑‑That's exactly correct. That's a fair comment.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


In other words, the training bond for those employees would be entirely ineffective?‑‑‑Well, there's two issues there.  We wouldn't negotiate an agreement that only paid the bare minimum of the award and contained a training bond, because it's clearly deficient relative to the award.  So, there would always be a small amount higher than the award that's payable to the employee and if they break a bond, if there's a reconciliation clause that reconciliation will be done.  How much they pay, will depend on how much above the award they were and what period they broke the bond - with those agreements that have a reconciliation clause.


Let's take up that example.  Let's say an award rate for a first officer flying a Fokker 100 is around $87 000 per annum.  The actual rate of pay is somewhat higher?‑‑‑Yes.


Say, around $109 000 per annum, so that the employee is paid $9000 per month as compared to an award minimum of something like $7250.  If the employee is employed for one month after the completion of their training and is subject to a bond to remain or two years, and the employee left after one month, in break of the bond?‑‑‑Yes.


They would have been entitled to have been paid $7250 under the award, right?‑‑‑The example you're using is a bit confusing to me, because you don't get that endorsement after a month.  You would have to be employed for a period of a number of months before you have what they refer to as check to line, to be qualified, to actually have finished the training.  So there's going to be a number of months of employment to begin with during the training.


I'm talking about after the completion of the training, the employee remains in employment for one month after the completion of training for which the employer has paid?‑‑‑Does the bond in this case commence from the completion of training or commence from the start of employment?


Let's assume it commences from the completion of training, the 24 months.  Let's just make that assumption for me?‑‑‑That's not usual.


Well it may not be usual, but it's possible?‑‑‑Okay.


Let's make it?‑‑‑They were bonded for one month.


They're bonded for two years; they leave after one months after completion of training.  They're paid $9000 above the award.  Their award entitlement is $7250 for that month.  They owe for a bonded amount of $30 000, less a month.  Let's say they owe $28 750 under the award, which is typical for our endorsement training bonds?‑‑‑Yes.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


Under the reconciliation provision that you describe, they would only have to pay an amount of $1750, the amount that they were paid over and above the award provision.  That's the way it works, doesn't it?‑‑‑Because alternatively, they would have got paid less than the award.  They would receive less than the award.


And so, notwithstanding the terms of the bond, they could break the bond, leave employment, go to a competitor of the price of $1750 instead of $28750, correct?‑‑‑Correct.


Thank you?‑‑‑You use examples of going to a competitor.  They might leave for other reasons, and obviously a month is an extreme example.


That's all I have.


VICE PRESIDENT CATANZARITI:  Does anyone else wish to cross-examine this witness?  Thank you, Mr Molnar.


DEPUTY PRESIDENT ASBURY:  I just have a question.  With respect to that OEA document that you were taken to, which I think was on page 256.  Page 257, there's a note on the bottom of the OEA's document which, you can correct me if I'm not reading it correctly.  But the second sentence, it seems that what the OEA was doing, was it was putting 50 per cent of the value of the training on the award side of the ledger, which meant it was nominating a benefit to the training that off-set the - so the formula, really, that was the reconciliation basis.  It was saying there's a benefit to the pilot of getting the training, and we're going to put that on the award side of the ledger and then on the other side - so, that's where the 50 per cent comes from?‑‑‑That's not how we understood it at the time.


Well it looks like it what the - well, otherwise mathematically doesn't make sense, does it, that they could say that there was a benefit?‑‑‑Yes, but we would say that the starting point for the no disadvantage test is the award and the award provides that all training is the responsibility of the employer.  So, a training bond is the whole of it, mitigating it to some degree by 50 per cent of the actual cost is fine, but we'd say the whole - - -

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


I know what you say, but it's not what the OEA was saying, that you appeared to have agreed with, is it?‑‑‑I think in the practical examples that we dealt with, as bargaining representatives, it was put on the side of the bond is a disadvantage next to the award and there needed to be compensatory benefits on the other side of the ledger.  So, in practice, I do know that all of those AWA's that were approved during that period, paid above the award and they did it in light of having a bond.  There's also a background to this in terms of some cases that I know.  I cited the McLennan case which the AFAP was very involved in, actually showed that the training bonds were not enforceable where they were outside of an industrial instrument for the simple reason that they were contracting out.  So, there was a background to this with some cases that were clearly showing, and it had been accepted by those courts, that the award provided that all the training to be provided by the employer.


Well clearly, the AWA was approving agreements - the OEA was approving agreements on that basis.  It was putting 50 per cent on the award side of the ledger?‑‑‑It was halving the actual cost.


Yes, and putting 50 per cent on the award side of the ledger and looking at it on that basis, that there was a benefit to the pilot on the award side of the ledger of getting the training paid for, so it would consider the bond on the other side of the ledger by apportioning it in that manner.  That's how I read the note, but in any event, if you didn't understand it on that basis, I guess we can't pursue it any further?‑‑‑It's interesting - I take your point, but I don't think it necessarily says which side of the ledger it's applying on.


Yes it does.  It says the reasoning behind utilising the starting point of 50 per cent, lies with the current NDT assessment practices of halving the training cost of the bond and placing the hard value under the award side of the NDT?‑‑‑Which side is the award side of the NDT?


