United Firefighters' Union of Australia-Victorian Branch v Metropolitan Fire and Emergency Services Board

[2012] FWA 1085

[2012] FWA 1085

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

United Firefighters' Union of Australia-Victorian Branch
v
Metropolitan Fire and Emergency Services Board
(C2011/781)

COMMISSIONER ROE MELBOURNE, 6 FEBRUARY 2012

Alleged dispute concerning MFBs accident and illness policy and the provision of income protection insurance to operational staff pursuant to Clause 42 Allowances and Clause 19 Dispute Resolution of Metropolitan Fire and Emergency Services Board, United Firefighters’ Union of Australia Operational Staff Agreement 2010.

[1] On 23 September 2011 the United Firefighters’ Union of Australia (UFU) made an application under s.739 of the Fair Work Act 2009 (the Act) to deal with a dispute in accordance with a dispute settlement procedure. The dispute is pursuant to the Metropolitan Fire and Emergency Services Board, United Firefighters’ Union of Australia Operational Staff Agreement 2010 (the Agreement). The Agreement was approved under the Fair Work Act 2009 (the Act) on 23 September 2010. 1 The employer covered by the Agreement is the Metropolitan Fire and Emergency Services Board (MFB).

[2] The dispute relates to the MFB’s Accident and Illness Policy and the UFU seeks income protection insurance for operational staff employed under the Agreement as a resolution to the dispute.

[3] The arbitration of this matter was on 30 and 31 January 2012. Written submissions were provided by the UFU 2 and the MFB.3

[4] Evidence for the UFU was given by:

• Peter Marshall, Victorian and National Branch Secretary of the UFU. 4



• Casey Lee, Senior Industrial Officer for the UFU. 5



• Sean McCormack, Legal Officer for the UFU. 6



• Shane Lucas, a member of the UFU and a firefighter employed by the MFB for approximately ten years. 7 Mr Lucas suffered from illness which resulted in the exhaustion of his personal leave entitlements and he was assisted by other firefighters through the UFU organised and MFB approved leave bank. The UFU and Mr Lucas claim he would have been better protected by income protection insurance.



• Wayne Hodder, a member of the UFU and a firefighter employed by the MFB since August 2008. 8 Mr Hodder suffered from illness which resulted in the exhaustion of his personal leave entitlements and he was assisted by other firefighters through the UFU organised and MFB approved leave bank. The UFU and Mr Hodder claim he would have been better protected by income protection insurance.



• Leigh Wicking, an electrician member of the Electrical Trades Union who has been in receipt of income protection insurance under a collective agreement. 9



• Cameron McDonald, Accident and Illness Underwriter for ATC Insurance Solutions Pty Ltd, a provider of income protection insurance. 10 Mr Cameron McDonald also provided a supplementary submission in response to the evidence of Mr Okley for the MFB.11



• Dr Charles Castle, Occupational Physician, Workers Occupational Health Centre, Melbourne, who provided evidence concerning the benefits of income protection to workers and employers. 12

[5] Evidence for the MFB was given by:

• Shane Wright, Chief Fire Officer and Executive Director Emergency Management for the MFB. 13



• Philip McInerney, Executive Manager, Health and Safety for the MFB. 14



• Kirstie Schroder, Acting Executive Manager, Operational Learning and Development for the MFB and whose substantive role is as Executive Manager Employment and Professional Development. 15



• Gary Okley, General Manager of Jardine Lloyd Thompson Pty Ltd, an international group of insurance brokers, risk consultants and employee benefit specialists. 16

[6] The statement of Dr Castle was provided in response to the material of the Respondent. The Respondent argued that the material was not properly a response to the MFB material. I was satisfied that important aspects of the statement were a response to the material of the MFB and that taking into account all the circumstances the material should be admitted. At the start of the arbitration hearing the UFU also sought to introduce a further witness statement of Mr Dean Mighell. Having regard to the circumstances and the material I was not satisfied that there was adequate justification to admit the material at that late stage.

The Background and Jurisdiction

[7] The relevant clauses of the Agreement are:

“19. DISPUTE RESOLUTION

19.1. This dispute resolution process applies to all matters arising under this agreement, which the parties have agreed includes:

19.1.1. all matters for which express provision is made in this agreement; and

19.1.2. all matters pertaining to the employment relationship, whether or not express provision for any such matter is made in this agreement; and

19.1.3. all matters pertaining to the relationship between the MFESB and UFU, whether or not express provision for any such matter is made in this agreement.

