Health Services Union of Australia v Peninsula Health

[2021] FWC 1420

[2021] FWC 1420

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Health Services Union of Australia
v
Peninsula Health
(C2020/8715)

DEPUTY PRESIDENT COLMAN MELBOURNE, 17 MARCH 2021

Application under disputes procedure in an enterprise agreement – whether consultation obligations triggered – government request for expressions of interest for public-private partnership – whether joint proposal for major change – whether employer is a decision-maker

[1] This decision concerns an application made by the Health Services Union of Australia (Victoria No 1 Branch) (HSU) under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedure in clause 7 of the Victorian Public Health Sector (Health and Allied Services, Managers and Administrative Workers) Single Interest Enterprise Agreement 2016 – 2020 (Agreement). The Agreement applies to a large number of employers in the Victorian public health sector, including Peninsula Health, which operates Frankston Hospital. Peninsula Health employs members of the HSU who work in non-clinical services at the hospital. These services include patient, linen and food services, as well as grounds and garden maintenance. The HSU is bound by the Agreement.

[2] Peninsula Health is incorporated under the Health Services Act 1988 (Vic) and has a separate legal identity from the State of Victoria (see ss 65P and 65Q). Frankston Hospital is publicly owned and funded by the State of Victoria.

[3] On 22 September 2020, the State government released a document entitled ‘Frankston Hospital Redevelopment Project – Invitation for Expressions of Interest’ (EOI Request), inviting qualified persons to submit expressions of interest to undertake the Frankston Hospital redevelopment project. The project will be a public-private partnership (PPP) that entails the construction of a multi-level tower and the creation of additional bed capacity and operating theatres. The EOI Request states that the project will be delivered by the Victorian Health and Human Services Building Authority (VHBA), in partnership with Peninsula Health. It contains an ‘indicative summary of the potential scope of services’, which includes the provision of various non-clinical services currently performed by employees of Peninsula Health. The EOI Request describes Peninsula Health as a key stakeholder in the project.

[4] The HSU contends that the release of the EOI Request demonstrates that Peninsula Health proposes to make a major workplace change, namely, to outsource non-clinical services, and that this proposal has triggered the consultation obligation in clause 6 of the Agreement. Peninsula Health disagrees. The HSU asks the Commission to determine the dispute under clause 7 of the Agreement and require Peninsula Health to commence consultation under clause 6, including by providing the union and employees with a ‘change impact statement’ within the meaning of clause 6.4 of the Agreement.

[5] The application was listed for conference however the matter was not resolved, and the HSU requested that it be programmed for hearing. The parties lodged written submissions and witness statements in accordance with directions issued by the Commission. The parties agreed that the Commission has authority to determine the dispute under clause 7.7 of the Agreement.

Terms of the Agreement

[6] The terms of the Agreement that are relevant to the determination of the dispute are contained in section 2 of the Agreement. Clause 6.1 (a) states:

“6.1 Consultation regarding major change

(a) Where an Employer proposes a major workplace change that may have a significant effect on an Employee or Employees, the Employer will consult with the affected Employee/s, the HWU, and the Employee’s other chosen representative (where relevant) before any proposed change occurs.”

[7] Clause 6.2(a) defines consultation to mean a ‘genuine opportunity to influence the decision-maker, but not joint decision-making’, and states that consultation is ‘not merely an announcement as to what is about to happen’. Clause 6.2(c) states that ‘major change’ means ‘a change in the Employer’s program, production, organisation, physical workplace, workplace arrangements, structure or technology that is likely to have a significant effect on Employees’. Clause 6.2(d) then states that ‘significant effect’ includes termination of employment, and changes in the size, composition, or operation of the workforce, including from outsourcing.