Well, the award side of the NDT.  When we consider - I read that as saying when we consider whether the agreement passes the no disadvantage test, we will apportion 50 per cent of the value of the training on the award side, as a benefit to the pilot under the award, and the other half of it we'll put on the agreement side?‑‑‑That's not how I understood it at the time, your Honour.  It's actually not how I read it now either and not how I understood that the policy was being applied by the OEA or by ourselves with multiple enterprise agreements.


But you've agreed that other than the 50 per cent apportionment, and the regulatory or the regular deductions or decrease in the value of the bond, there's no other benefit in the way that this is done for pilots.  You couldn't point to any other benefit in the NDT sense, other than the fact it's 50 per cent and it's decreased in periodic instalments over the life of the return of service obligation period?‑‑‑Yes.  My understanding of that, was they did a framework, they put it on one side of the ledger and they would say 50 per cent of the training costs and now we'll need to offset that with some benefits on the other side of the ledger - - -

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


Which is, the value of the training to the pilot?‑‑‑No, because the baseline for the award is that all training is provided free.  It would be benefits above the award such as leave or other clauses or higher wages that would offset the imposition of a bond, because a bond is an imposition for X number of years and a payment, if you breach that period, that's a detriment relative to the award, that needs to be offset on the ledger by some weight, and they've put - - -


Which is you've got training that is of value for 50 per cent of the actual cost to the employer.  That's the offset, isn't it?‑‑‑No, I don't see it that way.


Well I guess we'll - - -


VICE PRESIDENT CATANZARITI:  We'll have to resolve that.


COMMISSIONER MCKENNA:  If I could ask, what would you see as being an equitable balancing of the positions that are being put?  You've aware of what the employer's position is; they want to see a return on their investment if we can call it that?‑‑‑Yes.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


You want to ensure that your members aren't being paid sub-award wages?‑‑‑Yes, yes.  We would see - and we've negotiated this in a lot of agreements.  What we would see as a fair exchange and balance would be this one third of the annualised amount in a benefit.  So, for example, if it was a $30 000 training bond over three years, the annualised amount is $10 000.  A third of that, on the other side of the ledger and we would say that that was a fair exchange for the imposition of a training bond, relative to these benefits.  As long as it's got a minimum of that one third of the annualised amount, we would be very comfortable in supporting that and saying that overall, that agreement relative to the award is not a disadvantage to the employee and it's got the relevant offsets.  The only thing that has confused that position in recent years, is the application of the BOOT and that's not something that we support, but it's something we've become aware of and it's a reality.  Our position with most of our employers and most of the agreements that are still in place, do not have these individual reconciliation clauses.  They are a new phenomenon.  We've been doing bonded training agreements like in Rex as Mr Trindade mentioned before, like in other operators without that reconciliation clause.  So, we would be telling an employee you've got this bond, you've got these benefits.  If you break it, you owe whatever you owe and if that took you below the award, that's your responsibility because overall the agreement was more beneficial and that's enforceable.  Our position has been you can't do common law bonds because that's contracting out of the award.  You can't do common law bonds if it's contracting out of the agreement, unless it's provided for in the agreement as well.  We will negotiate them in the agreement; we'll support them.  The only thing that's created a little bit of confusion at the moment and some extreme examples, is the application of the BOOT and this reconciliation clause which is not of our doing, or something that we've actually looked to have; it's just become a reality in recent times.  If we could find a mechanism to overcome that, and we did propose it as part of this process, a mechanism that did provide that structure of here's the framework for a bond.  We're not going to have a bond for whatever amount the employer wants, for whatever period the employer wants.  We do accept that there needs to be a return on investment, but on the flip side of that, there needs to be some compensatory benefits across the group.  We don't support a reconciliation clause.  So, if they did something like a one third annualised amount that was put as benefits, we would be in support of it and that's what we've always done with our agreements and most of the agreements that we have at the moment with bonds, still reflect that.  It's only the more recent ones where there's been confusion and we've either got these reconciliation clauses, or as in the examples I've used here, the employer has gone it's just too hard, we won't have a bond.  I think that was the position for a couple of the Qantas Group employers.  But our position is we support bonds, but they need to be reasonable; they need to be structured along the terms that we talk, but importantly, there needs to be some compensatory benefit to the employees of some description because the award, in our view, is very clear and it's been tested.  All training is the responsibility of the employer and those wages and conditions in the award are predicated on that training condition.  All training is the responsibility of the employer.


DEPUTY PRESIDENT ASBURY:  Well, if you accepted the OEA's position, the example clause even that was appended, starting on page 259, talked about - where the employee voluntarily undertakes training to the mutual benefit, then the employee bears 50 per cent, which again, bears out this concept of putting 50 per cent of it on one side of the ledger or the other side of the ledger.  So, if I put the proposition to you, if the award contained some bare bones formula that had percentages and a definition of the costs, wouldn't that assist the parties in bargaining?‑‑‑It certainly would, and I don't know how - whether I'm able to talk about this, but they are the sort of proposals we have put to the employers as part of these proceedings and they've been rejected.  They like elements of it, but they don't like the compensatory benefit.  They don't want to pay higher wages or other benefits in compensation, but that's exactly what we've proposed.  I think it would overcome this BOOT test because if there was something in the award that gave this framework, set out, a bond can be no longer than three years for a jet, two years for everything, it pro ratas on this basis, it's no more than the actual cost of the training and it can be done in an enterprise agreement providing there's a one third of the annualised amount benefit, that would assist us for the BOOT.