The parties agree that disputes about any such matters shall be dealt with by using the provisions in this clause.

19.2. To ensure effective consultation between the employer, its employee(s) and the union on all matters, the following procedure shall be followed in an effort to achieve a satisfactory resolution of any dispute or grievance:

19.2.1. Step 1 The dispute shall be submitted by the union and/or employee(s) to the employee's immediate supervisor.

19.2.2. Step 2 If not settled at Step 1, the matter shall be submitted to the appropriate senior officer.

19.2.3. Step 3 If not settled at Step 2, the matter shall be recorded. The matter shall be submitted to the appropriate delegated Industrial Representative of the employer for consultation.

19.2.4. Steps 1 - 3 Must be concluded within a period of ten (10) consecutive days. Disputes are to be resolved at a local level wherever possible.

19.2.5. Step 4 If the matter is not settled at Step 3, the dispute shall be formally submitted in writing to the Manager Employee Relations, setting out details of the dispute and, where appropriate, with supporting documentation.

The Manager Employee Relations shall convene a meeting of the employer, employee(s) and the union within a period of one week (7 days) of receipt of such submissions and endeavour to reach a satisfactory settlement.

19.2.6. Step 5 If the matter is not settled following progression through the disputes procedure it may be referred by the union or the employer to FWA.

FWA may utilise all its powers in conciliation and arbitration to settle the dispute.

19.3. Notwithstanding the words contained in the above sub-clause, the steps or the procedure apply equally to a dispute raised by an employee, the union or Officer in Charge

19.4. While the above procedures are being followed, including the resolution of any dispute by FWA pursuant to clause 19.2.6, work must continue and the status quo must apply in accordance with the existing situation or practice that existed immediately prior to the subject matter of the grievance or dispute occurring. No party shall be prejudiced as to the final settlement by the continuance of work in accordance with this sub-clause.

19.5. This clause shall not apply to a dispute on a Health and Safety issue.

19.6. A dispute may be submitted, notified or referred under this clause by the UFU.

19.7. A decision of FWA under this clause may be appealed. A dispute is not resolved until any such appeal is determined.

42. ALLOWANCES

42.1. The monetary amounts of all allowances provided for in this agreement are set out in Schedule 4.

42.2. All other work related allowances will increase by 13.5% as identified in Schedule 4 of this agreement as from the date of lodgement of the Agreement with Fair Work Australia.

42.3. Any additional, new or increase of allowance above that already provided in the agreement will be referred to FWA for determination. Both parties reserve their rights to put their respective positions.

....

23. NO EXTRA CLAIMS

23.1. There shall be no extra claims by either party.”

[8] The relevant provisions of the Act are:

“Subdivision B—Dealing with disputes

738 Application of this Division

This Division applies if:

(a) a modern award includes a term that provides a procedure for dealing with disputes, including a term in accordance with section 146; or

(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or

(c) a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or

(d) a determination under the Public Service Act 1999 includes a term that provides a procedure for dealing with disputes arising under the determination or in relation to the National Employment Standards.

739 Disputes dealt with by FWA

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

(2) FWA must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to FWA dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises FWA to deal with the matter.

Note: This does not prevent FWA from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effectas subsection 65(5) or 76(4) (see also subsection 55(5)).

(3) In dealing with a dispute, FWA must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that FWA may arbitrate (however described) the dispute, FWA may do so.

Note: FWA may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

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

(6) FWA may deal with a dispute only on application by a party to the dispute.”

[9] I am satisfied that Clause 19.1 provides very wide scope for the resolution of disputes which arise. The scope is much broader than the matters specifically provided for in the Agreement. There is nothing in the Act which prevents a disputes settlement clause in an agreement from having such a broad scope so long as it only deals with permitted matters. I am satisfied that pursuant to Section 739(1) of the Act the Agreement disputes settlement provision provides authority for FWA to deal with the dispute. The matter of accident and illness policy is a matter which pertains to the employment relationship and it is also a matter which pertains to the relationship between the UFU and the employer. The MFB argue that it is possible that some additional benefits associated with income protection insurance specifically domestic duties assistance where an employee’s spouse is injured might not be a matter pertaining.

[10] Section 739(2) is not relevant.

[11] Section 739(3) and 739(4) are satisfied because arbitration of this dispute is a matter which is explicitly permitted by the disputes settlement term of the Agreement and the Agreement no extra claims term does not otherwise limit the matters to be dealt with. The parties have agreed that FWA should arbitrate the dispute.