[8] Clause 6.3 sets out the steps in the consultation process and contains indicative timeframes. The first step is for the employer to provide a ‘change impact statement’ to employees and the union. Next, written responses are provided by employees and the HSU. Following this are consultation meetings, a further employer response, and alternative proposals from employees or the HSU, which are then considered by the employer. There are then further meetings with employees and the union, prior to the employer advising of the outcome. Clause 6.3(b) states that the timeframes must allow a party ‘to genuinely participate in an informed way having regard for all the circumstances including the complexity of the change proposed’.

[9] Clause 6.4 concerns the ‘change impact statement’. It provides as follows:

“Prior to consultation required by this clause, the Employer will provide affected Employee/s and the HWU with a written Change Impact Statement setting out all relevant information including:

(a) the details of proposed change;

(b) the reasons for the proposed change;

(c) the possible effect on Employees of the proposed change on workload and other occupational health and safety impacts;

(d) where occupational health and safety impacts are identified, a risk assessment of the potential effects of the change on the health and safety of Employees, undertaken in consultation with HSRs, and the proposed mitigating actions to be implemented to prevent such effects;

(e) the expected benefit of the change;

(f) measures the Employer is considering that may mitigate or avert the effects of the proposed change;

(g) the right of an affected Employee to have a representative including a HWU representative at any time during the change process; and

(h) other written material relevant to the reasons for the proposed change (such as consultant reports), excluding material that is commercial in confidence or cannot be disclosed under the Health Services Act 1988 or other legislation.”

Contentions of the parties

[10] The HSU submitted that the Commission should determine that Peninsula Health’s obligation in cl 6.1(a) of the Agreement to consult about major change had been engaged. It said that the Commission should consider the question for determination in the context not only of the EOI Request, but also other recent developments, as well as events that are scheduled to occur, including: the shortlisting on 21 January 2021 of three consortia for the project; the planned release in early to mid-2021 of a request for proposals (RFP) to the three consortia; and the expectation that the successful bidder will be announced in early 2022.

[11] The HSU contended that the EOI Request entailed a proposal by Peninsula Health to outsource non-clinical services, and that this is a major change that would have a significant effect on employees. It submitted that the EOI Request was not the proposal itself, but evidence of the existence of an employer proposal for the purpose of clause 6.1 of the Agreement. It pointed to item 4.6.3 of the EOI Request, which relevantly states that ‘a range of soft facilities services will be included within the scope of Services’, and to item 4.6.4, which states that Table 7 sets out ‘an indicative summary of the potential scope of services to be provided by Project Co’, including patient and cleaning services. The HSU said that, although under the EOI Request the State may, in its absolute discretion, ‘withdraw, cancel or modify … the Project or any part of the Project’ (Appendix B, clause 6(xxii)), the possibility of modification is perfectly consistent with there being a proposal. Clause 6 of the Agreement does not require there to be a definite decision before consultation is triggered. The union contended that the proposal was plainly a formal, serious, and detailed one, published for the consideration of private tenderers on a $562m project, and that each of the shortlisted consortia had included a business identifiable as the possible provider of outsourced non-clinical services.

[12] The HSU submitted that the proposal was in substance a joint proposal of the State of Victoria and Peninsula Health, and that although the project might have been initiated by the State, which released the EOI Request, it had been agreed to by Peninsula Health, such that the project had now become a joint enterprise. The EOI Request identified the State and Peninsula Health as project partners. It also revealed that the project’s steering committee includes representatives of Peninsula Health, and that senior representatives of Peninsula Health, including its chief executive, form part of the project’s governance structure.

[13] The HSU contended that, because there was an employer proposal for the purposes of clause 6.1(a), albeit a joint proposal with the State, the obligation on the employer to consult had been enlivened, and consultation must commence now. It said that the stipulation in clause 6.1(a) that consultation take place before any proposed change occurs merely sets an outer time limit, and that clause 6 required genuine consultation, not consultation at the eleventh hour when there would be no opportunity for the union and employees to influence the decision-maker, for that would simply be ‘merely an announcement as to what is about to happen’, contrary to clause 6.2(a).