VICE PRESIDENT CATANZARITI:  Well, I think we'll stop there; you're confusing - you're not answering the question, because you've now gone back to enterprise agreements?‑‑‑Yes.


And the question was directed on the variation to the award, right?‑‑‑Yes.  Your Honour, that's a valid point and I get confused by this, because I think a lot of the agitating is over the BOOT, not over the actual award from the employers.  That's my take on it.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


But if the award had a formula, the BOOT wouldn't be an issue, because as long as the arrangement in the agreement met at least the formula in the award, then the BOOT wouldn't be an issue?‑‑‑As long as that formula encompassed all of the things such as the amount, the period and the compensatory benefit, exactly.  I couldn't agree more, but it can't just have one or two of those elements; it needs to have all three to provide - to make sure that employees are not worse off.


VICE PRESIDENT CATANZARITI:  It can't have an over-award component in it.  I mean, if when using the compensation, it can't have an over-award component?‑‑‑I would have thought it might be able to have the principles upon which it can be negotiated, without specifying the amount that the principles that would apply.


DEPUTY PRESIDENT ASBURY:  You've previously agreed, apparently, to a framework that accepts that there is some benefit to the pilot of getting the training?‑‑‑Yes, we do.  That framework, and again I come to it.  The framework says that - and my reading of that clause from the OEA in my discussions was, that they would put 50 per cent on one side of the column, but I actually thought that that was - that needed to be offset on the other side.  It wasn't a benefit to the employee when the employee already the right to all training for free.  The benefit, it needed to be offset, so when they did an assessment - - -


It's arguable that the employee did have the right to all training for free.  This was dealing with voluntary training.  I accept the employee had the right to required training for free, but the proposition - but I'm struggling with the proposition that the award has ever provided for the pilot to have all training whether the employer requires it or not.  I accept there's some grey areas around the definition of required.  But I'm really struggling with the proposition, for my part anyway, that all training is for free?‑‑‑No, it's not.  It says all training required by the employer.  Now, in terms of - - -


VICE PRESIDENT CATANZARITI:  Isn't that what has been put to you in this case, that there is a distinction of involuntary training and required training and the clause that's been suggested to you is that the carve-out is for voluntary training and the award should be amended to take that into account.  That's the issue in front of us and it's been confused and certainly, everybody seems to be focussing on, including yourself, on going back to compensation for that sort of clause.  When one reads again the stuff from the OEA, it's pretty clear they took the view that voluntary training had a benefit?‑‑‑Yes, we share that there is an element of a benefit to it, but relative to the award, there isn't.  There's a benefit to the employee to get trained.

***        SIMON JOHN LUTTON                                                                                                                 XXN MR CHIN


How can that be so, with respect to your answer?  If somebody is doing voluntary training as different to required training, they're enhancing their career, are they not?‑‑‑Well, if you want to take the example of - - -


No, answer my question please.  This is not required training by the employer.  You are taking on voluntary training.  Now bear in mind, I preface this, I have - and Mr Molnar will tell you, I have extensive experience in this industry, right?‑‑‑Yes.


So answer the question as directly put.  Voluntary training; training required by the employer, that's what is being put in this case before us.  So is there a benefit to an employee undertaking voluntary training to themselves?‑‑‑Yes, there is a benefit.


Right, thank you.  Anything arising?





CROSS-EXAMINATION BY MS SAUNDERS                               [10.44 AM]


MS SAUNDERS:  Mr Lutton, you refer to your exchange with the Bench to proposals that you've advanced during this proceeding.  Do you remember that?‑‑‑Yes, I do.


They had - the AFAP put a position that it would consent to a clause permitting bonds with certain conditions.  You recall?‑‑‑Yes.


One of the conditions was that the bond must be authorised for an enterprise agreement?‑‑‑Yes.


One of the conditions was capping the maximum amount of the bonds?‑‑‑Yes.


One of the conditions was requiring certain amounts of above-award payments?‑‑‑Yes.  All benefits I think the phrase was.


Increase salaries are other benefits; that's right?‑‑‑Correct.

***        SIMON JOHN LUTTON                                                                                                       XXN MS SAUNDERS


And the example given was monetary benefits in the context of annualised salary?‑‑‑Yes.  But you can trade - you can recognise - - -


I didn't ask anything further.  Nothing further.


COMMISSIONER MCKENNA:  If I could ask, is that in the papers before us?


MS SAUNDERS:  No, it's not.  It's in correspondence, but the letter can be provided.


COMMISSIONER MCKENNA:  If you could supply that.


VICE PRESIDENT CATANZARITI:  All right, you're excused.

<THE WITNESS WITHDREW                                                          [10.45 AM]


VICE PRESIDENT CATANZARITI:  We'll take a short adjournment to allow the next witness to be called.


MR CHIN:  Before the Commission adjourns, I wonder if - may I seek leave to interpose Ms Deegan as the next witness, rather than have her excluded for the entirety of the proceedings?  If it please the Commission.


