Health Services Union v Department of Human Services

[2014] FWC 6722

[2014] FWC 6722

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Health Services Union
v
Department of Human Services
(C2014/1381)

State and Territory government administration
COMMISSIONER BISSETT	MELBOURNE, 26 SEPTEMBER 2014

Alleged dispute about matters arising under an enterprise agreement - jurisdictional objections - permitted matters - referral of powers by State to the Commonwealth - implied limitations - jurisdictional objection upheld in part - orders granted.

[1] On 1 August 2014 the Health Services Union of Victoria (No 2 Branch) (HSU) notified a dispute to the Commission in accordance with the dispute settling procedures of the HACSU Department of Human Services Disability Services Enterprise Agreement 2012-2016 (the Agreement). The dispute relates to an announcement by the Victorian Government in early 2013 of a decision to close the Sandhurst Centre and move residents into group homes in the community. The new, community based services would be transferred to external service providers (that is, contracted to the private sector).

[2] The dispute is properly seen as one between the HSU and the State of Victoria. For ease, and unless it is otherwise necessary, I have referred to the State as the Department of Human Services (DHS).

[3] Following notification of the dispute the matter was subject to conciliation between the parties. On 29 August 2014 I issued a Recommendation with respect to the dispute. The dispute however remains unresolved and the HSU now seeks arbitration.

[4] To facilitate the hearing of the dispute directions were issued to the parties to file and serve submissions and witness statements. The HSU was also directed to file a draft order.

Orders sought

[5] The HSU seeks orders in the following terms:

1. The respondent specify in tender documentation disseminated by it to any prospective tenderer for the provision of disability support and accommodation services to resident of Sandhurst who will be effected by its closure on 2016 that:

(a) The successful tenderer will be required to offer employment to the current Sandhurst employees for any transferring work.

(b) Subject to the Agreement, the successful tenderer will be required to undertake that it will maintain the employment of any Sandhurst employee that accepts employment with it for so long as the Agreement remains in force pursuant to s.58 of the Fair Work Act 2009 (the Act).

(c) The successful tenderer will be required to adopt the appropriate government benchmark severance standard for voluntary separation and non-voluntary (targeted) separation (as stated on pages 14 and 15 of the Public Sector Workplace Relations Policy dated 12 December 2012) in the event of a termination of employment due to redundancy of any Sandhurst employee that accepts employment with it and to undertake to use its best endeavours once covered by the Agreement to give effect to that standard by varying the Agreement in accordance with the Act.

(d) The successful tenderer will be required to take the necessary steps to become an employing authority and to make requisite superannuation contributions on behalf of any Sandhurst employee that accepts employment with it [and] was at the time their employment with the State of Victoria ended a member of a defined benefit scheme under the State Superannuation Act 1988, known as the ‘State Employees Retirement Benefits (SERB) Scheme’, Revised Scheme’ and the ‘New Scheme’.

2. The Respondent is to take such action as is necessary to give effect to the requirement stated in paragraph 1(d);

3. The Respondent must not disseminate to any prospective tenderer for the provision of disability support and accommodation services to the residents of Sandhurst who will be affected by its closure a work roster (other than the roster which currently applies to employees covered by the Agreement at Sandhurst) until there is consultation in accordance with clause 26.2 and/or clause 12 of the Agreement.

Objections of DHS

[6] DHS opposes the making of the order. It raises a number of jurisdictional objections to the draft order and, should it not succeed on the jurisdictional grounds, raises issues of merit.

[7] The objections are:

• The Commission does not have jurisdiction to make the orders sought as it is not seized of a dispute about a matter arising under the Agreement. The case put and orders ought bear little or no resemblance to the dispute notified in the Form F10;



• The subject matter of the dispute does not pertain to the employment relationship of the employer and employees in their capacity as such and hence is not about permitted matters;



• If the dispute is about permitted matters it falls outside the matters referred pursuant to s.4 of the Fair Work (Commonwealth Powers) Act 2009 (Vic) (Referral Act); and/or



• If the dispute is about a permitted matter is offends the implied constitutional limitation in Melbourne Corporation v Commonwealth and, inter alia, Re AEU; ex parte State of Victoria.

