Re Murdoch University
[2017] FWCA 4472
•29 AUGUST 2017
| [2017] FWCA 4472 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Murdoch University
(AG2016/7598)
MURDOCH UNIVERSITY ENTERPRISE AGREEMENT 2014
| Educational services | |
| COMMISSIONER WILLIAMS | PERTH, 29 AUGUST 2017 |
Application for termination of the Murdoch University Enterprise Agreement 2014.
Introduction
Murdoch University (Murdoch or the Applicant) has applied under section 225 of the Fair Work Act 2009 (the Act) to terminate the Murdoch University Enterprise Agreement 2014 (the Agreement). The nominal expiry date of the Agreement was 30 June 2016.
The Agreement currently covers approximately 3,500 employees, both academic staff and professional staff.
At the hearing of this matter in July 2017 Murdoch was represented by Mr S. Wood QC and Mr A. Manos of counsel and the Respondent unions being the National Tertiary Education Industry Union (NTEU), the Community and Public Sector Union (CPSU) and United Voice (collectively, the Unions) were represented by Mr R. Attiwill SC and Mr J. Kirkwood of counsel.
Background and evidence
Ten days of the hearing was devoted to the extensive witness evidence led by the parties. This included expert evidence concerning the financial circumstances of Murdoch both historically and currently and the economic consequences of terminating the Agreement. Other witness evidence dealt with amongst other matters the significant historical influences affecting universities in Australia and today, the history of awards and agreements in the tertiary sector, comparisons of the terms of Murdoch’s Agreement with agreements in other universities, the operating environment in which Murdoch currently finds itself, the concerns Murdoch has with particular provisions of the Agreement, the history of the parties negotiations for a new agreement, the nature of the changes to the Agreement Murdoch has been seeking during those negotiations, the benefits Murdoch sees from these changes, the NTEU’s position in those negotiations, the concerns the Unions and some employees have about changes to provisions of the Agreement, the views of Murdoch, the Unions and some employees about terminating the Agreement and the circumstances of and likely effect upon Murdoch, the Unions and the employees if the Agreement is terminated.
Witnesses for Murdoch
The witnesses called by Murdoch are listed below.
· Mr Martin Langridge – Partner at Deloitte Touche Tohmatsu
· Mr John Nicolaou - Executive Director at ACIL Allen Consulting
· Mr Peter Raymond – Workplace Relations Consultant at the Australian Higher Education Industrial Association
· Mr Daniel Scasserra – Director of Progressive Employee Relations
· Mr David Flanagan – Chancellor of Murdoch University
· Mr Darren McKee – Chief Operating Officer at Murdoch University
· Ms Susan Mary Ashcroft – Former Librarian at Murdoch University
· Mr Neil Andrew Cullingford – Acting Director, Marketing and Communications at Murdoch University
· Mr Steven Watson Dickson – Senior Executive Director, Property, Development, Facilities Management and Commercial Services Office at Murdoch University
· Ms Fiona Feist – Executive Business Manager for the School of Veterinary and Life Sciences at Murdoch University
· Ms Rikki Kersten – Dean of the School of Arts at Murdoch University
· Mr Shaun Major – School Manager of the School of Business and Governance at Murdoch University
Witnesses for the Unions
The witnesses called by the Unions are listed below noting those with an asterisk where not cross examined.
· Mr Campbell Jaski – Partner at PPB Advisory
· Mr Richard Denniss – Chief Economist at The Australia Institute
· *Ms Marian Baird – Professor of Gender and Employment Relations and Head of Discipline of Work and Organisational Studies at The University of Sydney
· *Ms Robyn Dale – Office Manager to Nick Staikos MP State Member for Bentleigh
· *Mr Rob Pascoe – Dean Laureate and Professor of History at Victoria University
· *Ms Kelly Maree Thomas – Associate at Maurice Blackburn Lawyers
· *Mr Grahame McCulloch – General Secretary at the National Tertiary Education Industry Union
· *Mr Adam Frogley – Aboriginal and Torres Strait Islander Unit Coordinator at the National Tertiary Education Industry Union
· *Mr Marty Braithwaite – Senior State Organiser at the National Tertiary Education Industry Union, WA Division
· Mr Alex Cousner – Industrial Officer at the National Tertiary Education Industry Union, WA Division
· *Ms Donna Shepherdson – Industrial Officer at the National Tertiary Education Industry Union, WA Division
· *Mr Phillip Adams – Electrical Technician, Assets and Maintenance Team at Murdoch University
· Ms Kirsty Bayliss – Senior Lecturer, School of Veterinary and Life Sciences at Murdoch University
· Mr Peter Batskos – Marketing Lecturer in the School of Business and Governance at Murdoch University
· *Mr Grahame Bowland – Software Developer, Centre of Comparative Genomics at Murdoch University
· *Mr Michael Broderick – Associate Professor of Media Analysis, School of Arts and Murdoch University
· *Mr Michael Calver – Associate Dean of Learning and Teaching, School of Veterinary and Life Sciences at Murdoch University
· *Mr Guy Curtis – Senior Lecturer in Psychology, School of Psychology and Exercise Science at Murdoch University
· *Ms Kate Fitch – Senior Lecturer in Public Relations, School of Arts at Murdoch University
· Mr David Hill – Emeritus Professor, School of Arts at Murdoch University
· *Ms Amy Hoogenboom – Student Centre Assistant, Academic Registrar’s Office at Murdoch University
· *Ms Leonie Hughes - Lecturer, School of Engineering and Information Technology at Murdoch University
· *Mr Jim Jackson – Emeritus Professor at Southern Cross University
· Ms Elizabeth Jackson-Barrett – Lecturer, School of Education at Murdoch University
· *Ms Nany Kusumo – Former Graphic Designer, Marketing Services Area at Murdoch University
· *Ms Catriona Lawson – Associate Lecturer, School of Education at Murdoch University
· *Mr Ian McKernan – Senior Laboratory Technician, School of Veterinary and Life Sciences at Murdoch University
· *Ms Tracie Pollin –Librarian at Murdoch University
· Mr Nino Sekyere-Boakyere – Lecturer, School of Business and Governance at Murdoch University
· Mr Robert Trand – Former Digital Platform Coordinator, IT Directorate at Murdoch University
· Mr James Warren – Emeritus Professor, School of Arts at Murdoch University
· *Ms Joelene Washington-King – Former Academic Support Officer, School of Nursing at Murdoch University
· Ms Jo-Ann Whalley – Development Officer, Office of Advancement at Murdoch University
· *Ms Deborah Williams – Casual Lecturer in Public Relations, School of Arts at Murdoch University
· *Mr Kenneth Young – Senior Lecturer in Radiology, School of Health Professions at Murdoch University
· *Ms Lisa Young – Lecturer, School of Law at Murdoch University
The Murdoch University Act 1973
Clause 3− Parties Bound and Application of the Agreement says the Agreement will be binding on Murdoch University.
Clause 2−Definitions of the Agreement defines “University” to mean “Murdoch University constituted under the authority of the Murdoch University Act 1973 (WA).”
The Murdoch University Act 1973 (WA) (the Murdoch Act) is an Act to establish and incorporate Murdoch University, to make provision for the government of the University, and for incidental and other purposes.
Section 4 of the Murdoch Act says there shall be a University called ‘Murdoch University’ which shall be a body corporate.
Section 4(3) says Murdoch may in its corporate name acquire, accept, hold, deal with, charge, or dispense of real and personal property and is capable of suing and being sued in its corporate name and of doing and suffering all such other acts and things as bodies corporate may by law do and suffer.
Section 5 says the objects of Murdoch shall be the advancement of learning and knowledge, and the provision of university education.
Section 6 prescribes the functions of Murdoch as follows,
“(1) The functions of the University include the following —
(a) to provide courses of study appropriate to a university, and other tertiary courses;
(b) to encourage and participate in the development and improvement of tertiary education to meet the needs of the community;
(c) to undertake and support scholarship, pure and applied research, invention, innovation, education and consultancy, and to apply those matters to the advancement and application of knowledge —
(i) to the benefit of industry, business and government; and
(ii) to the benefit and wellbeing of the Western Australian, Australian and international communities;
(d) to commercially develop or commercially use, for the University’s benefit, any facility, resource or property (real or personal) of the University or in which the University has a right or interest (including, for example, study, research, knowledge and intellectual property and the practical application of study, research, knowledge and intellectual property), whether alone or with others;
(e) to generate revenue for the purposes of funding the carrying out of its functions;
(f) to serve the Western Australian, Australian and international communities and the public interest by —
(i) enriching cultural and community life; and
(ii) raising public awareness of educational, scientific and artistic developments; and
(iii) promoting critical and free enquiry, informed intellectual discussion and public debate within the University and in the wider society;
(g) to provide the facilities that are necessary or conducive to the attainment of the objects of the University and the performance of its functions.
(2) The University has all the powers, rights and privileges that are reasonably necessary to enable it to carry out its functions.
(3) The University may carry out its functions and exercise its powers, including the power to enter into business arrangements, within or outside the State.”
Section 17 says that the governing body of Murdoch shall be the Senate and the Senate shall have control and management of the affairs and concerns of the University and may act in all matters concerning the University in the manner which to it appears most likely to promote the objects and interests of Murdoch.
Section 29 says that the Senate on behalf of the University may grant leases of university land for any term not exceeding 21 years or with the approval of the Minister for a term exceeding 21 years but not exceeding 99 years.
Subsection 29(1)(b) says the Senate may enter into any business arrangements.
Murdoch’s operations and its subsidiaries
Murdoch is a university providing courses of study for students seeking tertiary qualifications and also engages in research.
Murdoch’s main campus is located in Perth on a landholding of 240 hectares. In addition there are minor campuses located in Rockingham, 30 km south of the main campus and Mandurah, 60 km south of the main campus.
Murdoch also has a campus in Singapore in partnership with Kaplan Singapore and an International Study Centre in Dubai.
Approximate student numbers in 2016 were 15,532 students at the Australian campuses, 6983 in Singapore and 634 in Dubai, making a total of 23,149 students.[1]
Murdoch has the following wholly owned subsidiaries:
- Murdoch Singapore, which is as an education provider.
- Innovative Chiropractic Learning Pty Ltd, which is a vehicle through which the business of a teaching Chiropractic Clinic is conducted as part of the University.
- Murdoch Ventures Pty Ltd, which manages investments which provide ongoing funding to various aspects of Murdoch’s operations.
- Murdoch College Properties Pty Ltd, which is a vehicle through which certain buildings utilised by Murdoch are held and leased to the University. Its principal activities are property investment.
- The Murdoch University Foundation, which is a trust that manages donations and bequests received which provide funding to Murdoch’s operations.
- The Murdoch University Veterinary Trust, which is a trust that manages donations and bequests received which provide funding to Murdoch’s operations.
- The Alan and Iris Peacocke Research Foundation, which is a trust that manages donations and bequests received which provide funding to Murdoch’s operations.
- Murdoch Investments Company Pty Ltd, which did not earn any income in 2015 or 2016.
- M.U.F.T Company Pty Ltd, which did not earn any income in 2015 or 2016.