[14] The HSU submitted that the project was now at the procurement stage of the PPP lifecycle, and that the government’s announcement of the shortlisting of the three consortia stated that in the coming months the consortia would prepare detailed proposals as part of a comprehensive tender process, and that the successful bidder was expected to be announced in early 2022. The union noted that the State’s ‘request for proposal template’ document includes a section about ‘project scope and delivery requirements’ and submitted that this would evidently include the outsourcing proposal, which would be determined by the project partners. The HSU submitted that, for consultation to be genuine, and for the union and employees to have an opportunity to influence the decision-maker, consultation had to occur before the RFP is issued. It said that genuine consultation would address matters such as job security, redundancy and maintenance of terms and conditions of employment of continuing non-clinical employees. Consultation should therefore occur now and should inform the framing of the RFP, before the essential characteristics of the outsourcing proposal have been defined.

[15] The union further submitted that the various steps in the consultation process set out in 6.3 of the Agreement entail an indicative timeframe of some 8 weeks, and that if the opportunity to influence the decision-maker is to be genuine, the consultation must occur at a point that leaves time for these steps to occur, so that suggestions can be made, considered, and responded to. It said that the industrial reality of a large-scale proposal such as this is that a genuine opportunity to influence the decision-maker means being heard as to the scope of the RFP. The union said that the project partners must already know sufficient detail about the outsourcing proposal in order to be able to prepare a detailed RFP for the delivery of services, and that such information would go to the matters that, under clause 6.4, are required to be addressed by the change impact statement, including details of the proposed changes, the reasons for them and their expected benefits, and measures to mitigate adverse effects on employees. The union said that Peninsula Health must be able to consult with the union and the workforce about the development of the RFP and provide a change impact statement.

[16] Peninsula Health submitted that it has not made any proposal to introduce major workplace change. It said that the redevelopment project, and the EOI Request that pertains to it, are an initiative of the State government, and that Peninsula Health had no decision-making power or function in respect of the project at all. It submitted that the EOI Request merely invited expressions of interest for the project, and that in due course the State government was expected to issue an RFP. Only then would there be any proposals to speak of, and these would be the proposals of the tenderers, which the State government could accept, modify, or reject.

[17] Peninsula Health contended that, even if the Commission were to conclude that it had made a proposal to introduce change, clause 6 requires only that it consult about the proposal ‘before any proposed change occurs’ (clause 6.1(a)), which in the present context means before the operational commencement of the proposal, and that this will not occur until 2025. Peninsula Health said that there was nothing in clause 6 that would require it to commence consultation about the alleged proposal now, and that it would simply not be possible to provide a change impact statement at this time, as it is not known what the relevant changes will be, let alone what details might be provided in a change impact statement.

[18] Peninsula Health objected to the union’s reliance on events that are scheduled to occur in the future and contended that these matters travelled beyond the dispute as notified. It said that the Commission should answer the question posed for determination by reference to the events that had occurred to date. It submitted that the Commission should conclude that its consultation obligations in clause 6 of the Agreement had not been enlivened.

Consideration

[19] I propose to answer the revised question for determination that was formulated by the HSU. That question asks: ‘In all the circumstances of the Frankston Hospital Redevelopment Project and Peninsula Health’s involvement in the project, which is currently in the development phase of the request for proposal, have the employer’s consultation obligations regarding major change in clause 6.1(a) of the Agreement been engaged?’ I agree with the HSU that I should have regard to facts that have arisen since the filing of the application and the events that are scheduled to occur, including the procurement phase and the expected course of the project more generally. These matters all relate to the same fundamental dispute between the parties, which is whether Peninsula Health is required now to consult with the HSU and employees under clause 6 of the Agreement. I consider that by answering this question, I will determine the dispute, which is what clause 7.7 authorises the Commission to do.