VICE PRESIDENT CATANZARITI:  Have you had a discussion about that?


MR CHIN:  I have with Ms Saunders.  I haven't yet with Mr Molnar.


MS SAUNDERS:  It can be accommodated.  I just need to observe that a number of other witnesses are giving evidence by telephone; that timing is a little tight.  But Mr Sharp is available in person, so he can be moved around.


VICE PRESIDENT CATANZARITI:  All right, so Ms Deegan is here, so we'll bat on.


MS SAUNDERS:  Mr Molnar may have wanted to re-examine.

***        SIMON JOHN LUTTON                                                                                                       XXN MS SAUNDERS


VICE PRESIDENT CATANZARITI:  No, no Mr Molnar said he was finished.


MR MOLNAR:  No, no.




VICE PRESIDENT CATANZARITI:  He said he was finished.


DEPUTY PRESIDENT ASBURY:  Can the witness be excused?


VICE PRESIDENT CATANZARITI:  I thought I had excused him.  I've said he was excused already, before.


MR LUTTON:  Thank you, your Honour.


MR MOLNAR:  May I - my witness Mr Hyme, I understand is not required by anyone to be cross-examined.  Might I just interpose and ask that we tender his statement which I think at the court book is at item 361.  It's Mr Hyme's statement and annexures.


VICE PRESIDENT CATANZARITI:  I'll call that - so we don't get confused, I'll call that exhibit REX1.



MR MOLNAR:  If the Commission pleases.


MR CHIN:  Could I just seek a short adjournment?



SHORT ADJOURNMENT                                                                  [10.47 AM]

RESUMED                                                                                             [11.45 AM]




MS SAUNDERS:  Thank you.  I call Ian Coxall.


THE ASSOCIATE:  Can you please state your full name and address for the record?


MR I COXALL:  Ian Andrew Coxall, (address supplied).

<IAN ANDREW COXALL, AFFIRMED                                         [11.47 AM]

EXAMINATION-IN-CHIEF BY MS SAUNDERS                          [11.47 AM]


MS SAUNDERS:  Mr Coxall's statement can be found behind tab 23.  Mr Coxall, this is Lucy Saunders for the RAAA.  Could you state your full name for the record, please?‑‑‑I can hardly hear you.


Could you state your full name for the record, please?‑‑‑Ian Andrew Coxall.


Your occupation?‑‑‑Pilot.


What is your business address?‑‑‑Valentine Road, Redcliffe, WA.


You've prepared a statement in these proceedings, is that right?‑‑‑Yes.


Do you have a copy of that in front of you?‑‑‑Yes.


Could I just get you to look at paragraph 3 of that statement?‑‑‑Yes.


Where it says, "GAM fleet", is that correct?‑‑‑It should say Skippers.


So instead of GAM - - -?‑‑‑That's an error.


With that correction, Mr Coxall, is everything in that statement true and correct to the best of your knowledge?‑‑‑It's changed since that date;  aircraft type is one less and there is less employees.


Okay, which aircraft type is different?‑‑‑The Conquest - one less.


That's the Cessna Conquest C441?‑‑‑Correct.

***        IAN ANDREW COXALL                                                                                                          XN MS SAUNDERS


How many employees do you have?‑‑‑Approximately 200 - - -


How many - - -?‑‑‑ - - - if it's aviation.


How many are pilots?‑‑‑41 today.


So where paragraph 2 says, "48 pilots", that should now read 41?‑‑‑Correct.


With those alterations, is this statement true and correct to the best of your knowledge?‑‑‑I believe so.


I tender the statement.


VICE PRESIDENT CATANZARITI:  Exhibit RAAA1 - any objection?  No?



MS SAUNDERS:  Nothing further.



CROSS-EXAMINATION BY MR MOLNAR                                  [11.49 AM]


MR MOLNAR:  Hello, Mr Coxall;  can you hear me?‑‑‑Yes, very faintly.


Is that better?‑‑‑That's much better.


At Skippers you have an enterprise agreement in place, don't you?‑‑‑Yes, we do.


That enterprise agreement deals with a return of service in exchange for the company, paying a certain amount of training costs?‑‑‑Can you say that again, sorry?


That enterprise agreement deals with a return of service or a bond in exchange for the company paying the training costs?‑‑‑Correct.

***        IAN ANDREW COXALL                                                                                                           XXN MR MOLNAR


You're aware, aren't you, that the purpose of the RAAA application to vary the award is to make crystal clear that bonds can be imposed on pilots?‑‑‑Yes.


You're aware that if the RAAA's application is granted by the Commission, that would have the effect that bonds can be imposed without having to enter into an enterprise agreement?‑‑‑I'm not sure about that.


You don't know if that's what the application is seeking?‑‑‑I believe it's that the bond could be entered into with individuals.


Right, under an enterprise agreement or under an award?‑‑‑I believe under an award.


If you can do it under an award, why have you got an enterprise agreement?‑‑‑I don't know.  You'd have to ask my boss.  I'm not sure.


VICE PRESIDENT CATANZARITI:  Sorry - there is no objection to that question by anybody but I'm not sure what that question was because if you do it under an award that's not - the question before that isn't answered that way, Mr Molnar.


MR MOLNAR:  I withdraw that.  Your witness statement says that you recover a portion under a bond of the training costs that you expend?‑‑‑We don't recover anything from them, just return it further.