- Murdoch Retirement Services Pty Ltd (MRS). Murdoch leases some land to MRS and has built buildings on this as an investment. Murdoch leases these buildings, which constitute a retirement village, to MRS. MRS has contracted with St Ives Villages Pty Ltd (trading as St Ives Retirement Living) to manage the land and buildings as a retirement village. The financial aspects of these arrangements will be explained in more detail later in this decision when considering Murdoch’s financial circumstances.
The existence of these subsidiaries may be relevant when considering Murdoch’s finances however it should be noted that Clause 3−Parties Bound and Application of the Agreement at 3.2(c) says that the Agreement does not bind or apply to “Subsidiary companies or related bodies corporate of the University and the employees of those companies.”
The financial circumstances of Murdoch
Both Murdoch and the Unions commissioned expert reports on Murdoch’s financial situation.
Mr Langridge was engaged by Murdoch to provide an expert report on Murdoch’s financial state. Mr Langridge is employed by Deloitte Risk Advisory. He graduated in 1983 with a Bachelor of Arts with Joint Honours in Accounting and Economics. Between 1987 and 1996 he worked at Arthur Andersen. In 1998 he was admitted to the Partnership at Deloitte Touche Tohmatsu, Chartered Accountants (Deloittes). He currently works as a Partner at Deloittes and has led the Forensic Practice in Perth since 2001. He is a fellow of Chartered Accountants Australia and New Zealand.
The letter engaging Mr Langridge requested him to “prepare an independent report which provides an overview of the current financial state of Murdoch University, taking into consideration historical trends in order to determine the financial capacity of the University to continue to operate.”
Mr Langridge produced an initial report[2] and subsequently three supplementary reports.[3]
Mr Langridge in his overview explained as follows,
“Murdoch University, as the parent entity, prepares consolidated financial statements on a calendar year basis which include a statement of the assets, liabilities and financial performance of Murdoch University (as an education provider) together with its eight subsidiaries.
For the purpose of this report, any reference to Murdoch Consolidated refers to the consolidated group of entities. Any reference to Murdoch University refers to the business that provides education services.
In order to understand the trends affecting Murdoch Consolidated, it is essential to understand the different factors which are driving those trends in each of the disparate areas of activity of Murdoch Consolidated.
With this purpose in mind, I have grouped the entities into the following three broad categories:
Education
Murdoch Retirement Village Charitable Trusts Murdoch University Murdoch Retirement Services Pty Ltd Murdoch University Foundation
Murdoch Singapore Pte Ltd Murdoch University Veterinary Trust
Innovative Chiropractic Learning Pty Ltd (ICL) The Alan & Iris Peacocke Research Foundation
Murdoch Ventures Pty Ltd
Murdoch College Properties Pty Ltd
In preparing this report, I have not examined the performance of each of the subsidiaries and their relative contribution to Murdoch University and Murdoch Consolidated. However, I have separately addressed Murdoch Retirement Services Pty Ltd (MRS) at section 8 of this report due to the significant differences in the drivers of performance in this business compared to those of Murdoch University.”
Mr Langridge’s summary of key observations were,
“The following are my key observations in respect of the financial performance of Murdoch Consolidated which are discussed in detail in this report:
•Net result (after tax) has declined from a surplus of $35.9m in 2013 to a deficit of $5.4m in 2016
•Net result (after tax) deficits were recorded in 2015 and 2016 of $4.8m and $5.4m respectively
•Net asset position has deteriorated by approximately $6m from 2013 to 2016
•Two thirds of revenue is derived from student fees which is largely driven by student load and mix:
o Murdoch University’s domestic student and international onshore student load peaked in 2013 and has remained below that peak through to 2016
o Total domestic Equivalent Full-time Student Load (EFTSL) across WA increased steadily from 2011 to 2014, then experienced a decline in 2015, however Murdoch University’s share of WA EFTSL has steadily declined in each of the years 2011 to 2015
o Murdoch University’s transnational student load increased significantly in 2012 and 2013 (due to expansion of Singapore operations) but this has since plateaued
o Total International EFTSL across Australia has been increasing since 2012, however WA’s share of this market has been declining at the same time with Murdoch University’s share of the WA market share falling since 2013
•Employee costs represent approximately 60% of total costs and from 2013 to 2016 have increased at a Compound Annual Growth rate (CAGR) of 3.3%
o In 2015 the domestic EFTSL to Full Time Equivalent (FTE) teaching staff ratio was 30% lower than the comparable ratios for UWA and Curtin
o Between 2013 and 2016, both academic and non-academic employee costs have increased (by approximately 10%) because:
▪academic and non-academic FTE has increased; and
▪the average cost per academic and non-academic FTE has increased
•Whilst Murdoch University continues to generate positive cash flow from operating activities, this has fallen to $15m per annum for 2014 to 2016 compared to in excess of $55m in 2012
•MRS has been a significant source of funding income over the period 2014 to 2016 contributing $52.5m, this will fall to $4-$5m per annum from 2017.
If Murdoch Consolidated continues to experience pressure on its student fee income, then it is likely that net result deficits will continue unless Murdoch Consolidated can effectively manage its costs. Employee costs are a major driver of total costs. From 2013 to 2016, the rate of increase in employee costs (10%) exceeded the rate of increase in student fee income (2%). This position is evident in the domestic EFTSL to FTE teaching staff ratio which is significantly below other universities in WA.”
Mr Langridge’s conclusions on the future outlook were as follows,
“The financial performance of Murdoch Consolidated in the future is affected by a complex range of factors, some of which are in the direct control of the University and some of which are not. I have been unable within the scope of my instructions to model the many complexities of the environment in which Murdoch Consolidated operates, however I have prepared a high level outlook for the next four years based on broad assumptions that historic income and expenditure trends will continue in this period.
In this analysis I have removed the impact of non-cash accounting entries relating to depreciation and asset revaluations to derive adjusted income and adjusted expenses.
The graph (right)[4] compares adjusted income and adjusted expenses and shows that:
Over the historic period 2013 to 2016:
•income is greater than expenses by an aggregate of approximately $110m (Adjusted Surplus)
•the amount of the Adjusted Surplus declined year by year
•the Adjusted Surplus funded capital expenditure of approximately $55m.
Over the future period 2017 to 2020:
•in aggregate, expenses are greater than income by approximately $5m
•the amount by which income exceeded expenses reduced year by year resulting in a deficit in 2019 and 2020
•As no Adjusted Surplus is generated in this period, capital expenditure cannot be funded from this source.
Although this analysis is rudimentary, it does serve to illustrate directionally that if Murdoch Consolidated does not take appropriate action and adopt appropriate strategies to arrest the current trends of income and expenditure, it will face significant challenges in funding future capital expenditure and experience continued deterioration of its net asset position.”
Mr Langridge was cross-examined about the point he makes above that the future outlook indicates Murdoch’s capital expenditure cannot be funded from surpluses and agreed that the alternative was for Murdoch to consider the option of debt financing for future capital expenditure. The context for this would be, as Mr Langridge agreed, that Murdoch has very little debt.[5] The option of debt financing of course will incur costs for Murdoch if it is acted on.
With respect to MRS Mr Langridge reported as follows,
“The retirement village is located on Murdoch University land and the buildings were constructed and are owned by Murdoch University. The village is leased to a subsidiary company, MRS, which contracts with the residents, incurs operational expenses and contracts with St Ives to manage the village for a fee.
A key feature of MRS is that it collects upfront payments (or bonds) from residents in return for the grant of a ‘lease for life’ for occupancy of each individual unit. Initially this payment generates both a cash balance and a liability to MRS. This liability is reduced over time as management and other fees are charged to the residents, deducted from their bond balance and recorded as income by MRS.
The significant cash balances resulting are available to fund the initial construction and ongoing operational and capital costs of the village. Unlike more traditional retirement villages where the entity granting the lease for life also undertakes and owns the village, in this case MRS has passed much of the cash received from the residents to Murdoch University which in turn has constructed and owns the village.
As a result, at 30 June 2016, the draft financial statements show that MRS has liabilities (unearned income, DMF, resident loans) of $229.6m. The only assets of MRS are cash and short term investments of $9.3m and net working capital of ($0.3m) and therefore MRS has a total deficiency of $220.6m.
Prima facie, MRS is insolvent, however its solvency and continuation as a going concern is maintained on the basis that all payments required to outgoing residents would be funded by cash inflows from incoming residents as stated in the 2015 audited financial statements. To further support this position Murdoch University has provided a letter of support to MRS undertaking to ensure that it can pay its debts as and when they fall due.
Between 30 June 2013 and 30 June 2016, the total liabilities in respect of unearned income, DMF and residents loans increased steadily from $202.2m to $229.6m ($27.4m increase), however over the same period the net working capital declined from $35.4m to $9m ($26.3m decrease).
The following table reconciles the movement in the balance sheet over this period to the components of profit and loss that have led to this movement:
$m Increase in liability to residents 27 Fair value movement (16) Decrease in net working capital 26 ---- 38 ---- Operational surplus 15 Lease/rental fees paid to Murdoch University (18) Donations to Murdoch University (35) ---- (38) ----
In simple terms, over the period 2014 to 2016, Murdoch University has received income (by way of lease fees and donations) from MRS totalling $52.5m which is $37.8m more than the surplus generated by MRS in the same period.
This has been possible by drawing down on the accumulated cash holdings, however the ability of Murdoch University to continue to receive income in excess of the profits generated into the future is limited for the following reasons:
•The village is now at a mature stage where additional capital funds will only be derived if the underlying value of the units continues to increase, otherwise outgoing residents repayments will simply be funded by incoming residents with total funds held remaining relatively stable (note these liabilities only increased by $27.4m, or 13.5%, over the last three years and by only $10.7m, or 5% in the last 2 years)
•Investment income which reached a peak of $1.5m in 2015 (on average investment funds of approximately $50m) will continue to decline since the investment holdings have been reduced to only $9m at 30 June 2016 with the balance already transferred to Murdoch University
•MRS has remaining cash holdings of only $9m and therefore limited capacity to fund deficits
•The operating surplus before revaluations and lease payments to Murdoch University is reasonably stable at approximately $3.8m per annum and while this may increase over time, on a break even basis this surplus could be considered to be the real amount available to Murdoch University by way of lease or rental charges
Over the period 2014 to 2016, Murdoch University has benefitted from MRS by way of lease rentals and donations as follows:
$m 2014 7.1 2015 7.6 2016 37.8 ---- 52.5 ----
Over the same period the underlying surplus generated by MRS has only been $14.7m. The excess of $37.8m has been funded from losses in MRS, however this will not be a sustainable position into the future.
Based on a high level assessment, the likely contribution to Murdoch University from MRS for the next few years is in the order of $4m - $5m per annum.”[6]
Mr Langridge’s supplementary witness statements and reports, some of which are responsive to the expert report commissioned by the Unions (Mr Jaski’s report), involve some clarifications and amendments to the calculations and detail but do not involve any material changes to the conclusions he drew in his first report as detailed above.[7]
Mr Jaski was engaged by the Unions to provide an expert report on Murdoch’s financial state. Mr Jaski is a Partner with PPB Advisory and in charge of their national valuation and dispute advisory practice. He graduated with a Bachelor of Science (Honours), Geology and Geophysics. He has completed an MBA studying Accounting, Economics and Finance at Melbourne Business School, Australian Graduate School of Management and New York University. He is an Affiliate of Chartered Accountants Australia and New Zealand and a Fellow of the Financial Services Institute of Australia. In 2007 he joined PPB Advisory where he provides financial and strategic advice in relation to disputes, transactions and restructuring and turnaround. He has 20 years’ experience in corporate finance and project management. He has particular experience in financial and operational analysis of businesses, projects and contracts.