[20] Clause 6.1(a) obliges an employer to consult with the HSU and relevant employees where it ‘proposes a major change that may have a significant effect’ on employees. In my view, Peninsula Health does not propose a major change for the purposes of the clause. The change to which the HSU refers is proposed by the State of Victoria. It is undisputed that the EOI Request was issued by the Victorian government. The same day, the Premier and the Minister for Health announced that the EOI Request had been released, and that the project would be delivered as a PPP. There is clear evidence that the State proposed the project, including the component of it that concerns the outsourcing of non-clinical services. The HSU does not dispute this. It contends rather that the project is a joint proposal of the State and Peninsula Health. I reject this contention. It is based on an inferential case that is simply not supported by the evidence.

[21] Ms Bridget Rusling is Peninsula Health’s director for redevelopment. She is the primary point of contact for the Frankston hospital redevelopment project. She gave evidence that Peninsula Health has an important role in the project, providing input and feedback to the VHBA about matters that are likely to have an operational impact on the project. She explained that the project steering committee comprises representatives of the VHBA, Peninsula Health, and several government departments, and that the committee makes recommendations to the Minister. Ms Rusling said however that Peninsula Health does not have any decision-making responsibility for the project. She further stated that she understood the purpose of the EOI Request was to test the market and determine which consortia might be willing to deliver the project. Ms Rusling said that the RFP process would be managed by the VHBA, and that while Peninsula Health would provide information on operational matters to the VHBA, it has no approval rights or decision-making role in the RFP process. Ms Rusling said that Peninsula Health did not propose the project, and that if it had proposed a project, it would have proposed an even bigger one. She said that there had been a direction from government concerning a PPP project, and that Peninsula Health was neither for nor against the outsourcing of clinical services.

[22] I accept Ms Rusling’s evidence. It was authoritative and credible. It was also consistent with the legislative context, under which the secretary of the Department of Health and Human Services has power under the Health Services Act to make decisions about the operation of hospitals and the delivery of health services. Ms Rusling’s evidence directly contradicts the inferential case that the HSU seeks to establish. The project is being proposed by government, not by Peninsula Health.

[23] The HSU contended that Ms Rusling’s evidence under cross-examination demonstrated that Peninsula Health was indeed a co-proposer of, or joint decision-maker in, the project. It referred to Ms Rusling’s evidence that Mr Peter Lotz, the director of non-clinical services, was a member of the steering committee, and that the committee had seen a draft of the EOI Request. It referred to Ms Rusling’s evidence that both she and Ms Felicity Topp, the chief executive officer of Peninsula Health, had been members of the evaluation panel that selected the shortlisted consortia. But none of this is inconsistent with Ms Rusling’s evidence that Peninsula Health did not propose the project and that it has no decision-making authority.

[24] The HSU emphasised the fact that Peninsula Health is described in relevant documents as a project partner. I find this to be of no moment. The mere use of the word ‘partner’ does not connote the joint instigation of the project. The hospital that Peninsula Health runs is to be subject to a major redevelopment. It possesses critical operational perspective. The State and Peninsula Health will need to work closely together. Peninsula Health would need to be a ‘partner’ in any government project to redevelop the hospital.

[25] In her evidence, Ms Dianne Stratton, the union’s Frankston Hospital delegate, said that shortly after the release of the EOI Request, she attended an all-staff meeting at which Ms Topp told employees that they would not be worse off as a result of the proposal and that no-one would lose their job. Ms Stratton said that at another meeting, Ms Topp said that if employees went over to a new employer, only the employer name on their payslips would change and nothing else. The union said that from this evidence an inference can be drawn that Peninsula Health does have some decision-making authority in relation to the project. However, this inference is inconsistent with the direct evidence of Ms Rusling that Peninsula Health has no decision-making authority. It is also inconsistent with the framework of the Health Services Act, under which the government can plainly direct certain outcomes. The full text and context of what Ms Topp said is not in evidence. From the comments attributed to Ms Topp by Ms Stratton, I consider that a more available inference is that Ms Topp was conveying to staff her wish to minimise the impact of any outsourcing on employees, and that if an outsourcing occurs, her perspective is that nothing ought to change but the employer name on the payslip. The arrangements that would be put in place in connection with any outsourcing are not yet known to anyone. There are as yet no proposals, nor any decision by the State government to accept a proposal. In this regard, I note Ms Rusling’s evidence, which I accept, that it is not yet known whether there will in fact be any outsourcing of the non-clinical services at all.