Yes, unless they - - -?‑‑‑They don't have to pay them.


Yes, unless the pilot leaves early?‑‑‑Yes, if he leaves early, correct.


You would prefer, wouldn't you, to have the whole of those training costs paid in the event a pilot left?‑‑‑I think it should be proportionate to their return of service.


What do you mean by that?‑‑‑I would have thought if they'd left in the first 12 months, they should have to pay it all but after that it should be reduced to - after a couple of years - should be down to zero.  They shouldn't have to return anything.


You don't want to increase the amounts that you currently have as bond amounts?‑‑‑I don't, but I don't know what the company's view is on that.

***        IAN ANDREW COXALL                                                                                                           XXN MR MOLNAR


Okay, so that is your view, not the company's view - it may not be the company's view?


VICE PRESIDENT CATANZARITI:  Well, there is a stay application before us in that nature, Mr Molnar.  We have to deal with the case in front of us.


DEPUTY PRESIDENT ASBURY:  And arguably the witness couldn't do it if he wanted to, of the company couldn't do it if they wanted to because they've got an enterprise agreement - well, not arguably, actually.


MR MOLNAR:  Moving on, you've now had bonds in place at Skippers for a number of years?‑‑‑Yes.


I think you said earlier you have 41 employees as pilots?‑‑‑As pilots, yes.


Sorry, as pilots - and you said that's decreased recently?


MS SAUNDERS:  No, 41 was the decreased number.


MR MOLNAR:  No, it's decreased to 41 recently?‑‑‑Yes.


Has the number of positions you have altered - the pilot positions?‑‑‑No.


No, so the number of positions to which pilots might be employed remains constant?‑‑‑Fairly constant.


Now, that is - - -?‑‑‑It's controlled by our ability to train them.


But the number of positions remains, regardless of their being filled or not?‑‑‑Yes, we try and crew to the aircraft.


You've got positions that aren't growing but the bonds aren't helping you create new positions, are they?‑‑‑I don't understand the question.


Sorry - - -?‑‑‑The bonds aren't helping us create the positions?

***        IAN ANDREW COXALL                                                                                                           XXN MR MOLNAR


I'm saying that you are not creating new employment opportunities at the moment, are you?‑‑‑We've got employment opportunities.


Yes, but they're not growing in number, are they?‑‑‑No.


But you do have bonds in place, don't you?‑‑‑Correct.


So bonds are not causing more employment opportunities at Skippers, are they?‑‑‑No.


You've had several employees leave during their bonded period?‑‑‑Yes.


You say in your witness statement that the cost of people leaving before their bond period is up has a grave effect on your business?‑‑‑Yes.


Have you sought to or are you aware that the company has sought to enforce those bonds that have been broken?‑‑‑Yes, once they did and I think it was settled before it got to a court.


But you don't know the details of that?‑‑‑No, I don't.


But there are other people who have left and broken their bond?‑‑‑Yes.


They haven't been - - -?‑‑‑They've never paid them, correct.


But the company has never sought to enforce the bond?‑‑‑Well, yes, they've tried but can't find them.


I see.  No further questions.


VICE PRESIDENT CATANZARITI:  Thank you?‑‑‑When they jump bond, they tend to go into hiding a bit.


MS SAUNDERS:  With that, no re-examination.

<THE WITNESS WITHDREW                                                          [11.57 AM]

***        IAN ANDREW COXALL                                                                                                           XXN MR MOLNAR


VICE PRESIDENT CATANZARITI:  Thank you, you are now excused.  We'll take a short adjournment.


MS SAUNDERS:  The next witness is in person.


VICE PRESIDENT CATANZARITI:  Okay, we won't, then.


MR CHIN:  Might I have leave to re-agitate my application for leave to interpose Ms Deegan?




MR CHIN:  Thank you.


THE ASSOCIATE:  Can you please state your full name and address for the record?


MS T DEEGAN:  Tracy Deegan, (address supplied).

<TRACY DEEGAN, SWORN                                                            [11.58 AM]

EXAMINATION-IN-CHIEF BY MR CHIN                                     [11.58 AM]


MR CHIN:  Your name is Tracy Deegan?‑‑‑Yes, it is.


You reside at (address supplied)?‑‑‑Yes.


Your position is as HR and development general manager for Alliance Airlines, is that correct?‑‑‑Yes.


For the purpose of these proceedings you've prepared three statements?‑‑‑Yes.


Do you have those statements with you?‑‑‑I don't.

***        TRACY DEEGAN                                                                                                                              XN MR CHIN


Can I hand you this bundle, open at the page 378 of the court book, your Honours.  The document before you, page 378 of the court book, is that your first statement of three pages in length?‑‑‑Yes, it is.


It's unsigned and undated?‑‑‑Yes, that's correct.


Do you say that the contents of that statement are true and correct to the best of your knowledge and belief?‑‑‑Yes, I do.


I tender that statement.





MR CHIN:  Thank you, your Honour.  Can I then ask you to turn to page 381 of the bundle before you?‑‑‑Yes.


You've got that?‑‑‑Yes, I do.


It's a document headed, "Second statement of Tracy Deegan"?‑‑‑Yes.