The letter engaging Mr Jaski advised him,
“The report of Martin Langridge dated 23 February 2017 examines and comments upon the financial performance of Murdoch Consolidated, being Murdoch University and its subsidiaries, in the years 30 June 2013 to date.
1.Please examine and comment on the financial performance of Murdoch University (as an education provider) in the financial years ended 30 June 2013 to date.
2.Please provide any comments you have on the analysis and conclusions contained in the Langridge report, including:
2.1any disagreement you have with any aspect of the analysis or conclusions, and the reasons for any such disagreement; and
2.2any other matters not addressed in the report that you consider relevant to an overview of the current financial state of Murdoch University, taking into consideration historical trends in order to determine the financial capacity of the University to continue to operate. …”
Mr Jaski was also asked specific questions regarding the evidence of Mr McKee, Murdoch’s Chief Operating Officer, concerning revenue from St Ives Retirement Living.
Mr Jaski produced an initial report[8] and a supplementary report.[9] It is apparent from his report that where he refers to Murdoch University he is referring to ‘Murdoch University as an education provider’ as distinct from Murdoch Consolidated.
Mr Jaski’s report summarised the financial performance of Murdoch University as an education provider as follows,
“7. Between 2013 and 2016, Murdoch University’s financial performance has deteriorated and profitability in 2016 is significantly lower than achieved in 2013.
8. However, the 2016 results show a reversal of the downward trend in performance over 2014 and 2015 and a return to profitability.
9. The decrease in profitability from 2013 was primarily caused by:
• a reduction in income, mainly due to lower investment income
• reduced margins because of higher costs; particularly employee related costs.
10. Income, including from student fees, which account for 75% of income, fell in 2014 and 2015, but increased in 2016. The increase in 2016 was largely because of an increase in average fees per student.
11. Expenses increased by around 6% between 2013 and 2016, largely due to an increase in employee related expenses.
12. Murdoch University’s net asset position increased from $975m in 2013 to $1.02b in 2016.
13. Overall, Murdoch University has maintained a strong balance sheet and remains in a financially secure position.
Langridge report
14. Mr Langridge analysed the financial performance of Murdoch Consolidated to assess ‘the current financial state of Murdoch University … [and] to determine the financial capacity of the University to continue to operate’.
15. In my opinion, an analysis of Murdoch University, as opposed to Murdoch Consolidated will provide greater insight into the financial performance of Murdoch University as it removes the effects and influence of the other non-core businesses that comprise Murdoch Consolidated, such as St Ives Independent Living.
16. In any event, I am unable to reconcile some of Mr Langridge’s calculations, as described in my report. I note Mr Langridge did not include his workings for many of his calculations.
17. I disagree with some of the conclusions drawn by Mr Langridge, as noted in my report. For example, I disagree that Murdoch Consolidated working capital position will necessarily deteriorate if capital expenditure is required. This is because capital expenditure can be, and frequently is, funded by an increase in non-current liabilities (eg long-term debt).
18. In respect of Mr Langridge’s assessment of the outlook of Murdoch Consolidated, I disagree with the trends upon which Mr Langridge has based his assumptions. In my opinion, such an assessment, involving the continuation of an historic trend, without regard to any forecasts or factors likely to influence future anticipated income or expenses is severely limited.”
Mr Jaski’s report includes the following regarding Murdoch University as an education provider and MRS.
“Net result
37. After a significant deterioration in trading performance in 2014 (-84%) and 2015 (-112%), Murdoch University recorded a profit of $39.4m in 2016. However, the 2016 results are skewed by an increase in donations from subsidiaries. For example, Murdoch Retirement Services Pty Ltd (MRS) donated $500,000 to Murdoch University in 2015, and $34.0m in 2016 (MRS Donations).
38. Figure 1 shows the net result as reported by Murdoch University, compared to adjusted results excluding the MRS Donations. Based on the adjusted results, Murdoch University realised a profit of $5.4m in 2016, representing an 87% decline from its 2013 results.”
As to the question of the appropriateness of considering Murdoch Consolidated rather than Murdoch University as an education provider’s financial position Mr Jaski position was as follows,
“65. I note Mr Langridge’s comments in this section, and the majority his report, address the financial performance of Murdoch Consolidated, rather than Murdoch University.
66. In my opinion, the financial performance of Murdoch University is a more appropriate measure of Mr Langridge’s instructions to assess ‘the current financial state of Murdoch University… in order to determine the financial capacity of the University to continue to operate’. This is because the financial performance of subsidiary entities distorts the performance of the University, which is subject to the current application to the Fair Work Commission.”
Mr Langridge in response to Mr Jaski on this issue said as follows,
“2.2 In my opinion the Jaski Report is flawed in that it deals with an analysis of Murdoch University as a standalone entity. In my opinion the analysis should be concerned with Murdoch Consolidated for the following reasons:
a) Excluding wholly owned subsidiaries results in a distorted picture of the financial performance and financial position of Murdoch University as a whole
b) Mr Jaski’s instructions required him to analyse Murdoch University (as an education provider) which can best be done on a consolidated basis
c) There are a number of non-arms-length and inter entity transactions between Murdoch University and its subsidiaries (for example: management fees, donations, dividends, leasing fees and cost allocations) which, unless eliminated through a consolidated view, distort the performance and financial position of Murdoch University from year to year.
2.3 The flaws that result in Mr Jaski’s report and conclusions as a result of not considering Murdoch Consolidated are fundamental and pervasive.
2.4 Nothing within the Jaski Report has caused me to materially alter my conclusions and observations as set out in My First Report.”[10]
Mr Jaski’s supplementary report considered Mr Langridge’s supplementary report and whilst conceding some points around calculations and an updating of his analysis Mr Jaski’s overall conclusions did not change.[11]
In his supplementary report Mr Jaski considers the disagreement between him and Mr Langridge as to whether the appropriate basis on which the financial performance should be assessed is that of Murdoch Consolidated or Murdoch University as an education provider.[12] Mr Jaski says that in his experience the appropriate basis on which to undertake a financial analysis of any entity would ordinarily take into account amongst other things, the reason or context for which the final financial analysis is required.
Mr Jaski then reasons as follows,
“23. In this matter, I understand that the context in which the financial analysis of Murdoch University is required is in respect of an application before the Fair Work Commission to terminate the Murdoch University Enterprise Agreement 2014, which nominally expired on 30 June 2016 (the ‘Agreement’).
24. I also understand that the Agreement applies to various employees of Murdoch University but does not apply to, or bind, “Subsidiary companies or related bodies corporate of the University and the employees of those companies.”
25. By incorporating subsidiaries of Murdoch University that are not education providers in Western Australia, in my view distorts the financial position of the subject entity itself ie Murdoch University.
26. I accept that there are a number of non-arm’s length and inter-entity transactions which complicate the analysis of Murdoch University on a standalone basis. However, in my experience it is a common issue that is routinely overcome in financial analysis by, for example, considering the materiality of potentially non-arm’s length transactions and inter-entity transactions and making appropriate adjustments.
27. Mr Langridge’s comments in his Supplementary Report do not change my opinion that the most appropriate basis on which to analyse the financial performance and position of Murdoch University, in the current circumstances, is on a standalone basis.”
Mr Jaski expanded on his criticism of Mr Langridge’s approach to likely future performance as follows,
“88. Mr Langridge prepared a ‘high level outlook’ of Murdoch Consolidated’s financial performance, based on ‘broad assumptions that historic income and expenditure trends will continue’. As noted by Mr Langridge, future performance ‘is affected by a complex range of factors’, which, in my opinion, must be considered when attempting to model the group’s future performance. In my opinion, such an assessment, involving the continuation of an historic trend, without regard to any forecasts or factors likely to influence future anticipated income or expenses is severely limited.”[13]
Mr Langridge agrees with Mr Jaski that any assessment of the future outlook without regard to forecasts or other factors likely to influence future anticipated income or expensive has limitations. He recognised this limitation when making his assessment of the future outlook in his first report.
Mr Jaski himself however did not in his reports attempt to model Murdoch’s future performance at all.
Separately Mr Langridge’s assessment of the future outlook is queried by the Unions because the University itself in its 2017 Annual Budget makes different and more favourable assumptions about future growth in revenue and expenses. The point made by Mr Langridge, which I accept, is that the basis and intent of his future outlook calculations compared with the approach taken by the University in its Annual Budget 2017 are not contradictory. Rather the basis and intent of his assessment of the future outlook versus the University’s budgeting process are simply different.
Financial situation – “Murdoch Consolidated” or “Murdoch University as an education provider”?
The financial situation of Murdoch is one of the circumstances the Commission should take into account in determining this application.
The expert witnesses, Mr Langridge and Mr Jaski, disagree as to whether it is appropriate to consider the financial situation of Murdoch Consolidated or Murdoch University as an education provider. I note that the instructors to Mr Jaski, in the questions they asked him, themselves drew the distinction between Murdoch Consolidated and what Mr Jaski’s instructors asked him to report on which was “Murdoch University (as an education provider)”. Mr Jaski reported on Murdoch University as an education provider as he was instructed to do.
Mr Jaski’s view is that the reason for which the financial analysis is required determines in large part the appropriate basis on which it should be undertaken. He says that because the financial analysis is part of a case regarding an application to terminate the Agreement and the Agreement does not apply to employees of Murdoch’s subsidiary companies, incorporating those subsidiaries which are not education providers in the financial analysis distorts the view of the financial situation.
Mr Langridge’s view is that excluding subsidiaries results in a distorted picture of the financial performance and position of Murdoch as a whole. This is because there are a number of non-arm’s length and inter-entity transactions between Murdoch University and its subsidiaries (e.g. management fees, donations, dividends, leasing fees and cost allocations) which unless eliminated through a consolidated view distort the financial performance and position of Murdoch from year to year.
Neither Mr Jaski nor his instructors sought to define what ‘Murdoch University as an educator provider’ meant in terms of the various subsidiaries that, together with the University, make up Murdoch Consolidated. Criticism of this lack of definition caused Mr Jaski to make a number of errors in his original report due to his inconsistent treatment of the subsidiaries which necessitated later revision.
The most material issue with respect to whether the subsidiaries should be considered in the financial analysis is the existence of MRS and how this affects Murdoch. Whether MRS is included in the financial analysis or not largely explains the differences between Mr Langridge’s and Mr Jaski’s reports.