[8] In the alternative DHS submits that it has met all of its obligations under the Agreement to consult with the HSU about the change in accordance with the consultation provisions of the Agreement. Further, it says that the order constitutes an extra claim contrary to the provisions of the Agreement.

Legislative provisions

[9] The relevant legislative provisions which affect the content of agreements made under the Fair Work Act 2009 (the Act) and the Commission’s powers in dealing with disputes arising under such an agreement relevant to this matter are: s.172 of the Act, which deals with the content of agreements; s.253, which specifies terms of an agreement that will have no effect; s.595(1), which limits the Commission’s power to deal with disputes; and s.739(5),which limits the form of a decision in respect to a dispute.

172 Making an enterprise agreement

Enterprise agreements may be made about permitted matters

(1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

(a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

.....

253 Terms of an enterprise agreement that are of no effect

(1) A term of an enterprise agreement has no effect to the extent that:

(a) it is not a term about a permitted matter; or

(b) it is an unlawful term; or

(c) it is a designated outworker term.

595 FWC’s power to deal with disputes

(1) The FWC may deal with a dispute only if the FWC is expresslyauthorised to do so under or in accordance with another provision of this Act.

739 Disputes dealt with by the FWC

(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.

...

(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

[10] It is abundantly clear that, to the extent that an agreement deals with a non-permitted matter, it has no effect. Permitted matters are matters that pertain to the relationship between employer and that employer’s employees. The use of the phrase that employer’s employees, in respect to matters pertaining, is definitive.

[11] The Fair Work Bill Explanatory Memorandum in relation to s.172(1)(a) of the Act makes reference to the decision in Electrolux Home Products v The Australian Workers’ Union and others 1(Electrolux) and makes is clear that existing jurisprudence with respect to ‘matters pertaining’ continues to apply.2

The capacity of the Commission to deal with a dispute is limited to that expressly authorised by the terms of the agreement itself and a decision is respect to a dispute cannot be inconsistent with the agreement.

[12] It therefore follows that, for a decision of the Commission arising from the exercise of powers pursuant to the dispute resolution clause of an agreement to not be inconsistent with the terms of the agreement or the Act, it must be about permitted matters. That is, the decision and any order of the Commission must come within the scope of s.172(1) and, in particular for the purposes of this matter, s.172(1)(a).

[13] The order sought by HSU therefore must be about permitted matters and, if it is not, is beyond the power of the Commission.

The Enterprise Agreement

[14] The Coverage clause of the Agreement states:

4.1 This Agreement covers:

4.1.1 The Crown in the Right of the State of Victoria, and to any successor, assignee or transmittee to or of the business or part of the business of the State of Victoria comprising the provision of services for people with a disability, including a corporation that has acquired or taken over the business of part of the business of the State of Victoria (‘the Employer’)...

[15] Whilst the coverage clause allows for more than one employer to be covered by the agreement a provision of the Agreement is only a permitted matter to the extent it relates to the specific relationship between an employer and its employees - that is, it cannot extend to the relationship between the Crown and some other employer covered by the Agreement or the Crown and employees of another employer covered by the Agreement.

[16] The dispute settling provisions of the Agreement states, in part:

13. DISPUTE SETTLING PROCEDURES

13.1 Resolution of disputes and grievances

13.1.1 Unless otherwise provided for in this Agreement, a dispute or grievance about a matter arising under this Agreement or the National Employment Standards, other than termination of employment, must be dealt with in accordance with this clause. This includes a dispute or grievance about whether an Employer had reasonable grounds to refuse a request for flexible working conditions or an application to extend unpaid parental leave...

[17] A dispute therefore can only be dealt with to the extent that it is about a matter arising under the Agreement.

[18] The Agreement also has a clause that relates to modes of employment. The clause states:

15. MODES OF EMPLOYMENT

15.1 Movement across geographic areas does not affect an Employees continuity of employment or accrued entitlements.

15.2 The department believes that ongoing and secure workforce best meets the needs of our clients. To that end, the department will encourage a move from casual and fixed term arrangements to more secure employment arrangements where possible.