[12] The Application is made by a party to the dispute, the UFU, and hence Section 739(6) is satisfied.

[13] It is necessary to consider if the granting of the UFU’s claim or any alternative form of income protection insurance would be inconsistent with the Agreement. If this were to be the case then to determine such an outcome would be contrary to Section 739(5) of the Act. The obvious term of the Agreement which might raise such an issue is Clause 23 No Extra Claims. The term “no extra claims” has an established industrial meaning. In this case the term is not restricted to matters in the Agreement and it is therefore designed to ensure that the agreement is a closed agreement until bargaining for the next agreement is permitted under the Agreement and the Act. Clause 5 of the Agreement provides for renegotiation to occur six months prior to the nominal expiry date of the Agreement. I am satisfied that Clause 23 means that no extra claims can be made until six months prior to the nominal expiry date of the Agreement. The Act provides that a protected industrial action ballot in pursuit of such claims cannot occur earlier than 30 days prior to the nominal expiry date of 30 September 2013.

[14] Extra claims are claims for a new, additional or changed entitlement. Given that the scope of the no extra claims term is not restricted in this Agreement the term can include further claims about matters which were settled and included in the Agreement, matters which were subject to the negotiations for an Agreement but which were not agreed to be included in the agreement, and matters which were not subject to negotiations for an Agreement. A dispute over the application or interpretation of a matter in the Agreement is not generally an extra claim. Since the disputes settlement clause in this Agreement is able to deal with matters wider than the Agreement provisions themselves there are also many possible disputes over the employment relationship or the relationship between the union and the employer which would not constitute claims for new, additional or changed entitlements. Where the Agreement specifically provides for the parties to resolve a matter during its term or for further claims to be made about a particular matter during its term then claims about those matters would not generally be extra claims.

[15] In my view the nature of the claim in this case means that it must be regarded as an extra claim, and hence prohibited under Clause 23, unless a clause in the Agreement specifically allows for such a claim or unless the parties to the Agreement specifically agreed that the claim was not an extra claim at the time of making the Agreement (reserved matters). Since the disputes settlement clause in this Agreement is able to deal with matters wider than the Agreement provisions themselves then such reserved matters can be dealt with.

[16] The other clauses of the Agreement which may have an impact are Clause 55 which provides for accident make up pay up to 52 weeks and Clause 49 which provides for Journey Accident Insurance coverage up to 52 weeks. The MFB argues that to the extent that the income protection claim involves a claim for accident make up pay and or journey accident insurance this would offend the no extra claims clause. I agree with this submission. However, I note that the parties have reserved the matter of extension of journey accident insurance protection to 104 weeks as a separate matter which can be arbitrated and which is also exempted from the no extra claims provision. I also note that there are other provisions of the Agreement that provide protection for firefighters who are injured as a result of their employment (e.g. Clause 91).

[17] If the provision of income protection insurance can be regarded as a new or additional allowance then the dispute over the matter can be arbitrated pursuant to Clause 42.3 Allowances. Clause 42.3 does not restrict the nature or amount of any new allowance claim. If the provision of income protection insurance can be regarded as a matter which the parties specifically agreed was not to be regarded as an extra claim at the time the Agreement was made then the matter can also be arbitrated pursuant to the disputes procedure in Clause 19.

[18] The log of claims forwarded to the MFB for the negotiations for the Agreement on 11 June 2009 contained a Clause 46 “Accident and Illness Policy” which provided for the MFB to provide income insurance for employees for injuries which occur outside work hours and for the details to be settled between the UFU and the MFB within six months of the agreement.

[19] The claim was as follows:

“46. Accident and Illness Policy

Recognising that employee well-being is directly linked to the MFESB’s productivity, and wishing to encourage the speedy return to work of injured employees by minimising any additional burdens they may suffer as a result of accidents outside of work time, the MFESB will provide income insurance cover for employees for all injuries which occur to an employee outside of work hours and which render the employees partly or wholly incapable for work. The details of the insurance cover are to be agreed between the UFU and MFESB within 6 months of the date of this agreement.”

[20] Mr Lee also gave evidence that this claim did not change in the draft documents used throughout the period of the negotiations for the Agreement. 17

[21] On 17 August 2010 Peter Marshall, Branch Secretary of the UFU sent a letter to the MFB stating that:

“In the course of discussions around the proposed MFB UFU Operational Staff Agreement, the parties identified a number of matters that it is agreed should be arbitrated by Fair Work Australia if they cannot be otherwise agreed between the parties.” 18

A list of items followed, with the first item on the list being “Accident and illness policy”.