MRS has in the past contributed significantly and positively with many tens of millions of dollars in donations to Murdoch, $49 million in 2012 and $34 million in 2016. However MRS is also the source of a significant current liability, the value of all the St Ives Retirement Living resident loans, which is recorded in Murdoch’s 2016 Annual Report as being a total of $199.8 million. The annual reports note that Murdoch University has provided a letter of support to MRS regarding this amount. Further the buildings that make up the retirement village are included as investment properties in both Murdoch Consolidated’s accounts and the University’s accounts and the 2013 Annual Report recorded a $20 million increase in the fair value adjustment of this investment property.
The financial interaction between Murdoch and its subsidiary MRS identified above is significant. The existence of MRS has a varying year to year real impact on the financial situation of the University. The fact that the Agreement has no application to the employees of MRS does not change this financial impact of MRS on the University.
The Murdoch Act prescribes the functions of the University. These functions amongst others include providing courses of study, undertaking research, commercially developing property and generating revenue. Murdoch’s Senate is also empowered to grant leases of land and enter into business arrangements. The various subsidiaries are consistent with the legislative scheme which established Murdoch. It is quite artificial to consider the finances of ‘Murdoch as an education provider’ in isolation considering the multiple functions of the University under the Murdoch Act. The existence of Murdoch’s subsidiaries and their impact on the University both positive and negative cannot simply be ignored.
I accept Mr Langridge’s view that a financial analysis based on Murdoch Consolidated’s position is more appropriate.[14] Such an analysis more accurately and fully reflects the financial circumstances of Murdoch which the Commission should take account of.
Whilst the future outlook analysis of Mr Langridge is limited by the approach he adopted[15] I accept it does indicate the direction that Murdoch Consolidated finances will take in future without appropriate action being taken to arrest the current trends of income and expenditure.
2017 Student Enrolments
The Unions submit that recruiting and retaining students is critical to Murdoch’s financial success, because University revenue is linked to the fees that students pay to attend the University (either through direct payment or through a Commonwealth Supported Place) and the full picture regarding student enrolments also concerns student enrolments for 2017.
The Unions point to evidence that at the census date in semester one of 25 March 2016 there were 13,002 students in Australia and at the corresponding census date a year later, being 24 March 2017, there were 13,623 students in Australia as showing Murdoch’s performance is improving.[16]
Mr McKee, Murdoch’s Chief Operating Officer, agreed these figures were a complete snapshot of Murdoch’s student population for the first semester of 2017 and they demonstrate the success of Murdoch’s recruitment and retention strategies in Australia. His evidence however was that how this increase in headcount figures translates into Equivalent Full-Time Student Load (EFTSL) may be different because for example there may be lots of part-time students which is not necessarily positive.[17]
Mr McKee also explained that the census date at the end of semester one is halfway through the year and final figures, in terms of student load for the year, will also be affected by intakes later in the year particularly the second semester intake. So even though student numbers look positive in semester one there could be a bad semester two intake which for example could mean the overall year’s student numbers could actually decrease from the previous year.[18]
Mr Jaski’s evidence explained how student numbers at a point in time translates into income as follows,
“46. Income derived from student fees is driven by a variety of factors, including student numbers, student mix, course selection and funding arrangements.
47. Between 2013 and 2016 the number of domestic, full-time equivalent, or Equivalent Full-Time Student Load (EFTSL), decreased from 12,073 to 10,352 (-14.3%). However, total student fees only decreased by 0.01% during the same period, due to an increase in average fees per EFTSL.”[19]
Making a similar point Mr Langridge noted that whilst EFTSL is a driver of student fee income “…there are many other factors which impact the revenue that is generated. These factors include courses elected, domestic and international student mix, pricing bands and government contributions and initiatives.”
The evidence as to what enrolments for 2017 will be is only partial and in any event enrolment numbers alone are not predictive of Murdoch’s income with any degree of certainty.
Murdoch’s future aims and objectives
Murdoch, based on the evidence of Mr McKee, submits that the last ten years have seen Australian universities experience many stressors. Funding has been reduced, student demands and expectations have changed, technology has rapidly evolved, student expectations and university operating models have changed, industry demands have become greater and there are unprecedented levels of national and international competition for the higher education market. The culmination of these factors mean Murdoch is re-visiting its business model and the way it operates.
Some of the areas that Murdoch has identified as requiring expenditure in order to improve its desirability and attractiveness to students are:
(a)technology;
(b)marketing;
(c)campus facilities;
(d)the recruitment of overseas students to both the Australian campus and its existing overseas campuses;
(e)another international campus.
Murdoch has also identified the following changes as being necessary:
(a)to build on its strong research collaboration projects with industry;
(b)to invest in the software that enables P2P interactions. It also needs to expand the campus and make it more physically conducive to such interactions. This means building physical spaces where students can engage in such tasks as meeting with study groups, discussing research etc;
(c)to grow research collaboration;
(d)to make significant changes to its business model and culture so it can operate more efficiently, adapt to new opportunities, and have a flexible and agile workforce;
(e)to regenerate and reinvigorate its workforce by engaging staff who meet Murdoch’s needs to deliver high quality education and research in multiple locations and to align workforce activities and ways of working with the University's strategic imperatives;
(f)to allow employees to play to their strengths;
(g)to be able to align its workforce to deliver on its necessarily ambitious growth and quality targets for the next five to 10 years;
(h)to improve efficiency in academic employees;
to improve staff utilisation;
(j)to improve productivity;
(k)to reduce labour costs;
(l)to have the People and Culture department engaged in strategic workforce planning, staff engagement strategies, talent acquisition, and wellness campaigns instead of spending so much time on matters arising under the Agreement;
(m)to move to a less restrictive regime for managing performance, conduct and organisational change;
(n)to have a remuneration structure which recognises and rewards staff who help the organisation meet its challenges;
(o)to be better able to respond to the demands of the changing environment.
Over the next five years, Murdoch has identified it will need to make significant changes to its business model and culture to be financially sustainable. This will require structural and workforce change.
If Murdoch wants to meet its aims and objectives above and return to surplus on a long term sustainable basis then it submits it needs to:
(a)reshape its workforce,
(b)alter staff behaviour,
(c)control staff costs,
(d)remove other costs, reduce bureaucracy and improve workplace culture.
Murdoch’s view is that,
· If it is to reshape its workforce, the Agreement’s clauses dealing with consultation, grievances, disputes and redundancy are likely to hinder this.
· If it is to alter the behaviour of its workforce, the Agreement’s clauses dealing with misconduct and unsatisfactory performance are likely to impede this.
· If it is to effectively control staff numbers then the manning clauses such as scholarly teaching fellows, fixed term contracts and academic workload are likely to obstruct this.
Murdoch submits that making the above changes will improve workforce flexibility and make it more agile. If Murdoch is able to reform and effectively alter its business model then it is confident revenue will increase.
With greater revenue, Murdoch submits it will be able to:
(a)pursue community projects such as the Murdoch University Knowledge and Health Precinct which will be a vehicle for community engagement, business and industry collaboration and innovation;
(b)reinvest in itself and staff and better provide all the favourable outcomes that a functional and sustainable university provides.[20]
The relationship between the Agreement and Murdoch’s financial situation
The Unions’ view
Mr McCulloch, the NTEU’s General Secretary gave extensive evidence, based on his analysis of publicly available data, as to Murdoch’s financial situation in comparison with other Australian Universities.
The Unions submit that Mr McCulloch’s analysis highlights amongst other things that,
“a. the University’s revenue growth and enrolment performance has been lower than the sector and its comparator universities;
b. the University has lost market share in Western Australia;
c. the University has outperformed its competitors in overseas fee paying student load but this has not been matched by revenue growth because the load growth has been in the less lucrative off-shore market; and
d. the University has outperformed the sector and its comparator universities in containing growth in its total costs and expenses, non-employee benefit costs, total employee benefits and total FTE employees” [21]
The Unions submit that Murdoch’s financial situation has been caused by a combination of external factors and poor management. Mr McCulloch’s evidence identified the following causes,
“a. the introduction of the uncapped domestic demand-driven and enrolment system in 2012;
b. the introduction of the “half-cohort” of school leaver age possible university entrants which temporarily reduced the local domestic undergraduate pool for all Western Australian universities;
c. over the period from about 2010 to 2015 there was instability in the senior management ranks at the University, including proven serious misbehaviour by its most recent previous Vice-Chancellor;
d. the very substantial investment the University has and is making in its offshore programmes is generating very little revenue; and
e. the University’s failure to generate student load growth in all key market segments on a scale sufficient to increase revenue growth and maintain a balanced or surplus budget.”[22]
The Unions submit that the evidence does not support a conclusion that the Agreement is the cause of Murdoch’s financial situation and does not support a conclusion that the Agreement prevents Murdoch from addressing these challenges.
Mr McCulloch’s evidence is that the Agreement provides Murdoch with competitive advantages compared to other universities in meeting these financial challenges. Mr McCulloch’s evidence sought to demonstrate that the claims by Murdoch that the Agreement’s provisions have contributed to its uncompetitive position cannot be sustained because Murdoch’s competitors operate under broadly similar employment terms and conditions and have to deal with similar issues and similarly face the need to rapidly adapt to a changing environment. Mr McCulloch’s evidence was that to the extent there is variation between the employment conditions at different universities in their agreements and Murdoch’s Agreement, from a management point of view, Murdoch’s is superior to that of its competitors.[23]
Mr McCulloch’s evidence was that Murdoch will need to compete by improving its institutional reputation, attractiveness to students and achieving a new mix of teaching and research focused on discrete market segments and the unions understand the need for Murdoch to develop work force skills and flexibility to deal with the presence in the offshore market.[24]
Murdoch’s view
Mr McKee’s evidence was that the reason Murdoch has brought this application is to free itself of the constraints and impediments in the Agreement, enabling the University to be more agile in transforming to meet new challenges within a constantly changing, globally competitive education landscape.[25]
Murdoch is operating at a deficit and this is placing great strain on the University. It needs to make organisational and structural change so it can meet this challenge. There are clauses in the Agreement that inhibit this from occurring.[26]
It is irrelevant how the other universities’ agreements or financial positions compare to Murdoch. These matters and how they compare to Murdoch’s do not make it any easier for Murdoch to improve its financial position or overcome clauses in the Agreement that restrict it from achieving its strategic objectives.[27]
Murdoch is not running an argument in this case that its Agreement is worse compared to other universities.
A substantial portion of Mr McCulloch’s statement deals with comparing Murdoch’s operating and financial position with those of other universities.
Again, Murdoch is in its own unique operational and financial position.
Mr McCulloch’s comparative approach is flawed because:
(a)The performance of other universities does not assist Murdoch to arrest its financial decline and turn its performance around; and
(b)Selectively taking slices of data from other universities without looking at the whole picture is misleading.
Mr McCulloch says in his statement at [75] that the key issue in these proceedings is “what has caused this deteriorating position and what can be done to remedy it.” He then spends a substantial proportion of his statement giving his retrospective analysis using general statistics.
In reply Mr McKee says the University is in the position it is in for a variety of reasons. The terms of the Agreement have played a part but they are far from the only reason. Since joining the University in October 2014, Mr McKee says he has been focussed on trying to repair the University’s position. He is concerned about contributing factors to the extent they still apply but has been far less concerned with working out and apportioning the impact that each contributing factor has played which led to the position the University was in when he joined.