[26] The HSU placed emphasis on Ms Rusling’s acknowledgement in cross-examination that Peninsula Health had ‘agreed’ with the EOI Request, which contemplates the outsourcing of non-clinical work. However, I consider that by her answer, Ms Rusling meant that Peninsula Health had agreed that the EOI Request was a suitable document. She did not mean that Peninsula Health had given the State government its approval to proceed, because plainly the State government did not need the approval of Peninsula Health. I reject the union’s contention that by ‘agreeing’ with the EOI Request, Peninsula Health became a co-proposer of the project, or a joint decision-maker in relation to the project.

[27] The HSU contended that, even if Peninsula Health had been obliged to adopt the project that was proposed by the State government, it was nevertheless apt to refer to this as a joint ‘proposal’. Clause 6.2 does not use the word ‘proposal’. It speaks instead of when an employer ‘proposes’ a relevant change. The verb ‘propose’ carries a dimension of meaning that the noun ‘proposal’ does not; it can mean either ‘to put forward for consideration’, or ‘to form a purpose’ – to intend. If an employer is required to implement change that has been determined by another, it is not the employer’s proposal to make the change, but one could reasonably say that the employer proposes (has the purpose, intends) to make the change, simply because it has to do so. This would support the HSU’s argument that an employer can propose a major change, even if another party is the sole instigator of the change. However, in the context of the present dispute, this point does not assist the HSU’s argument. It encounters the following problem. Clause 6 is plainly concerned with change that is proposed to be made by an employer that is also the relevant decision-maker. Clause 6.2(a) speaks of consultation affording an opportunity to ‘influence the decision-maker’. If the employer is not the decision-maker, the clause has no work to do. And as I have said above, it is clear that Peninsula Health is not the decision-maker for, or in relation to the project.

[28] The HSU referred to this as the ‘anomaly’ in the employer’s argument: that employees performing non-clinical services could have their work outsourced in the absence of an employer proposal for that to occur, and thereby be deprived of consultation. I do not accept that this is the implication of Peninsula Health’s argument, or that there is any anomaly.

[29] First, the Agreement does not say that the employer must consult with employees and the union about any matter affecting their employment. It states that the employer must consult when it proposes a major workplace change. The obligation does not apply to decisions made by others. This is not anomalous. It is unsurprising. If the employer is not the relevant decision-maker, any ‘consultation’ is likely to be confined to the provision of information, and consultation connotes more than this. For this reason, enterprise agreements do not usually purport to subject employers to ‘consultation’ obligations in respect of matters that are beyond their control. Moreover, a consultation provision that imposed obligations on an employer to consult with employees about decisions taken by others would arguably not pertain to the relationship between employer and employee, with the result that the provision would, to that particular extent, be a non-permitted matter and have no effect (see ss 172 and 253).

[30] Secondly, the conclusion that Peninsula Health’s consultation obligations under clause 6 of the Agreement have not been enlivened does not mean that the outsourcing of non-clinical services, if it occurs, could not require Peninsula Heath to consult with the HSU and employees at some later stage. Peninsula Health may need to propose major change in respect of matters for which it does have decision-making authority, such as in relation to termination of employment of certain employees, or transfer arrangements. Such proposed changes would trigger the consultation obligations under clause 6 of the Agreement. It is not the case that the employer’s position in this matter implies that employees’ positions could be outsourced without consultation.