[22] On 1 September 2010 Casey Lee on behalf of Peter Marshall sent a follow up email seeking a response to the correspondence of 17 August 2010 to Kirstie Schroder, Acting Director Capacity Development for the MFB. Ms Schroder had been a key participant in the negotiations for the Agreement. On 3 September 2010 Ms Kirstie Schroder responded by email that:

“I can confirm that the attached letters are reflective of our agreed position in relation to the matters contained in each of the letters. I would like to make one clarification in relation to private arbitration on Journey Accident Cover, this matter relates to the UFU seeking to extend Journey Accident provisions from 52 weeks to 104 weeks of cover.” 19

[23] The parties agree, and I am satisfied that the matter of “Accident and illness policy” was a matter which the parties agreed at the time they made the Agreement was a matter which did not constitute an extra claim pursuant to Clause 23 of the Agreement because it was a matter which they agreed should be subject to private arbitration during the term of the Agreement. The employees were advised by the UFU and the MFB of this fact prior to the employees voting for the Agreement. The vast majority of employees covered by the Agreement are members of the UFU and were represented by the UFU in the bargaining process. Mr Marshall gave evidence which was not contested by the MFB that on 1 September 2010 a general membership meeting was held to brief employees on the Agreement which had been negotiated and which was to be put to a vote. A power point slide show was given which outlined the content of the proposed Agreement. One of the slides is headed “Allowances to be arbitrated by consent” and one of the items under that heading is “Accident and Illness Policy.” 20

[24] The parties submit and I am satisfied that the steps of the disputes resolution procedure have been followed. I conducted conciliation of the dispute based upon the Application made by the UFU pursuant to Step 5 and Clause 19.3 of the procedure. In response to directions I issued on 29 September 2011, the parties held a high level meeting on 6 October 2011. On 17 October 2011 I was satisfied that conciliation was exhausted. The parties agreed that the matter should proceed to arbitration.

[25] The parties agreed with these jurisdictional and factual findings.

[26] The union submits that the claim for income protection insurance is a claim for an amount of money to be paid on behalf of each relevant worker to provide them with income protection benefits. They say this is the nature of an allowance and that the matter can also be determined pursuant to the allowance clause which provides for new or additional allowances to be determined by FWA. The MFB argue that the UFU did not categorise this matter as a new allowance claim during the bargaining process for the Agreement but did so categorise a number of other claims.

[27] It is not necessary to determine this matter given that I am satisfied that Clause 19 provides a jurisdictional basis for FWA to resolve the dispute concerning the claim for the provision of accident and illness policy through income protection insurance. However, if I am wrong about this matter I would be satisfied that the claim for the payment of a fixed amount each week in respect of each worker to provide them with income protection benefits can be characterised as a claim for a new income protection insurance allowance and that Clause 42.3 of the Agreement can also provide jurisdiction for FWA to resolve the dispute about the claim. It is also relevant that the “Accident and Illness Policy” reserved matter was listed under the heading “Allowances to be arbitrated by consent” in the slide presentation of the Agreement made to employees immediately before voting on the Agreement. 21

The matter in dispute.

[28] In response to the directions I issued in this matter the UFU has detailed what it seeks as a resolution to the dispute over the claim. 22 The UFU are seeking that the MFB pay the premium for an income protection policy to be taken out in the Union’s name directly to an insurer nominated by the Union. The policy would cover all employees covered by the Agreement and would have features including:

• Weekly payments which are the lesser of $2000 per week or 100% of income.



• Benefits payable for up to 104 weeks.



• A waiting time of 14 days.



• Top up benefit for 104 weeks to supplement payments from partial duties or in the case where the employee is in receipt of lesser workers compensation or transport accident commission payments.



• Lump sum benefits for death and for serious trauma such as loss of limb or senses or broken bones or teeth.



• Domestic duties assistance when the spouse of an employee is ill and unable to carry out domestic duties.



• Emergency home help.



• Return to work assistance such as counselling or training.



• Rehabilitation assistance.



• Funeral expenses.