The University has formed a view about how to remedy its deteriorating position. It needs to raise more revenue which is primarily achieved by attracting more students. In addition, Murdoch needs to reduce costs including labour costs.
Mr McCulloch offers his view about why Murdoch is in the financial position it is. Many of his opinions do not necessarily follow from his analysis. These are unsophisticated conclusions based on high level data. They do not consider Murdoch’s inner workings and the details that sit beneath it.
For example, Mr McCulloch concludes at [95] and [96] of his statement that:
(a)Murdoch has made “a very substantial investment” in its offshore campuses;
(b)These campuses are “generating very little revenue”;
(c)“There must be a serious prospect that the offshore programmes are running at a loss”; and
(d)“If this is the case the offshore expansion may be a hidden contributor to the University’s deficit position in recent financial years.”
Murdoch says his analysis is incorrect. Mr McKee gives evidence that since establishing the Singapore operations, Murdoch has never lost money on it. It has always made a surplus. In 2016, Murdoch’s revenue for Singapore was $17.6m. The estimated net profit was around $3m.
Further, Mr McCulloch’s analysis is based on the University’s standalone financial data. It does not appear to consider Murdoch’s consolidated position. Mr Langridge explains in detail in his second expert report why the consolidated position tells the true story.
Murdoch accepts some responsibility for being in the position it is. It also believes the Agreement has caused some of its problems. Apportioning the blame does not assist the Commission or Murdoch.
Murdoch submits it is in a difficult position and needs to evolve and transform to work its way out. It sees the Agreement as a serious impediment to its future recovery.[28]
Mr McKee’s evidence was that over the last six to nine months, the Vice Chancellor has engaged in numerous University wide town hall meetings and discussions with staff. These views are being fed into a new overarching strategy plan for the University. It is anticipated the Senate will consider this strategy plan in August this year.
Murdoch is considering a number of new projects. One of these is the Knowledge and Health Precinct. This will be a collaboration between Murdoch, government and commercial investors. It will be built on 44 hectares of Murdoch’s land. The aim is to create a world class knowledge hub. It will take 15 to 20 years to complete.
Some of the outcomes of the project are:
(a)To create 21,000 full time jobs;
(b)Create research opportunities (the aim is to have up to 1,000 researchers by 2031);
(c)Connect the area to the local indigenous history and community; and
(d)Build better transport links to and from the city and surrounding areas.
Murdoch’s new projects could require significant workforce change. Some of these changes are likely to be met with resistance.
Mr McKee’s evidence was that he is concerned that the following provisions in the Agreement could slow or inhibit these projects from being implemented:
(a)Managing organisational change;
(b)Dispute resolution;
(c)Grievances; and
(d)Redundancy.
Mr McKee is concerned that these clauses will slow down the change process and Murdoch will be caught up in disputes with the NTEU and its members that will frustrate Murdoch’s plan. He believes these clauses give them the power to do that.
Murdoch cannot afford any delay or additional cost to its new strategy. Its financial position is dire. It cannot afford to continue on this downward trajectory. Murdoch needs to immediately reform if it is to turn its fortunes around.
These reforms will bring about direct public benefits. They will lead to Murdoch returning to surplus. The surplus can be reinvested in the University’s programs to assist in, amongst other things:
(a)Improving scholarship;
(b)Conducting world class research; and
(c)Providing high calibre education.
By terminating the Agreement, Murdoch submits it will be free to pursue its reforms which will reinvigorate the University. Employees will have the benefits and protections of the undertakings and the underlying awards until a new enterprise agreement is negotiated.[29]
Consideration
The financial circumstances of Murdoch are obviously one of the circumstances the Commission should take into account in this matter. What Murdoch intends to do to improve its financial circumstances is another circumstance the Commission should take into account.
I accept as the Unions submit that Murdoch’s current financial circumstances have not been caused solely by the Agreement. Rather there are a multitude of factors interacting that have caused Murdoch’s current financial circumstances. These include market conditions, government decisions, corporate governance failures, poor strategic decisions, some employee resistance to change and at times poor management by Murdoch. I also accept that the constraints and limitations the Agreement imposes on Murdoch, whatever their merit, has contributed to Murdoch’s current financial circumstances. Removing the clauses in the Agreement, or the parts of the clauses Murdoch identifies as problematic, will assist Murdoch make changes it wants to as part of improving its financial circumstances and not removing these provisions will make it harder for Murdoch to achieve this.
The clauses in the Agreement Murdoch says are problematic and why
Clause 4−Relationship to Awards and Other Agreement of the Agreement provides that the Agreement is comprehensive and replaces in full any awards that would otherwise apply.
The evidence is that the Agreement covers approximately 1661 academic staff and 1897 professional staff, a total of 3558 employees. Of these approximately 1091 are permanent employees, 2059 are casual employees and 408 are fixed term employees.[30]
Murdoch takes issue with 24 of the Agreement’s 110 clauses.
One of those clauses is common to both academic and professional staff, 12 clauses concern academic staff and the other 11 concern professional staff.
Murdoch categorises the clauses into three tiers, one down to three, in order of decreasing concern.
Tier One
These are the clauses of most concern to Murdoch and affect either staff behaviour or workplace change.
The clauses that affect staff behaviour are,
· 20 and 62 Misconduct/Serious Misconduct
· 21 and 63 Unsatisfactory Performance
The clauses that affect workplace change are,
· 45 and 108 Managing Organisational Change
· 47 and 110 Dispute Settlement Procedure,
· 46 and 109 Grievance Resolution
· 22 Redundancy and 64 Managing Redundancy, Transfer and Redeployment
Tier Two
These clauses affect the ability to control workforce numbers,
· 16.6 Scholarly Teaching Fellows
· 16.4 and 59.4 Fixed Term Contracts
· 50.5 and 50.7 Academic Workload
Tier three
These clauses add expense and/or involve inefficiency,
· 31 and 89 Annual Leave
· 48 Academic Promotions and 65 Classification and Reclassification
· 44 Academic Staff Consultation Group and 107 Professional Staff Consultation of Group
· 13.6 Union Matters - facilities
· 26 and 73 Superannuation
Murdoch called a number of witnesses who gave evidence of examples which they submit demonstrate the legitimacy of their concerns about these clauses in the Agreement. However the Unions, through their own witnesses’ evidence, challenged whether the particular examples did demonstrate the clause or clauses in the Agreement are problematic.
Murdoch’s view of these clauses and the concerns they have, plus their view of the likely effect if these clauses no longer operated as a result of the Agreement being terminated, are detailed below.
Clauses 20 and 62 Misconduct/Serious Misconduct
Murdoch’s concerns are that,
(a)There are too many steps to be followed;[31]
(b)there are too many people involved in the process, including the Academic’s supervisor, the Vice Chancellor, an investigator and a review panel which is made up of the Vice Chancellor's nominee, an NTEU nominee and an independent chair;
(c)the people involved are too senior;
(d)the people involved are not accountable for the outcomes;
(e)the standard for termination is too high (that is – serious misconduct only);
(f)the inclusion of this provision in an enterprise agreement means if Murdoch breaches it then the matter could be:
(i)referred to the Commission for conciliation and arbitration; or
(ii)pursued as a breach of the enterprise agreement through a claim or injunction in the Federal Court or Federal Circuit Court.
Clause 20 involves:
an informal process;
a formal process (employee requested to provide a response);
determination that there is no misconduct, or referral to Vice Chancellor, or investigation;
a decision by Vice Chancellor on action/contemplated action to be taken (after referral, or after provision of investigation report);
if misconduct/serious misconduct found, the employee may seek review by a panel or advise mitigating circumstances;
if the employee seeks review, a panel conducts the review and provides a report to Vice Chancellor within 14 working days; and
the Vice Chancellor considers any review panel recommendations and makes final decision on action.
Clause 62 involves:
an informal process;
a formal process being instituted (employee requested to provide a response);
a finding of no misconduct, or referral to the Vice Chancellor, or investigation; and
a decision by the Vice Chancellor University on action to be taken (after referral, or after provision of investigation report).
Murdoch submits the effect of removing these clauses will be that Murdoch will be able to deal with misconduct in a more efficient, flexible and timely manner. Senior staff will no longer unnecessarily be involved and so will be able to be more productive. Managers will be more inclined to deal with misconduct in the absence of the convoluted and complex processes which will improve workplace culture and potentially lead to a reduction in inappropriate workplace behaviours. Dismissals for other than serious misconduct will be possible where appropriate, such as in the case of multiple instances of misconduct. Because an employee who is dismissed still has the opportunity of making an unfair dismissal claim in the Commission, notwithstanding any internal review process, removing these clauses will mean Murdoch will no longer be subject to two processes concerning the same dismissal thereby reducing managers’ time and effort and costs incurred in such matters.
Murdoch submits that the circumstances of the employees and likely effect on them of removing these clauses would be that the provisions of the Act concerning unfair dismissal remedy applications will apply which is the same protection afforded to other national system employees in Australia.
Clauses 21 and 63 Unsatisfactory Performance
Murdoch’s concerns are that,
(a)the clauses contain too many prescriptive steps;[32]
(b)the processes prescribed by the clauses involve too many people;
(c)the people involved are too senior (for example, the Vice Chancellor); and
(d)the inclusion of this provision in an enterprise agreement means if Murdoch breaches it then the matter could be:
(i)referred to the Commission for conciliation and arbitration;
(ii)pursued as a breach of the enterprise agreement through a claim or injunction in the Federal Court or Federal Circuit Court.
Clause 21 involves:
an informal process;
a formal process;
referral to the Vice Chancellor;
referral to the Director of Human Resources;
referral back to the Vice Chancellor;
referral to a three member Unsatisfactory Performance Review Panel; and
referral back to the Vice Chancellor for a final decision.
Clause 63 involves:
an informal process;
a formal process;
referral to Administrative Head;
referral to Director Human Resources; and
referral to the Vice Chancellor.
Under the clauses the University must:
engage in informal counselling before pursuing the formal process;
prepare a written performance plan setting out such matters as performance goals or expectations, staff development activities, adjustment of work allocation, methods of assessment, milestones and timelines;
provide an opportunity for the employee to improve;
hold regular review meetings with the employee;
prepare reports when referring the matter up the hierarchy;
provide continual opportunities for the employee to provide input into written documents prepared during the process including referral reports; and
prepare a final report when disciplinary action is taken.
These processes must be observed prior to Murdoch taking any disciplinary action for unsatisfactory performance – for example, issuing a written warning.
Murdoch submits the effect of removing these clauses will be that Murdoch’s managers will no longer be required to deal with unsatisfactory performance through a prescriptive, onerous and lengthy process which requires excessive amounts of managers’ time and contributes to an adversarial workplace culture. There will be associated productivity benefits and reductions in administrative costs. Being able to deal with unsatisfactory performance in an efficient and timely manner will assist in retaining good staff and removing poor staff which will assist in improving teaching quality for the benefit of students.
Murdoch submits that the circumstances of the employees and likely effect on them of removing these clauses would be that the provisions of the Act concerning unfair dismissal remedy applications will apply which is the same protection afforded to other national system employees in Australia.