15.3 The Employer is committed to maintaining a stable and skilled workforce, recognising its contribution to the operation of the Employer. As such, full time direct and ongoing employment is a guiding principle of this Agreement.

15.4 The Employer will take all reasonable measures to achieve employment security for the direct permanent employees of the Employer to protect and enhance health and safety, terms and conditions of employment.

15.5 ...

[emphasis added]

[19] The general consultation provisions are found at clause 12 of the Agreement and clause 26.2 deals with consultation about roster changes:

26. ROSTER CHANGES

26.1 ...

26.2 Any proposed alterations to rosters shall be subject to consultation between the Employer at local management level, affected staff and HACSU representatives as requested and within the indicative timeframe. HACSU will be notified and provided with the details of any proposed roster review. Sufficient time should be given to allow that consultation to occur, including with HACSU, at a convenient time and to permit consultation with the Employees concerned to ensure that whatever results from the consultation process is implemented in a smooth and harmonious manner. This consultation process shall occur in an indicative timeframe of twenty eight (28) days.

Jurisdiction objections

[20] As set out above, DHS raises a number of jurisdictional objections to the Commission’s power to deal with the dispute.

Is the dispute about matters arising under the Agreement and in accordance with the dispute notified in the Form F10?

[21] DHS argue that the dispute now before the Commission bears little or no resemblance to the dispute notified by the HSU on 1 August 2014 in its Form F10.

[22] DHS says that the Commission’s powers are invoked by the notice of dispute (Form F10) filed by the HSU. Clause 13.5.3 (Dispute settling provisions) of the Agreement provides that, where a matter is not settled through internal process, a party may refer the matter to the Commission. That is, the matter before the Commission for arbitration is defined by what was notified in the F10.

[23] Further, DHS submits that the Commission can only exercise powers limited by the terms of the agreement and the Commission cannot grant an order that would be inconsistent with the Agreement or the Act. DHS says that the orders sought by the HSU are not matters that arise from the dispute as notified by the HSU or under the Agreement.

[24] The HSU says that what is a dispute or grievance is a matter for the Commission to determine as a matter of fact. Further it says that the dispute settling procedure contained in the Agreement recognises that a dispute may go through a number of steps prior to arbitration. In doing so the dispute may evolve - it may change, contract or grow. 3

[25] In any event the HSU says that the Form F10 makes it clear that the matter in dispute is about the decision of DHS to close Sandhurst and to outsource the work performed by employees at Sandhurst.

[26] The HSU further says that the orders sought properly come within the scope of clauses 12, 15.4 and 26.2 of the Agreement. The draft order is directed to DHS as the current employer and requires that it require of a future employer of its staff specified terms and conditions of employment. This, it says, goes directly to the issue of employment security and the action is directed to DHS.

[27] The draft order is not directed to who the future provider of services is or the conditions on which DHS contracts with that provider, except in respect to conditions that concern existing employees of DHS.

[28] The HSU says that DHS seeks to limit the operation of clause 15.4 by importing in a requirement that it only operate with respect to the employment of employees with DHS. The HSU says there is no ground on which to place such a limitation on the clause.

[29] The HSU says that DHS has ignored clause 15.4 of the Agreement in suggesting that the draft order does not deal with matters arising under the Agreement.

Consideration

[30] I have carefully considered the application made by the HSU as set out in the Form F10 and the articulation of the dispute and the draft order that is now before me.

[31] I observe that it would make the process of dispute settlement through a dispute settling procedure unworkable if there had to be a direct linear progression from the words in the notification of a dispute to the order finally sought in arbitration as suggested by DHS.

[32] It is trite that a dispute will evolve as it is subject to negotiations between the parties and conciliation before the Commission. It is inevitable that a dispute will develop in some aspects and disappear in others as discussion continues and solutions are found. On the submissions of DHS once a matter has come before the Commission if it changed in some way the parties would have to go back to the beginning of the dispute settling procedure, go through all of the steps required, re-notify the re-defined dispute and hope it does not change again and then seek arbitration. Such a process would be antithetical to having a dispute resolved as quickly as possible.