[29] The MFB argue that the income protection policy sought by the UFU contains a number of benefits which go beyond the claim raised by the UFU in Clause 46 of the log of claims. In particular the MFB refers to lump benefits for death and disablement, funeral expenses, domestic duties assistance where the employee’s spouse or partner is ill, and emergency home help. The MFB argue that the scope of the arbitration in this matter must be confined to the agreed reserved subject matter which is the claim set out in Clause 46 of the UFU log of claims quoted earlier. The MFB also argue that the provision of domestic duties assistance where the employee’s spouse or partner is ill is not a matter pertaining to the employment relationship between the employee and the MFB.

[30] I agree that the matter in dispute is the claim raised by the UFU in Clause 46 of the log of claims. That is the matter which was not resolved in the bargaining process and which was reserved for private arbitration by agreement. The evidence is clear that the claim did not change prior to the making of the Agreement and the agreement to arbitrate this reserved matter.

[31] Considering this claim in the overall context, including the associated claims concerning consultation and disputes determination, I am satisfied that it is implied that if the details of the insurance policy are not agreed within six months they would be determined through the disputes settlement processes of the Agreement which include access to arbitration.

[32] I am not convinced that in all cases the matters raised by the MFB do fall outside the ambit of that dispute, however, I do accept that there is an argument that this is the case. The UFU argued that the matter in dispute has been clarified during the process since the making of the Agreement culminating in the statement of what it seeks in resolution of the dispute in response to the directions of FWA in November 2011. They therefore argue that the proposed income protection scheme is within the scope of the dispute. The UFU referred to the judgment of Justice Murphy in the High Court decision The Queen v Bain and Cadbury Schweppes Australia Limited 23 in support of its contention that the matter in dispute can develop during the process before the Tribunal. The MFB argue that this authority relates to the question of the jurisdictional basis for the finding of a dispute and does not relate to the question of defining what is the matter agreed to be subject to private arbitration. In my view the scope of the dispute is what the parties agreed to put to private arbitration. I accept that by agreement the matter can to some extent be clarified through the process of negotiation and conciliation. I also agree that the matter should not be narrowly or pedantically construed. However, it is not fair to the parties for the matter which was agreed for arbitration to be changed without agreement.

[33] I am satisfied that the expression “all injuries which occur to an employee outside of work hours” in clause 46 of the log of claims is a clumsy expression for all non-work related illnesses and injuries. That is all injuries or illnesses which are not eligible for workers compensation payments under the appropriate legislation or the Agreement.

[34] I am satisfied that the expression “income insurance” should be read as shorthand for income protection insurance and as broadly encompassing income protection insurance in the industrially understood meaning of that term. I consider this to be a reasonable conclusion when reading the objective in clause 46 of the log of claims, “wishing to encourage the speedy return to work of injured employees by minimising any additional burdens they may suffer”, in conjunction with the proposed remedy to meet this objective, that “the MFESB will provide income insurance cover for employees.” Income protection insurance is industrially understood to encompass matters which can include income maintenance and lump sum payments for death and disability. The expert witnesses for both the MFB and the UFU agreed that such matters come within the generally industrially understood meaning of the term. I accept the argument of the MFB that there is doubt as to whether funeral expenses or domestic duties assistance falls within the scope of the claim in Clause 46 as it is expressed.

[35] Domestic duties assistance in the context of a very male dominated workforce is a concept which might raise equity considerations. I suspect that the concept is that domestic duties assistance allows the employee to properly attend work for the employer when their spouse is ill. If carers leave is a matter pertaining to the employment relationship, which it clearly is, then domestic duties assistance may also be a matter pertaining to the employment relationship. The UFU in closing submission agreed that it was not pressing this aspect of the claim so there is no need to determine this matter.

[36] I am satisfied that any decision I might make in resolution of this dispute may include income protection insurance for injuries or illnesses which are not eligible for workers compensation payments under the appropriate legislation. Such insurance may include benefits including income maintenance, lump sum payments for death and disability and rehabilitation assistance. Any decision I might make cannot require payments for injuries or illnesses which have been accepted for workers compensation payments. Any decision I might make cannot require payments for injuries covered by journey to work protection under the Agreement or which has the affect of altering the extent of such cover. Any decision I might make cannot include funeral benefits.

The approach to be adopted in resolving the dispute

[37] In determining this matter the parties agree that I should be guided by:

• Section 577(a) of the Act that requires fairness and justice; and



• Section 578 of the Act that requires consideration of the objects of the Act and equity, good conscience and the merits of the matter.