Clauses 45 and 108 Managing Organisational Change
These two clauses are in practically identical terms with 45 concerning academic staff and 108 professional staff. The clauses prescribe consultation processes which must be followed when managing organisational change.[33]
The clauses set out a two stage process for consultation:
(a)‘formal’ consultation is required when the University has developed a ‘proposal’ for organisational change, and
(b)further consultation is required when the University has made a definite decision to implement organisational change.
At each stage, consultation is to be no less than ten working days.
There is a non-exhaustive definition of ‘formal consultation’ which includes:
(a)the provision of documentation setting out the change,
(b)the opportunity to employees to provide written responses/alternatives,
(c)meetings, and
(d)the ongoing provision of information over the duration of the change process.
Each stage of formal consultation requires Murdoch to consult with the Unions in their own right i.e. whether or not they have been nominated as an employee’s representative in the process.
Murdoch’s concerns are that,
(a)Consultation commences too early because there is a requirement to consult on a ‘proposal’ for organisational change. The concept of a ‘proposal’ is ambiguous. Consulting about proposals causes staff often unnecessary stress and anxiety in circumstances where managers are not yet able to provide concrete answers to their concerns due to the high degree of uncertainty involved in a proposal.
(b)Consultation takes too long as it often occurs under the threat of disputes or grievances being initiated under other provisions of the Agreement.
(c)The level of consultation required is excessive.
(d)The scope of consultation required is too broad. Many employees may be potentially affected by a ‘proposal’ for change. There is also a requirement to consult the Unions in their own right irrespective of whether or not they are a representative for affected employees.
Murdoch submits the effect of removing these clauses will be that Murdoch’s managers will not be required to consult before a definite decision is made which will reduce stress for staff and reduce the time spent on unproductive consultation. The time spent on change management consultations can be reduced and tailored to the circumstances. Managers will be free to discuss proposals informally with staff without fear of been challenged that they are not complying with the Agreement’s requirements. A simplified one step consultation process will reduce the potential for unwarranted disruption to consultation processes by the notification of disputes and the associated obligation to observe the status quo.
Murdoch submits that the circumstances of the employees and likely effect on them of removing these clauses would be that the model consultation provisions in the relevant modern awards would apply which requires Murdoch to consult once a definite decision to introduce major changes has been made.
Clauses 46 and 109 Dispute Settlement Procedure
These clauses are in practically identical terms with 46 concerning academic staff and 109 professional staff.
The clauses prescribe that,
(a)the Unions have the ability to raise a dispute in its own right, regardless of whether or not it is representing an employee but Union membership is only approximately 25% of Murdoch’s employees[34] (clauses 46.3 and 109.3);
(b)a party may refer a matter to the Commission for binding arbitration without the consent of the other party (clauses 46.6 and 109.6); and
(c)Murdoch is required to maintain the status quo whilst a dispute settlement procedure is being conducted (clauses 46.7 and 109.7).
Murdoch’s concerns are that,
(a)Dispute resolution procedures in agreements are ordinarily for the benefit of employees, who may be represented in those disputes by their union.
(b)Clauses 46 and 109 inhibit Murdoch’s productivity and managerial prerogative.
(c)Murdoch should not be required to utilise its financial and other resources dealing with disputes on matters that are of importance to the Unions but not to Murdoch employees.
Murdoch submits the effect of removing these clauses will be that its managers can focus their time on legitimate disputes raised by or on behalf of employees. Arbitration by the Commission would only occur with the consent of both parties and time and resources will not be wasted on matters without merit. Invoking the status quo provision cannot then be used disingenuously by employees or the Unions to thwart or delay processes such as organisational change or performance management. This will allow Murdoch to more efficiently and effectively implement change management and not have this frustrated by what can be a minority of disaffected employees.
Murdoch submits that the circumstances of the employees and likely effect on them of removing these clauses would be that an employee party to a dispute would remain entitled under the terms of each award to refer that dispute to the Commission which would allow the Commission to exercise any methods of dispute resolution permitted by the Act that it considers appropriate to ensure the settlement of the dispute (clause 9.4).
Clauses 47 and 110 Grievance Resolution
These clauses are in practically identical terms with 47 concerning academic staff and 110 professional staff.
The clauses prescribe that,
(a)A ‘grievance’ is :
“…any type of problem, concern or complaint related to work, workload or the work environment. A grievance can be raised about any act, behaviour, omission, or situation that has occurred, but not about any matter covered by a separate review process under this Agreement.”
(b)The grievance process is initiated by the grievance being set out in writing summarising the relevant facts and the remedy the employee seeks.
(c) At first, an attempt ‘should’ be made with the employee’s supervisor to resolve the grievance.
(d)the next step is for the grievance to be “raised with senior management”.
(e)the matter should be dealt within five working days.
(f)the employee is not precluded from making a claim to an independent body such as the Commission.
Murdoch’s concerns are that,
(a)The requirements contained in these clauses are better contained in a workplace policy. The inclusion of these provision in an agreement means if Murdoch breaches it then the matter could be:
(i)referred to the Commission for conciliation and arbitration;
(ii)pursued as a breach of the enterprise agreement through a claim or injunction in the Federal Court or Federal Circuit Court.
Murdoch submits the effect of removing these clauses will be that the time spent in dealing with grievances will be reduced leading to increased productivity, improved workplace culture and a reduction of costs.
Murdoch submits that the circumstances of the employees and likely effect on them of removing these clauses would be that an employee would retain the protections of the Act with respect to unfair dismissal remedy application and potentially the other protections in that legislation regarding arbitrary and unfair acts from an employer. Murdoch’s intention in any event is to retain a grievance process by way of a policy which will be accessible by employees.
Clauses 22 Redundancy and 64 Managing Redundancy, Transfer and Redeployment
Clause 22 concerns academic staff and clause 64 concerns professional staff.
Both clauses involve an employee entering into a redeployment period after being notified that their role has been made redundant, with retrenchment and payment of a severance payment to occur if no alternative position can be found during that redeployment period.
The differences for academic staff versus professional staff are,
(a)academic employees are entitled to a maximum of 82 weeks’ redundancy pay, whereas professional employees are entitled to a maximum of 90 weeks’ redundancy pay;
(b)academic employees are entitled to apply for voluntary separation upon being notified of redundancy, whereas professional employees are not;
(c)academic employees are entitled to apply for review of the decision to make their role redundant, whereas professional employees are not;
(d)the formal redeployment period for academic employees is eight weeks (called the ‘transition period’), compared to 26 weeks for professional employees;
(e)after the transition period, there is a 22 week ‘entitlement period’ for academic employees which they may, by agreement, work out or be paid for. There is no obligation on the University to consider redeployment options during the entitlement period. This is in contrast with the requirement relating to professional employees, who the University must attempt to redeploy during the entire 26 week redeployment period; and
(f)professional employees may be transferred to a position at Murdoch’s discretion (subject to consideration of any detriment raised by the employee) and are entitled to salary maintenance for an unlimited period of time if the role is a lower salary/classification.
Murdoch’s concerns are that,
(a)The processes are unnecessarily complicated and lengthy. Clause 22 contains up to eight steps which must be followed before academic staff may be made redundant and these can take up to 30 weeks to complete. Similarly clause 64 contains up to six steps which must be followed before professional staff may be made redundant and these can take up to 28 weeks to complete. This process will have followed the separately mandated consultation process for organisational change under other provisions of the Agreement.
(b)The processes involve too many staff who are too senior. In addition to human resources staff the Vice Chancellor is required at several stages in the process. Where academic staff apply for a review of the redundancy decision a review panel is convened consisting of the Vice Chancellor’s nominee, a nominee of the unions and an independent chair.
(c)The inclusion of these provision in an agreement means if Murdoch breaches it then the matter could be:
(i)referred to the Commission for conciliation and arbitration;
(ii)pursued as a breach of the enterprise agreement through a claim or injunction in the Federal Court or Federal Circuit Court.
(d)Transferring an employee whose position is made redundant to a position at a lower level requires Murdoch to indefinitely maintain their salary at their previous higher rate. This requires Murdoch to indefinitely pay for work performed at a higher rate than it is worth at significant ongoing cost to the University each year.[35] This provision is a perverse incentive for employees to seek redeployment into a lower role.[36]
The employees views, circumstances and the likely effect of terminating the Agreement
Murdoch has not presented any evidence to the Commission as to the views of their employees.
The Unions called a number of Murdoch employees covered by the Agreement who gave evidence as to their circumstances, their views and the likely effect on them of terminating the Agreement. These employees do not support termination of the Agreement and say they would be negatively impacted by its termination.
The Unions summarised that evidence as to the circumstances of and likely effect on the employees as including the following:
(a)uncertainty and possible loss of the existing level of contributions to superannuation;
(b) uncertainty and possible loss of existing pay levels;
(c) reduction in existing redundancy entitlements;
(d) loss of the academic freedom provisions in the Agreement, meaning that academic freedom would not be protected with the force of an enterprise agreement;
(e)the University would be free to set academic workloads whenever it wished to and at whatever level it chose;
(f) loss of paid parental leave benefits;
(g) loss of promotion and reclassification appeals;
(h) loss of grievance procedures;
(i)loss of the benefits concerning Aboriginal and Torres Strait Islander people and culture, meaning that these benefits would no longer be enforceable under an enterprise agreement;
(j) loss of the research program; and
(k) loss of the NTEU’s rights and benefits.
The evidence as to these employees views of terminating the Agreement and other likely effects include:
(a) the reputation of the University and its employees would be tarnished;
(b) there would be uncertainty over employment conditions which would influence people’s choice to stay or start at the University;
(c) the best staff that can be employed elsewhere will leave, including the most prolific researchers;
(d) the potential impact on employment security;
(e) protections for employees that are in the Agreement, including important checks and balances between the University and its employees will be lost;
(f) the security provided by the Agreement and its provision for mutual obligations for workers and the University, would be lost;
(g) without the certainty of the Agreement, work practices will change all the time and staff will simply be at the direction of the University;
(h) people will not be able to support their families and lives;
(i) Murdoch will be a less attractive place for Aboriginal and Torres Strait Islander people to seek employment and other opportunities;
(j) there will be a negative impact on Aboriginal and Torres Strait Islander employment at the University and consequently the broader Aboriginal and Torres Strait Islander community and the cause of reconciliation within the Australian community
(k)there is concern over the removal of matters such as performance management, misconduct and grievance into policy.
Consideration
The evidence of the views of these employees covered by the Agreement, their circumstances and the likely effects if the Agreement was terminated indicate these employees strongly oppose termination of the Agreement.
The employees are understandably concerned that terminating the Agreement will mean terms and conditions of the Agreement beneficial to them will no longer apply and this will have a direct financial cost to them and their families. The employees also hold concerns as to the negative effect termination of the Agreement will have on their workplace, how they are treated by Murdoch and what changes Murdoch may make and how this affects them. Some of the employees who gave evidence are concerned that one of the effects will be that some staff will leave Murdoch to seek employment elsewhere which will be to the detriment of the University and the remaining employees.
These concerns are all legitimate concerns.