[33] In the Form F10 the HSU identified the dispute to be about clause 12 (Introduction of change), clause 13 (Dispute settling procedure), clause 15.2 (Appointment to position), clause 15.13 (Recruitment to vacant positions), clause 19.2 (Recruitment to positions) and clause 40 (Redeployment). The description of the matters in dispute is broad and, in my view, goes beyond the specific clauses identified. The failure to identify all specific clauses cannot detract from the totality of the information and dispute described in the Form F10.

[34] I am satisfied that the dispute notified by the HSU encompasses matters associated with the closure of Sandhurst, the redeployment, retraining and redundancy of staff of Sandhurst, consultation on the closure of Sandhurst and arrangements to mitigate the negative impact of the closure. Some matters that were raised in the Form F10 no longer remain in dispute but this does not detract from those matters in dispute notification that are not yet resolved.

[35] The draft orders (putting aside other matters to be determined in relation to the orders) go squarely to matters associated with the closure of Sandhurst and measures to mitigate the impact of the closure on staff of DHS currently working at Sandhurst. To this extent those things sought by the HSU in its order come within the broad scope of the dispute as notified in the Form F10.

[36] I am satisfied that the dispute before me is a matter arising under the agreement and is in accordance with the dispute notified in the Form F10. The requirements of the dispute settling procedure have been met. I therefore find that I have jurisdiction under the dispute settling procedure to deal with the dispute to this extent.

Is the dispute and the orders sought about permitted matters?

[37] For the reasons outlined above, if the relief sought by the HSU is not about permitted matters then it is not possible that I can make the orders sought.

[38] In Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 4 (Schefenacker), a decision handed down following the decision of the High Court in Electrolux, the Full Bench of the AIRC considered whether provisions in a number of agreements were about matters pertaining to the relationship between employers and employees. After considering the decision of the High Court in Electrolux the Full Bench5 then considered the construction of the phrase ‘matters pertaining to the relationship between employers and employees.’ The Full Bench said:

[37] Before turning to the disputed matters in these appeals, it is important to refer to the authorities governing the construction of the expression "matters pertaining to the relationship between employers and employees". For present purposes we shall refer to three authorities only. The first two cases seem to us to provide an accurate and comprehensive statement of the correct legal approach. Both cases were concerned with a slightly different definition of the term "industrial dispute", but the differences are not relevant. The third case concerns the jurisdiction of a state industrial authority.

[38] We refer first to what was said by the High Court in its unanimous judgment in Re Manufacturing Grocers' Employees Federation of Australia; Ex Parte Australian Chamber of Manufacturers (Manufacturing Grocers):

"For present purposes, it is sufficient to say that a matter must be connected with the relationship between an employer in his capacity as an employer and an employee in his capacity as an employee in a way which is direct and not merely consequential for it to be an industrial matter capable of being the subject of an industrial dispute."

[39] Next we refer to a passage from another unanimous judgment of the Court, that in Cram:

"Before dealing with the various strands of thought embedded in this argument, we should mention some aspects of the general words of the definition of "industrial matters" as established in the context of s.4 of the Conciliation and Arbitration Act 1904 (Cth). The words "pertaining to" mean "belonging to" or "within the sphere of" and the expression "the relations of employers and employees" refers to the relation of an employer as employer with an employee as employee: Kelly [(1950) 81 CLR, at p 84] And, as Dixon C.J. noted in Reg v. Findlay; Ex parte Commonwealth Steamship Owners' Association [(1953) 90 CLR 621, at pp 629-630], although the possibility of an indirect and consequential effect is not enough, the conception of what arises out of or is connected with the relations of employers and employees includes much that is outside the contract of service, its incidents and the work done under it."

[40] The last sentence of this passage indicates that the concept of matters falling within the relevant relationship is not to be artificially limited by reference to the contract of service, its incidents and the work performed pursuant to the contract...

[Footnotes omitted]

[39] The Explanatory Memorandum makes it clear that the jurisprudence outlined above continues to apply to the concept of permitted matters in agreements.

[40] The issue then is whether each of the orders sought by the HSU is connected to the relationship between the employer in its capacity as an employer and an employee in its capacity as an employee in a way which is direct and not merely consequential.