It's signed by you and dated 2 September 2019?‑‑‑Yes, that's correct.


Do you say that the contents of that statement are true and correct to your knowledge and belief?‑‑‑Yes, I do.


I tender that statement.





MR CHIN:  Finally, can I ask you to turn to page 383 of the bundle?‑‑‑Yes.

***        TRACY DEEGAN                                                                                                                              XN MR CHIN


That is a document headed, "Third statement of Tracie Deegan"?‑‑‑Yes.


It's signed on page 388 by you and dated 4 November 2019?‑‑‑Yes, that's correct.


It includes three annexures, I think:  annexure A is a deed on page 389?‑‑‑Yes.


Annexure B on 392, another deed and annexure C on 395?‑‑‑Yes, that's correct.


That completes your third and final statement prepared for these proceedings?‑‑‑Yes, it does.


Do you say that the contents of this statement are true and correct to the best of your knowledge and belief?‑‑‑Yes, that's correct.


I tender this statement.





MR CHIN:  Thank you, that's the evidence in chief.



CROSS-EXAMINATION BY MR MOLNAR                                   [12.01 PM]


MR MOLNAR:  At paragraph 37 - - -


VICE PRESIDENT CATANZARITI:  - - - of which statement?


MR MOLNAR:  - - - of your third statement, at page 388, you say there that you're being advised by pilots that they understand that the employer must get a return of service for the significant outlay they are making.  Do you hear that often?‑‑‑I do, yes.

***        TRACY DEEGAN                                                                                                                     XXN MR MOLNAR


How many pilots have said that to you?‑‑‑Numerous pilots during the recruitment process.


During the recruitment process?‑‑‑Yes.


What about once they're employed?‑‑‑In general discussions I have heard it, yes.


So those pilots would have no problem staying, even if there was no bond?‑‑‑I'm unsure about - - -


Unsure about it?‑‑‑ - - - (indistinct) the conversation that I have.


What is the average length of employment of a pilot with Alliance, off the top of your head?‑‑‑Last time I did the statistics it was over four years.


Over four years, and that's longer than two years?‑‑‑Yes.


Two years is the length of the bond?‑‑‑Yes.


So pilots aren't suddenly jumping ship right after their bond has expired?‑‑‑If their tenure is four years on average;  that's an average.


Just going to paragraph 16 on page 385, what you're saying there is that a Dash 8 aircraft is of no real benefit to someone who needs a Fokker 100 aircraft?‑‑‑We do not operate Dash 8 aircraft.


Yes, so the qualification isn't transferrable in that circumstance?‑‑‑No.


So you have to go from like to like aircraft type?‑‑‑I don't understand the question.


Obviously, a Dash 8 aircraft would go to another Dash 8 aircraft employer;  that would be fairly painless, but they can't go to a different aircraft type without having to go under more training for the new aircraft type?‑‑‑Yes.


So Alliance in that circumstance are not getting a benefit from the previous type rating that they have?‑‑‑No.

***        TRACY DEEGAN                                                                                                                     XXN MR MOLNAR


Alliance has consistently used training bonds for its employed pilots?‑‑‑Yes.


Are all those bonds pursuant to an enterprise agreement?‑‑‑Yes, they are.


Why are you seeking a variation to the award?‑‑‑I cannot answer that, that's - - -


You can't answer that?‑‑‑No.


You've had bonds in place at Alliance with pilots for quite a few years now?‑‑‑Yes.


How many pilot positions do you have there?‑‑‑We currently have 166 pilots.


166 - has that grown over time?‑‑‑Yes, it has.


Is that because you have bonds in place, that it's grown?‑‑‑I don't understand the question.


Well, I'm just asking - so having bonds in place, does that lead to more employment opportunities at Alliance?‑‑‑The number of pilots that we currently have is a direct reflection of the growth of the business.


Yes, okay.  No further questions.


VICE PRESIDENT CATANZARITI:  Thank you.  Any re-examination?


MR CHIN:  No, your Honour.  Might the witness be excused?



<THE WITNESS WITHDREW                                                          [12.06 PM]


MS SAUNDERS:  I've got a further in-person witness that I can bring in now.  I call Mal Sharp.

***        TRACY DEEGAN                                                                                                                     XXN MR MOLNAR


VICE PRESIDENT CATANZARITI:  So if you play around with the batting order, Ms Saunders, does that mean that they'll want an early lunch and adjournment to continue discussions?


MS SAUNDERS:  It's more that their - that probably will assist, your Honour.  It's more that there is no one precisely lined up to be on the phone at this moment but Mr Sharp's available.


VICE PRESIDENT CATANZARITI:  Yes, so we'll do Mr Sharp and then we'll take the luncheon adjournment.


MS SAUNDERS:  Certainly.


VICE PRESIDENT CATANZARITI:  Then we can hopefully continue some discussions.


MS SAUNDERS:  Mr Sharp's statement is at page 356 of the court book.


THE ASSOCIATE:  Can you just state your full name and address for the record?


MR M SHARP:  Malcolm Alexander Sharp, (address supplied).

<MALCOLM ALEXANDER SHARP, SWORN                              [12.07 PM]

EXAMINATION-IN-CHIEF BY MS SAUNDERS                           [12.08 PM]


MS SAUNDERS:  Could you state your full name for the record, please?‑‑‑Malcolm Alexander Sharp.