It is however apparent from their evidence that their concerns about the financial effect on them of termination has not taken into account the fact the terms and conditions undertaking Murdoch has given will apply for at least the first six months after the Agreement is terminated. This undertaking preserves the beneficial monetary clauses for employees for this period. For example the undertaking preserves the Agreement’s rates of pay and monetary allowances, rates of superannuation payment, hours of work, overtime, leave entitlements, and redundancy payments. Consequently during this first six months after termination of the Agreement the effect on employees would be quite limited.
The employees concerns as to the loss of the financially beneficial clauses in the Agreement will only be a reality if a replacement agreement is not negotiated and approved within six months of termination and if that occurs Murdoch does not provide any further undertaking. Only then would the employees’ wages and conditions fall to be only those prescribed in the Awards. Whilst this is a possible effect it is in my view an unlikely outcome if the Agreement was terminated.
In any event it must be recognised that under the Act modern awards are required to meet the particular objectives prescribed in section 134,
“134 The modern awards objective
What is the modern awards objective?
(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:
(a) relative living standards and the needs of the low paid; and
(b) the need to encourage collective bargaining; and
(c) the need to promote social inclusion through increased workforce participation; and
(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and
(da) the need to provide additional remuneration for:
(i) employees working overtime; or
(ii) employees working unsocial, irregular or unpredictable hours; or
(iii) employees working on weekends or public holidays; or
(iv) employees working shifts; and
(e) the principle of equal remuneration for work of equal or comparable value; and
(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and
(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and
(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.
This is the modern awards objective.
When does the modern awards objective apply?
(2) The modern awards objective applies to the performance or exercise of the FWC’s modern award powers, which are:
(a) the FWC’s functions or powers under this Part; and
(b) the FWC’s functions or powers under Part 2-6, so far as they relate to modern award minimum wages.
Note: The FWC must also take into account the objects of this Act and any other applicable provisions. For example, if the FWC is setting, varying or revoking modern award minimum wages, the minimum wages objective also applies (see section 284).”
So whilst the employees concerns about possible reductions in financial benefits are understandable the context is that the Awards which, absent any undertaking from Murdoch beyond the first six months, will apply to them are each a safety net of relevant and enforceable minimum terms and conditions, as the Full Bench has previously held.[73]
The evidence of some of the employee witnesses was also that they believe Murdoch has damaged its own interests by making this application because it is now viewed negatively by some parties outside the University. Some of these employees say their relationship with their employer, Murdoch, has in their minds been damaged by Murdoch’s decision to make this application.
The evidence of Mr Cousner[74] includes responses to the NTEU from some other NTEU members expressing similar concerns to those expressed by the employee witnesses.
I note the evidence from the recent protected action ballot is that of the approximately 3,500 employees covered by the Agreement 506 employees are NTEU members.[75]
It cannot be assumed that the views of the employee witnesses are representative of the views of the balance of Murdoch’s employees.[76] The views of the silent majority of employees covered by the Agreement are not known.
Murdoch’s view, the circumstances and the likely effect of terminating the Agreement
Murdoch’s view is that it is appropriate to terminate the Agreement because it does not strike an appropriate balance between the rights of Murdoch and its employees, it is inflexible and inhibits productivity, it’s procedural obligations are time consuming and costly and it restricts Murdoch from changing and evolving to overcome its financial restraints and to meet future challenges.
The circumstances of Murdoch have been considered in detail above in regard to the University’s past, current and forecast financial situation, it’s past and current operating environment, the future challenges it faces as well as its intentions for the future.
Murdoch submits that terminating the Agreement will remove clauses that would otherwise hinder changes it needs to make to its operations, impede its management of employees and obstruct the efficient use of the University’s employees.
Murdoch believes terminating the Agreement will likely have the effect of assisting it evolve and reconfigure its business to meet its challenges and if this occurs it is likely to return to surplus and operate in a financially sustainable way. This will have the likely effect of enabling Murdoch to deliver better student education which will make for better graduates for the benefit of business and the economy. This is likely to enable Murdoch to improve collaboration with industry, undertake better research which benefits the community and to develop projects that benefit the public one example being the Knowledge and Health Precinct.
Murdoch submits that terminating the Agreement will assist future bargaining because future negotiations will not be based on the existing terms and conditions and instead the parties will have an opportunity to reset bargaining on a ‘clean slate’.
Murdoch submits it is seeking an agreement that is fair both to the employees and to Murdoch and which enables Murdoch and its staff to embrace future challenges and opportunities in an agile and flexible manner.
Consideration
Mr Langridge’s evidence on the financial position of Murdoch, which I accept, was detailed earlier in this decision. It shows that Murdoch has experienced declining surpluses and a deteriorating net asset position between 2013 and 2016 with deficits recorded in 2015 and 2016. If Murdoch continues to experience pressure on student fee income then it is likely deficits will continue unless Murdoch can effectively manage its costs. Employee costs are a major driver of total costs and from 2013 to 2016 the rate of increase in employee cost was 10%, exceeding the rate of increase in student fee income of 2%.
Whilst recognising the shortcomings in the high level outlook for the next four years Mr Langridge adopted, and that it was based on broad assumptions that historic income and expenditure trends will continue in this period it does demonstrate that if Murdoch does not take action and adopt strategies to arrest the current trends of income and expenditure it will face significant challenges in funding future capital expenditure and experience continued deterioration of its net asset position.
I accept there is a financial imperative for Murdoch to make changes in its operations.
Murdoch has identified changes it believes it needs to make to its business model and its culture to be financially sustainable. Some of these changes involve reshaping its workforce, altering staff behaviour, controlling staff costs and removing unnecessary bureaucratic costs.
I do accept as the Unions argue that the Agreement is not the sole cause of Murdoch’s financial situation however I also accept the provisions in the Agreement have had some negative impact on Murdoch’s financial situation as have the changed market, government decisions, poor strategic decisions, lax corporate governance, poor management and other external factors.
It is entirely appropriate that a university in a poor financial situation look into all aspects of its business for improvement. There is no reason why the employment arrangements, particularly when these were negotiated some years ago, should not now be reviewed as part of striving for improvement.
Importantly for this application Murdoch’s argument is about the future and is that the clauses it impugns in the Agreement will hinder or obstruct it making the changes it needs to in order to improve its financial situation.
Murdoch’s view of these clauses is rejected by the Unions however Murdoch’s view is not unreasonable. Individually and collectively these clauses in the Agreement do impose significant procedural burdens and some costs on Murdoch and some clauses expressly impose constraints on how Murdoch operates and how it manages its employees.
If the Agreement is terminated there are some Award provisions that will then apply which are less flexible for Murdoch than the Agreement’s clause but these are few. Acknowledging this I am persuaded that overall if the Agreement is terminated Murdoch will have fewer constraints on how it manages its employees and its operations. Consequently, all other things being equal, Murdoch will then be able to more easily make changes it wants to and to implement these more quickly than has been the case in the past. Whilst this alone will not guarantee an improvement in Murdoch’s financial circumstances this will support Murdoch in its endeavours to improve.
Any ongoing improvement in Murdoch’s financial circumstances, if achieved, will potentially be beneficial for its employees and a range of other direct and indirect stakeholders.
The likely effect on future bargaining will be considered later in this decision.
The Unions’ view, circumstances and the likely effect of terminating the Agreement
The Unions oppose termination of the Agreement and their view is that there is nothing about the operation of the Agreement or the course of bargaining that makes it appropriate to terminate the Agreement.
The Unions submit that there is no foundation for the University’s contention that the provisions in the Agreement about which Murdoch complains prevent it from managing its staff, or from addressing the challenges facing the University and its staff.
These provisions strike an appropriate balance between the interests of the University and the interests of its academic and professional staff.
The provisions of the Agreement are unremarkable and comparable to provisions in other enterprise agreements in the university sector. If anything, the Agreement provides the University with competitive advantages. This is not a case where the agreement contains a range of conditions which are in excess of community standards or unreasonably constrain the University from being competitive.
In terms of the likely effect of termination of the Agreement the Unions submit this will actually damage the University, by causing further damage to its reputation, its relationship with its staff, and its ability to attract and retain staff and students.
The University has chosen to burden the Commission with a selective wilderness of individual cases which it contends have arisen under various provisions of the Agreement. At the hearing, the University abandoned several of these case examples. The remaining examples did not withstand scrutiny. The Unions submit the evidence demonstrates that the examples simply do not support a conclusion that the Agreement is either a cause of the University’s present challenges, or that its termination is necessary to enable the University to meet those challenges.
The fact that these were the only case examples that the University could come up with, across a workforce of more than 3,500 employees and a three year period, illustrates the weakness of the University’s case for termination.
The Unions view is that termination of the Agreement would shift the balance in bargaining in favour of Murdoch which, given the context set out immediately above, is inappropriate. Termination is not necessary to break a ‘deadlock’. Indeed, it may be that termination of the Agreement would make the re-negotiation more difficult because of the deterioration of the relationship between the University and its staff precipitated by this application.
The reality is that, contrary to the University’s case, termination of the Agreement will make it harder to reach an agreement. Given the recalcitrance of the University to date, it is likely that termination will simply embolden the University to dig in further and continue to demand acceptance of its clauses without compromise.
By contrast, dismissing the application for termination, and not disturbing the Agreement, will mean that parties can constructively bargain in relation to the limited number of unresolved matters between them. There is no evidence that the NTEU will not make further compromises in bargaining, but the employees’ position will not be weakened. Indeed, the parties would be able to apply to this Commission for any assistance required in order to reach an agreement on the remaining issues. If necessary, that step would be far more conducive to reaching an agreement than if the Agreement were terminated.
In summary, the course of bargaining also does not provide any justification for the termination of the Agreement.
If the Agreement is terminated this would undermine the rights of members to be represented by the Unions in the workplace, and the capacity of the Unions to provide that representation. It would undermine the ongoing bargaining process.
It would see the Unions, and there members and all University academic and professional staff disadvantaged by an application that is, in reality, a legal tactic being pursued by the Murdoch in bargaining.
Consideration
The Unions oppose the termination of the Agreement. In terms of their circumstances and the likely effect on them if the Agreement is terminated it is not apparent that there would be any significant effect on the Unions themselves other than for the removal of those clauses conferring benefits directly on the Unions from the Agreement however these changes are not significant. The Unions will continue to have all the rights conferred upon them by the Act as representative of their members employed at Murdoch. They will also have rights as representatives of their members as provided for in the respective awards.
The likely effect on future bargaining will be considered later in this decision.
Is it appropriate to terminate the Agreement?
The Full Bench decision in Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd[77] explained the discretionary nature of the decision the Commission is required to make under section 226 as follows,
“[17] In identifying that s.226 required the exercise of a discretion, the Full Bench in AWX Pty Ltd referred to the following passage in the High Court decision in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (footnotes omitted):
“[19] "Discretion" is a notion that "signifies a number of different legal concepts". In general terms, it refers to a decision-making process in which "no one [consideration] and no combination of [considerations] is necessarily determinative of the result." Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion. On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment.”