Consideration

[41] The proposed draft order is set out at paragraph [5] above. Orders 1(a) - (d) and 2 go to matters of the employer acting in its capacity as an entity able to enter into a commercial contract. It does not go to the employer acting in its capacity as an employer. Orders 1(a) - (d) and 2, if granted, would require of DHS that it do things that directly go to the form and content of a request for tender that it intends to put to the market. Putting a tender to market is not an action that DHS takes in its capacity as an employer but rather in its capacity as a Department of State responsible for the care and support of people with disabilities.

[42] While it may be that these orders do go to matters that impinge on job security of employees affected by the contracting out of services, the job security is with a future employer who, as yet, does not exist. Further, I consider the employment relationship issues to be ‘merely consequential’ to the main activity of DHS in the activity of seeking tenders for the provision of services. That the order is directed to DHS and not some future employer does not overcome this problem. To this extent the orders 1(a)-(d) and 2 cannot be seen as going directly to the employment relationship.

[43] I recognise that orders 1(a)-(d) and 2 do not seek to stop the request for tender process DHS intends to engage in but rather to impose conditions on the successful tenderer. In that respect the orders place obligations on DHS in the operation of a commercial transaction.

[44] For these reasons I do not consider that orders 1(a) - (d) or order 2 are matters pertaining to the employment relationship and therefore are not permitted matters. I cannot include order 1(a) - (d) or order 2 in any order that I may issue.

[45] As to order 3 I am satisfied that this pertains to the relationship between DHS in its capacity as employer and its employees in their capacity as such. The indicative roster is a proposed roster that may be implemented in the new community houses for the residents of Sandhurst, regardless of who operates those houses. It is a matter that goes directly to staffing, hours of work and how that work will be organised. That the indicative rosters will also be relevant to the commercial activity of DHS seeking tenders does not detract from the fact that consultation on those rosters pertains directly to the employment relationship between DHS as an employer and its employees. There is no reason the rosters cannot have a dual role.

[46] I understand from the evidence before me that the indicative rosters form a critical component of the tender documents. Whilst, for the reasons given above, I do not believe I can direct DHS as to what it puts in its tender documents, I do have power to issue an order that it not disseminate the indicative rosters until such time as the consultation obligations pursuant to clause 12 and clause 26.2 are complete. The draft order does not seek to stop DHS from providing the existing Sandhurst roster with the tender documents but rather requires consultation on the indicative roster prior to its dissemination.

[47] No submissions were put as to how long the consultation will take or what may or may not be reasonable in this respect.

[48] For this reason I am satisfied that order 3 is a matter pertaining to the employment relationship and is therefore a permitted matter. Order 3 is an order I am capable of making.

Does the dispute fall outside the matters referred in the Referral Act?

[49] Having found that orders 1 and 2 are not permitted matters and hence cannot be subject to any order I make it is not necessary to consider them in respect of further objections.

[50] There are a range of restrictions that operate on the relief the Commission may grant in an application such as this. One such restriction is the limitations imposed by the Referral Act.

[51] Section 4 of the Referral Act states that referred subject matters includes terms and conditions of employment including bargaining in relation to those terms and conditions, matters incidental or ancillary to the operation of the Fair Work Act or of instruments made or given effect under the Act but does not include any excluded matter. The excluded matters are set out in s.5 of the Referral Act:

5 Matters excluded from a reference

(1) A matter referred by section 4(1) does not include—

(a) matters pertaining to the number, identity or appointment (other than terms and conditions of appointment) of employees in the public sector who are not law enforcement officers;

(b) matters pertaining to the number or identity of employees in the public sector dismissed or to be dismissed on grounds of redundancy...

[52] For the reason given above it is only necessary to determine if order 3 is in breach of the limitation in the Referral Act. Clearly it is not.

[53] Order 3 goes to matters associated with the rostering of staff, their hours of work and the arrangement of those hours. These are matters currently contained in the Agreement. They are not matters excluded by virtue of s.5 of the Referral Act. For this reason the Referral Act does not limit my capacity to make order 3.