Your occupation?‑‑‑I'm a managing director of a small regional airline and the chief pilot.


Your business addresses?‑‑‑Our business address is Hamilton Airport, Hamilton, Victoria.


You've prepared a statement in these proceedings?‑‑‑I have.


Do you have a copy of that with you?‑‑‑I do.

***        MALCOLM ALEXANDER SHARP                                                                                          XN MS SAUNDERS


Could I get you to look at paragraph 15 of that statement?  Does that information need to be updated in any way?‑‑‑Yes, since this statement was prepared back in February, we had two further pilots leave our employment without paying back their training bonds.


If you happen to know, what was the cost of that bond?‑‑‑The total now, with the five bonds all inclusive, is around $110,000.


With paragraph 16, you are considering action.  Is there any update to that paragraph?‑‑‑No, there is no update at this stage.


Thank you.  I tender the statement.





Thank you, Mr Molnar.

CROSS-EXAMINATION BY MR MOLNAR                                   [12.09 PM]


MR MOLNAR:  You're aware that the AFAP doesn't think that bonds can be done under the current version of the award?‑‑‑Yes.


You know that the AFAP thinks that you can only have a bond if it is in an enterprise agreement?‑‑‑Yes.


I'd like to assume that the AFAP is correct in its interpretation - - -


MS SAUNDERS:  I object to this line of questioning.  It appears to be exploring opinions on contraventions of the award.  Whether the AFAP's interpretation is correct is a matter for the Bench.


VICE PRESIDENT CATANZARITI:  We'll hear the full question, but our preliminary view is we are likely to rule against you, Mr Molnar.


DEPUTY PRESIDENT ASBURY:  If that's where you're going.

***        MALCOLM ALEXANDER SHARP                                                                                            XXN MR MOLNAR


VICE PRESIDENT CATANZARITI:  If that's where you're going - we're happy to hear the full question first.  Don't answer the question, Mr Sharp.


MR MOLNAR:  No, I'll change.  Have you tried to bargain with your employees for an enterprise agreement previously?‑‑‑No.


Why not?‑‑‑Simply because I believe that the award should be encompassing of those arrangements.


So the only reason you would enter into an enterprise agreement is something to do with a bond?‑‑‑No.


So, sorry, can you just repeat your answer before?  Why don't you enter into enterprise agreements?‑‑‑Can you ask the question again, thanks?


Why have you never tried to enter into an enterprise agreement with your employees?‑‑‑Because we've relied on the award to provide us with that guidance.


So if the RAAA's proposed amendment was made, there would still be no reason for you to collectively bargain with your employees?‑‑‑Not that I can bring to attention right now.


You have bonds in place already, yes, you do, and you've had them in place for a number of years?‑‑‑Correct.


How many pilots do you employ?‑‑‑At the moment we have over 30 pilots.


Has that increased or decreased over time?‑‑‑The number of pilots?


Well, sorry, no;  the number of pilot positions that you have to fill?‑‑‑Well, as we've been in business 30 years, it has increased over time, yes.


It has increased?‑‑‑Yes.

***        MALCOLM ALEXANDER SHARP                                                                                            XXN MR MOLNAR


Is that because you implement training bonds or is it for other reasons?‑‑‑It's probably an - sorry, I'd answer it in two parts:  by providing training bonds it's given us the capacity to employ more pilots and to have more faith in the employment process because we can get a return of service from those pilots, therefore we're prepared to actually employ more pilots on that basis.


Taking into account the two pilots that you've just mentioned, you've had eight pilots leave since introduction of written pilot bond agreements?‑‑‑Since we've had written ones, correct.


You say that you haven't taken any enforcement measures to recover the amounts owing under those bonds?‑‑‑We've only taken preliminary measures at this stage.  That's correct.


What do you mean by preliminary measures?‑‑‑Well, we have written to the pilots and we've had our legal counsel write to them at this point.  That's the only action that we've taken.  Coincidental with that is that the AFAP has then written back to us in response to that claiming that the award - that the bonding isn't legal.  So we're still considering our actions in regard to that, responding to that position.


No further questions.


MS SAUNDERS:  Nothing arising.


VICE PRESIDENT CATANZARITI:  Thank you, you're excused.

<THE WITNESS WITHDREW                                                          [12.14 PM]


VICE PRESIDENT CATANZARITI:  We'll take the luncheon adjournment.

LUNCHEON ADJOURNMENT                                                         [12.15 PM]

RESUMED                                                                                               [4.28 PM]




MR CHIN:  Yes, may I on behalf of the parties please thank the Commission for its indulgence in affording us the time to have discussions this afternoon?  I can report that the AFAP, the RAAA and Alliance Airlines - my client - have reached a consent position in relation to a proposed amendment to clause 16 of the award, dealing with training.  May I hand the proposed amendment to - - -

***        MALCOLM ALEXANDER SHARP                                                                                            XXN MR MOLNAR


VICE PRESIDENT CATANZARITI:  So where does that leave REX and Qantas Group?