[31] Even if Peninsula Health were to be regarded as having proposed a major change, one in respect of which it had some level of decision-making authority, the proposed change would still not be a major change for the purpose of clause 6.1(a). This is not because a proposal by the employer to outsource work covered by the Agreement would not be a major change; plainly it would be. Rather, clause 6 is concerned with a proposed change that has sufficient detail to be capable of being the subject of a change impact statement. Clause 6.1 is not concerned with conceptual, or high-level change, but with concrete proposals for change. Clause 6.4 requires that, before consultation takes place, employees and the union are to be provided with a change impact statement addressing ‘all relevant information’, including the matters in subclauses (a) to (h). These include ‘the details’ of the proposed change, the reasons for the change, the expected benefit of the change, and measures to mitigate or avert the effects of the proposed change (presumably the clause is concerned here with ‘adverse’ effects). A ‘proposed change’ must be one that is sufficiently detailed that, before the consultation occurs, a change impact statement may realistically and usefully be provided to the union and employees, one that addresses the matters referred to in clause 6.4. I do not consider that the ‘proposed change’ in this case currently meets that description. Any change impact statement would be hopelessly abstract. The HSU said that Ms Topp’s statement to employees demonstrated that she had considered mitigation measures. I agree that this appears to be the case. But these can only be hypothetical measures, because Ms Topp, like everyone else, is as yet unaware of what proposals will be submitted by the consortia, or which if any of the proposals will be selected by the State.

[32] The EOI Request specified ‘indicative services’ that include non-clinical services. The shortlisted consortia could put forward proposals to undertake non-clinical services in a wide variety of different ways. One proposal might offer to undertake the services by utilising the services of all existing employees of Peninsula Health, another might propose to use none. One proposal might intend to make no changes to current terms and conditions of employment, another might suggest extensive change. It would not make any sense for Peninsula Health to issue a change impact statement now. It would be premature. Little purpose could be served by issuing a change impact statement in abstract and general terms.

[33] I agree with the HSU that it is important to have regard to industrial reality, but one must also take account of commercial reality. The fact is that requests for expressions of interest and then for proposals are commonly used as a mechanism to test the market in order to ascertain whether it can offer an appropriate value proposition. It is possible that none of the proposals, as they relate to the provision of non-clinical services, will be attractive to the State and that it will decide to proceed with the redevelopment of the Frankston Hospital without this component. Further, a request for proposals is just that. The State is not bound to accept any of them. It is free to negotiate alternative arrangements. The terms of the EOI Request expressly stated that the State of Victoria reserves its right to make changes to the project, or to withdraw, cancel or modify it, in whole or in part, in its absolute discretion. At the present time, there is only a high-level proposal. It is a proposal of the State. Peninsula Health is not proposing to make a major change for the purpose of clause 6. It is therefore not required to issue a change impact statement.

[34] I agree with the HSU that the reference in clause 6.1(a) to the requirement that consultation occur before the proposed change occurs sets only an outer time limit. It is not to be read in isolation. It does not authorise consultation at a minute to midnight when there is no time for employees and the union to have a genuine opportunity to influence the decision-maker. However, this timing consideration is only relevant once the obligation to consult has been enlivened. This has not yet occurred. If the obligation is triggered in the future, it will be important that appropriate time be allowed for genuine consultation to occur.

[35] These proceedings have concerned the legal obligations of Peninsula Health to consult with the HSU and employees under clause 6 of the Agreement. However, there is nothing to prevent the HSU from requesting to hold consultations or discussions with the State government or Peninsula Health about matters that may be of interest or concern to its members.

Conclusion

[36] The answer to the question posed for determination is ‘no’.

DEPUTY PRESIDENT

Appearances:

M. Champion of counsel for the HSU
J. Tracey of counsel for Peninsula Health

Hearing details:

2021
Melbourne
11 March

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