[18] Section 226 involves the exercise of a “narrow” discretion of the type described in the last sentence of the above passage. Notwithstanding this, it remains the case that the evaluative assessments required by s.226(a) and (b) allow a degree of latitude on the part of the decision-maker as to the conclusions to be reached. For the reasons explained in Coal and Allied Operations, this means it is necessary in an appeal from a decision made under s.226 to demonstrate error in the decision-making process. The types of errors that might be demonstrated are those identified in House v The King.” (References omitted)
The likely effect on bargaining if the Agreement is terminated
The parties’ bargaining has been ongoing for a year and limited progress has been made. The parties are apart on multiple matters that are fundamental issues to them.
Murdoch has sought to change provisions it believes impacts its efficiency and ability to implement change in the workplace and to manage its employees and its operations. In the negotiations Murdoch is not proposing to reduce monetary benefits and has offered a limited wage increase. The NTEU have agreed to some changes to the Agreement but are resistant to change other provisions they view as beneficial to their members and are seeking wage increases significantly above what Murdoch has offered.
Both parties in the negotiations are entitled to hold to their respective positions and it is not for the Commission to endorse one approach over the other.
The Unions submit termination of the Agreement will shift the balance in bargaining in favour of Murdoch which given they say Murdoch’s approach to bargaining has been inflexible would be inappropriate. They submit that termination is not necessary to break a supposed ‘deadlock’.
The Unions submit termination of the Agreement would make renegotiation more difficult because of the deterioration of the parties relationship, will shift the bargaining balance in Murdoch’s favour and so embolden Murdoch to demand acceptance of its clauses. Dismissing this application and not disturbing the Agreement will mean the parties can continue to constructively bargain. Not terminating the Agreement would mean that employees’ position will not be weakened.
Implicit in the Unions’ submission that terminating the Agreement will shift the bargaining balance in Murdoch’s favour is that bargaining since April 2016 has occurred in circumstances where the bargaining balance is favourable to the employees and their representatives.
The context for the negotiations to date has been that the provisions of the expired Agreement remain in operation unless both parties agree to changes.
This is important in this instance because the specific changes Murdoch is bargaining to achieve is to remove or redraft numerous clauses in the Agreement it views as problematic. If bargaining does not result in an agreement the problematic clauses continue to apply unchanged into the future, indefinitely.
In this situation the current context for negotiations has not been neutral, it has favoured the NTEU where they do not agree to change these clauses.
As the Unions submit, if the Agreement is terminated this will change the bargaining dynamics. This is because the context for bargaining will be different. The starting point then would be that the provisions of the expired Agreement are not operative and will not be in a new agreement unless both parties agree to this. The focus for negotiations will likely then be on why provisions from the terminated Agreement should be retained and why different provisions should be included in a new agreement.
In Aurizon the Full Bench considered the impact of terminating the Agreement on future bargaining as follows,
“[158] As we have earlier indicated, there is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and the continuation of collective bargaining in good faith for an agreement. Neither the Unions nor Aurizon have suggested that bargaining will stop if the agreements are terminated. Neither have suggested that they will not pursue new agreements or that they will cease bargaining if the agreements are terminated.
[159] While we accept that a termination of the agreements will disturb the current bargaining positions, we do not accept, as the Unions submit, that this is counter to the object of a fair framework for collective bargaining and facilitating good faith bargaining. Collective bargaining will remain available to the bargaining parties. The bargaining parties in their bargaining will continue to be required to meet the good faith bargaining requirements. The disturbance of the bargaining position does not result in the disappearance of collective bargaining or the rules by which the bargaining parties must abide.
[160] Moreover the Unions and employees will have available to them the full arsenal of tools under the Act to exert legitimate industrial pressure on Aurizon to bargain and to reach agreement. It is therefore not correct that the termination of the agreements results in little or no incentive on Aurizon to bargain.”[78]
If the Agreement is terminated there will be some immediate benefits for Murdoch and there will be some negative consequences for the Unions and the employees as has been considered in detail above. If a replacement agreement is negotiated and approved within six months these negative consequences will be significantly reduced.
The parties in this instance are well apart in their positions. The bargaining has been heavily focused on the detail of the clauses to be included in a new agreement. Terminating the Agreement will change the context for bargaining, more to Murdoch’s favour than has been the case to date, which has favoured the NTEU’s unwillingness to change existing clauses.
If the Agreement is terminated bargaining can continue and the employees will have the right to take protected action if they wish. The content of a new agreement will not be determined by termination of the Agreement but will be in the hands of the negotiating parties.
The evidence is the parties all want to put in place a new agreement. If the Agreement is terminated there will be benefits for each party in successfully negotiating a replacement agreement.
The most likely outcome if the Agreement is terminated is that at some point the parties do negotiate a replacement agreement which can be put to the employees for approval.
In my judgement in all the circumstances if the Agreement is terminated this will promote further bargaining and there is more likelihood the parties will successfully complete negotiations for a new agreement.
Taking all of these circumstances into account I am satisfied that it is appropriate to terminate the Agreement.
Conclusion
As explained above I am satisfied that in the particular’s circumstances of this case it is not contrary to the public interest to terminate the Agreement.
Having taken into account all of the circumstances including the views of the employees, the employer, the Unions, covered by the Agreement and the circumstances of those employees, the employer and the Unions and the likely effect the termination will have on each of them I consider that it is appropriate to terminate the Agreement.
Consequently under section 226 of the Act the Commission must terminate the Agreement. An order [PR595664] terminating the Agreement will be issued and pursuant to section 227 of the Act the termination of the Agreement will operate on and from 26 September 2017.
COMMISSIONER
Appearances:
S. Wood QC and A. Manos of Counsel for the Applicant.
R. Attiwill SC and J. Kirkwood of Counsel for the Unions.
Hearing details:
2017.
Perth:
July 4, 5, 6, 7, 10, 11, 12, 13, 14, 17 and 21.
[1] Exhibit A4, vol. 2, tab 78, p. 1014 at [17].
[2] Ibid., vol. 2, tab 69, pp. 897- 924.
[3] Ibid., vol. 2, tab 71, pp. 927-958 plus Exhibit A23 and Exhibit A6.
[4] Graph not reproduced in decision.
[5] Transcript at PN1591-PN1608.
[6] Exhibit A4, vol. 2, tab 69, pp. 913-914.
[7] Ibid., vol. 2, tab 71, p. 933 and Exhibit A6 at [2.17]-[2.19].
[8] Ibid., vol. 5, tab 178, pp. 2893-2943.
[9] Exhibit R64.
[10] Exhibit A4, vol.2, tab 71, p. 933.
[11] Exhibit R64 at [19].
[12] Ibid., at [20]-[27].
[13] Exhibit A4, vol. 5, tab 178, p. 2910.
[14] Transcript at PN1647.
[15] Exhibit A4, vol. 2, tab 71, p. 947 at [4.98].
[16] Ibid., vol. 3, tab 95, p. 1566 -1567.
[17] Transcript at PN665-PN672.
[18] Ibid., at PN1308.
[19] Exhibit A4, vol. 5, tab 178, p. 2903.
[20] Applicant’s closing submission at [115]-[125].
[21] NTEU’s closing submission at [53].
[22] Ibid., at [30].
[23] Exhibit A4, vol. 6, tab 183, pp. 2982-2983 at [177]-[179].
[24] Ibid., vol. 6, tab 183, pp. 2968 and 2970 [85] and [99].
[25] Ibid., vol. 2, tab 82, p. 1078 at [14].
[26] Ibid., vol. 2. tab 82, p. 1078 at [17].
[27] Ibid., vol. 2, tab 82, p. 1078 at [18].
[28] Ibid., vol. 2, tab 82, pp.1098-1100.
[29] Ibid., vol. 2, tab 82, pp. 1109-1112.
[30] Ibid., vol. 4, tab 106, p. 2019 at [39].
[31] Exhibit A5, tab 3.
[32] Ibid.
[33] Ibid.
[34] Exhibit A4, vol. 4, tab 106, p. 2036 at [151].
[35] Ibid., vol. 4, tab 106, p.2037 at [160] and Transcript at PN3976.
[36] Transcript at PN8047-PN8053.
[37] Exhibit A4, vol. 2, tab 82, p. 1091 at [77].
[38] Neither Award contains the ability to cash out annual leave so this will not be available if the Agreement is terminated.
[39] Exhibit A5, tab 2 at clause 65.4.
[40] [2015] FWCFB 540.
[41] Section 134 of the Fair Work Act 2009.
[42] Exhibit A4, vol. 4, tab 106, p. 2020 at [42].
[43] [2016] FWC 3508.
[44] [2016] FWCFB 6470.
[45] Transcript at PN6611.
[46] Ibid., at PN6656-PN6776 and Exhibit A4, vol. 4, tab 106, p. 2043 at [198].
[47] Exhibit R5.
[48] Exhibit A4, vol. 4, tab. 134, pp. 2473-2479.
[49] Compare exhibits R5 and R8 to ibid.
[50] Exhibit A4, vol. 3, tab. 78, p. 1041 at [173].
[51] Ibid., vol. 3, tab. 78, p. 1042 at [177].
[52] Ibid., vol. 3, tab. 37, p. 734 at [40].
[53] [2015] FWCFB 540.
[54] (2005) 139 IR 34.
[55] [2015] FCAFC 126 at [22].
[56] [2016] FWCFB 4620 at [42].
[57] Kellogg Brown & Root v Esso Australia Pty Ltd (2005) 139 IR 34 at [47] and [48].
[58] Exhibit A4, vol. 5, tab. 164, p. 2712 at [14].
[59] Ibid., vol. 5, tab. 164, p. 2713 at [22] and [26].
[60] Ibid., vol. 5, tab. 164, p. 2714 at [27].
[61] Transcript at PN1882-PN1885.
[62] See clauses 20.2 and 20.3 of the Agreement.
[63] Exhibit A4, vol. 5, tab. 173, p 2847 at [53].
[64] Unions’ closing submission at [108],[109] and [112].
[65] Kellogg Brown & Root v Esso Australia Pty Ltd (2005) 139 IR 34 at [27].
[66] Exhibit A4, vol. 5, tab. 228, pp. 3127-3144.
[67] Subclause 41.2 of the University of Wollongong (Academic Staff) Enterprise Agreement 2015 [AE415561].
[68] Clause 5− Definitions of the University of Tasmania Staff Agreement 2013 – 2016 [AE407077].
[69] Clause 1.8−Sefinitions of the University of the Sunshine Coast Enterprise Agreement (EA) 2014 – 2018 [AE419671].
[70] Clause 6.16 (g) of the Queensland University of Technology Enterprise Agreement (Academic Staff) 2014 – 2017 [AE409056].
[71] (2005) 139 IR 34 at [46].
[72] Ibid., at [23].
[73] AMWU v Griffin Coal Mining Company Pty Ltd[2016] FWCFB 4620 at [61].
[74] Exhibit A4, vol. 5, tab. 157, pp. 2630-2637.
[75] Ibid., vol. 4, tab 106, pp. 2020 and 2022 at [42] and [55].
[76] Transcript at PN8763-PN8770.
[77] [2016] FWCFB 3591.
[78] This view was endorsed in AMWU v Griffin Coal Mining Company Pty Ltd[2016] FWCFB 4620 at [69].
Printed by authority of the Commonwealth Government Printer
<Price code J, AE407853 PR595663>
6
6
0