MR CHIN:  Their position, as I understand it, is that they require further time to consider, formulate their final position in relation to the proposal.  They have been included in relation to the discussions to some extent.  They've seen the consent position that the parties I've mentioned have developed.  They require further time to finalise their position.  There may be some difficulty on their part, with some elements of the position, but I'm not in a position to say that at this stage.  It may be that the matter will need to be stood over for further directions to enable those parties to arrive at their respective positions.


VICE PRESIDENT CATANZARITI:  All right, let's see what you've got.


MR CHIN:  Thank you.


VICE PRESIDENT CATANZARITI:  Yes, I've seen something similar in agreements so let's see what REX and Qantas have to say in a moment.


MR CHIN:  Yes, the Vice President will notice that it picks up on some of the features of the training bonds, in particular the policy developed by the OEA.




MR CHIN:  It picks up on the distinction between unilaterally directed training and other training, for which bonds can apply.  There is an avoidance of doubt provision at the end of 15.6.2 that makes it clear that the training - the type of training for which my client enters into bonds is permitted;  that is initial class and type rating training, where an employee or prospective employee receives training to enable him or her to operate the type of aircraft for which they are initially employed, and also upgrade training.




MR CHIN:  The Commission will also note that this proposed amendment to the clause is a stand-alone amendment.  No further variations are required to the preceding provisions, clause 13.2, 16.2 and 0.6.




MR CHIN:  Thank you.


VICE PRESIDENT CATANZARITI:  Mr Molnar, do you want to say anything?


MR MOLNAR:  No, we consent to that.




MR TRINDADE:  Thank you, your Honour.  Obviously there have been some fruitful discussions between the three parties who identified as consenting to it.  We are slightly different in that we haven't, obviously, been involved in all of those discussions.  There are some aspects of this that have some concerns for us, that we would like to take away and consider.  So we're not really in a position to consent but neither at this stage do we have a position that we have a firm view about opposing any particular aspect of it.  We certainly appreciate that it meets the prime objective of having a - - -


VICE PRESIDENT CATANZARITI:  Do Regional Express currently have an enterprise agreement?


MR TRINDADE:  It does currently have;  it's in the middle of re-negotiation.


VICE PRESIDENT CATANZARITI:  They may well have some difficulty opposing this going into the award.


MR TRINDADE:  Well, your Honour, I'd say we'd have as much view about what goes into the award as any other party.




MR TRINDADE:  And the practical effect will obviously by that whatever is into the agreement will be the basis upon which the BOOT is passed.




MR TRINDADE:  So it is a live matter for us, as we'd say.  So we would seek a brief period - we'd say no more necessarily than a week - to consider this and to perhaps report back to the Commission as to our view.


VICE PRESIDENT CATANZARITI:  Yes, okay;  thank you.  Ms Srdanovic?


MS SRDANOVIC:  I can essentially echo what Mr Trindade just said.  We would also similarly be assisted by a short period in which just to consider the clause further.  I can indicate from A to H generally speaking there is a higher level of acceptance, of those provisions.  In particular we've been considering (i) in 13.6(2) by reference to the Qantas Group position in enterprise agreements as well.


DEPUTY PRESIDENT ASBURY:  You might want to consider also that you haven't got a definition of actual cost of training, which might be - I think that could be capable of - it could be the wages of the pilot, it could be a range of things that that could mean and I'd hate to see down the track some disagreement about exactly what that means but in any event, that's a matter that - it may be that there will be some - - -


VICE PRESIDENT CATANZARITI:  All right, so I don't have my diary presently, but it will be - my associate will contact the parties.  It will be brought back for mention in front of me in a few weeks' time.  Thank you, the Commission is adjourned.

ADJOURNED TO A DATE TO BE FIXED                                        [4.34 PM]



SIMON JOHN LUTTON, AFFIRMED.............................................................. PN156

EXAMINATION-IN-CHIEF BY MR MOLNAR............................................. PN156



CROSS-EXAMINATION BY MR CHIN.......................................................... PN175

CROSS-EXAMINATION BY MS SAUNDERS............................................... PN301

THE WITNESS WITHDREW............................................................................ PN313

EXHIBIT #REX1 WITNESS STATEMENT OF MR HYME........................ PN329

IAN ANDREW COXALL, AFFIRMED............................................................ PN336

EXAMINATION-IN-CHIEF BY MS SAUNDERS.......................................... PN336


CROSS-EXAMINATION BY MR MOLNAR.................................................. PN357

THE WITNESS WITHDREW............................................................................ PN402

TRACY DEEGAN, SWORN............................................................................... PN410

EXAMINATION-IN-CHIEF BY MR CHIN..................................................... PN410


EXHIBIT #AA2 SECOND WITNESS STATEMENT OF TRACIE DEEGAN DATED 02/09/2019............................................................................................................... PN427

EXHIBIT #AA3 THIRD WITNESS STATEMENT OF TRACIE DEEGAN DATED 04/11/2019................................................................................................................................. PN436

CROSS-EXAMINATION BY MR MOLNAR.................................................. PN438

THE WITNESS WITHDREW............................................................................ PN468

MALCOLM ALEXANDER SHARP, SWORN................................................ PN477

EXAMINATION-IN-CHIEF BY MS SAUNDERS.......................................... PN477


CROSS-EXAMINATION BY MR MOLNAR.................................................. PN488

THE WITNESS WITHDREW............................................................................ PN513