Does the order offend the implied limitation in Melbourne Corporation v Commonwealth?

[54] Order 3 requires that consultation occur with the HSU about the indicative rosters.

[55] My experience suggests that it is not unusual to find in agreements between the State and its employees obligations in respect of consultation generally or consultation on roster changes. Consultation provisions are a mandatory part of an agreement and, since 1 January 2014 consultation on rostering has become part of the model consultation clause.

[56] I am not aware that it has been suggested in matters before the Commission that a consultation provision offends Melbourne Corporation v Commonwealth. 6

[57] I am satisfied that order 3 does not offend such an implied limitation. Melbourne Corporation v Commonwealth presents no barrier to order 3 being issued.

Consultation

[58] DHS submits that, if it fails on its jurisdictional objection, the orders sought should not be otherwise issued as it has already consulted with the HSU beyond what is required by the Agreement. It submits that the HSU’s real complaint is that DHS has not acceded to its demands. Consultation, it submits, is not about agreement but rather about a party being given a real opportunity to influence the decision maker.

[59] I do not understand there to be any major disagreement between the parties as to the meaning and purpose of consultation.

[60] In this case the HSU says that its proposed draft order only came about after it had seen documentation provided arising from a Recommendation of the Commission. Only one meeting has been held since this documentation was produced. Further, it says that the indicative rosters were produced after that meeting and there has been no consultation with the HSU about the roster.

[61] The evidence of Mr Williams is that there has been no consultation with HACSU about the proposed rosters. Whilst there has been consultation with at least one employee at Sandhurst the obligation under clause 26.2 includes an obligation to consult the HSU (HACSU). An order requiring that consultation to occur is a permitted matter and is matter that arises under the Agreement by virtue of clause 12 and clause 26.2.

[62] Whilst I am satisfied that there has been meetings and correspondence between the HSU and DHS on many matters associated with the announcement to close Sandhurst I am satisfied that the indicative rosters have not been subject to such consultation. It cannot have been so if they were produced after the last meeting between the parties.

[63] An order with respect to consultation on the indicative roster will do no more than ensure that the requirements of clause 12 and clause 26.2 of the Agreement are met.

No extra claims

[64] DHS says that the orders sought by the HSU breaches the no extra claims commitment at clause 8 of the Agreement. There is no disagreement between the parties as to the relevant legal principles that apply. 7

[65] I am satisfied that the order 3 gives effect to matters already contained in the Agreement in respect to consultation (clauses 12 and 26.2). In these circumstances it cannot be that such an order is an extra claim.

Conclusion

[66] I am satisfied that there is a dispute properly before the Commission pursuant to the dispute settling procedures of the Agreement. That dispute goes to the decision of DHS to close Sandhurst, consultation in respect of the decision, the consequents effects of that decision on the terms and conditions of employment of employees at Sandhurst employed by DHS and efforts to mitigate the adverse effects of that decision.

[67] In terms of the relief sought by the HSU, for the reasons given, I decline to issue orders 1 and 2 as proposed in the draft order.

[68] I am satisfied that there is no jurisdictional barrier to issuing order 3 and that it is appropriate in the circumstances to do so.

Order

[69] I will issue a draft order with this decision in a slightly amended form to that in the draft order 3 provided by the HSU. The parties are asked to provide any submission on the proposed order by close of business Tuesday 30 September 2014. Upon receipt of the submissions the order will be finalised.

COMMISSIONER

Appearances:

M. Harding of Counsel with B. Annson for the Applicant.

J. Forbes of Counsel with B. Avallone for the Respondent.

Hearing details:

2014.

Melbourne:

September 16.

 1 (2004) 221 CLR 309.

 2   Explanatory Memorandum, paragraphs 661-666.

 3   FSU v GIO Australia Pty Ltd PR9191615 at [33], Bain; ex parte Cadbury Schweppes Australia Ltd (1983) 159 CLR 163 per Murphy J at 168.

 4 (2005) 142 IR 289.

 5 Ibid, [7]-[27].

 6 (1947) 74 CLR 31.

 7   ToyotaMotor Corporation v Mamara & Ors [2014] FCAFC 84.

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