[38] The MFB submit that I should have regard to:

• The object of the Act concerning achieving productivity and fairness in the workplace.



• The nature and cost of the benefit sought.



• The level and nature of the existing protections provided for employees suffering from accident or illness.



• The likelihood that granting the UFUs claim will deliver better outcomes in terms of managing absences arising from illnesses or injuries occurring outside work. The incentives to return to work are a relevant consideration here.



• Alternative ways of providing protection for employees suffering from accident or illness including by enhancing existing benefits available to firefighters.

[39] The UFU submit that I should have regard to:

• The particularly strenuous and dangerous nature of employment as a firefighter.



• The risks of firefighters being unable to perform their work when injured or ill.



• The accessibility of other paid leave when paid personal leave is exhausted.



• The incidence and impact of situations where firefighters who are ill or injured are not able to access their normal income.



• The adequacy and impact of the current procedures for addressing situations where firefighters who are ill or injured are not able to access their normal income.



• The costs and benefits of the proposed income protection insurance for employees and the MFB.



• The costs and benefits of group as opposed to individual insurance.

[40] I agree that the matters raised by the UFU and the MFB are all relevant considerations and I have had regard to them in reaching my conclusions.

[41] I am not restricted to simply two alternatives in resolving this dispute - to grant the UFU claim in full in the manner sought or to reject the claim as sought by the MFB. I can determine other resolutions provided that they are within the scope of the matter in dispute and do not otherwise conflict with the Agreement. The parties agreed to this proposition during proceedings.

[42] The MFB in accepting that this matter should be arbitrated did not qualify that agreement by restricting the cost of any outcome. In agreeing to the arbitration the MFB accepted the risk that if the claim was granted in part or in full it would result in additional costs for the MFB. The UFU in accepting that this matter should be arbitrated did not qualify that agreement by requiring that some form of income protection insurance must be granted. In agreeing to the arbitration the UFU accepted the risk that income protection insurance might not be the outcome determined by FWA. During the proceedings the parties accepted that this was correct.

[43] The MFB argue that I should have regard for the objective under the legislation that productivity and fairness outcomes should be largely achieved through collective bargaining not imposed outcomes. I consider that the decision that this matter be privately arbitrated is in fact an outcome of collective bargaining and in that sense imposing an outcome is a decision which has been made by the parties and is therefore consistent with the promotion of collective bargaining under the Act. The MFB also argue that I should have regard to the fact that it is unprecedented for the Tribunal to arbitrate the matter of income protection insurance. I accept that income protection insurance is not generally a matter included in Awards and therefore is not a matter which has generally been arbitrated by the Tribunal. However, the parties themselves have directed me to arbitrate a claim for income protection insurance and I am required to consider whether or not to grant the claim based upon the merits of the claim.

[44] Nothing that I determine in resolving this dispute is a precedent for any other matter. The resolution depends entirely on the particular facts and the particular situation of the parties. I am not required to have regard to the matters which might be relevant in determining a variation to an award or an agreement.

UFU evidence concerning the merits of the claim.

[45] I have carefully considered the evidence and submissions of the UFU. I do not intend to canvass all of the evidence and submissions in this decision.

[46] The UFU submit that firefighters have particularly strenuous and dangerous jobs and are required to maintain a very high standard of fitness to perform their duties. 24 This means that they are at a higher risk of missing work if they are ill or injured. Mr Marshall gave the examples of a minor sprain, an open wound or stitches which would prevent a firefighter from working but would not prevent workers in most other occupations from attending work. Firefighters on shift (92% of all firefighters are on shift) are required under the Agreement to utilise their annual leave entitlements within roster cycles and hence they do not accumulate significant amounts of annual leave which could be used in cases where personal leave is exhausted in case of illness or injury. The Agreement requires leave to be taken in blocks of 28 days within a certain time frame.25

[47] Employees have instituted a practice whereby other firefighters donate accrued long service leave to a “leave bank” to assist firefighters when they are absent from work for an extended period of time and have exhausted their paid leave entitlements. Of course this does not include cases where an employee is being paid under WorkCover. On occasion firefighters will work a “change of shift” whereby they do the shift for an injured or ill firefighter and the MFB pays the injured or ill firefighter rather than the employee who works the shift. The leave bank and change of shift arrangements are organised by the UFU. Mr Marshall submitted a number of bulletins requesting that members donate to the leave bank to support particular individual workers. These bulletins are evidence of a leave bank being established in respect to 10 firefighters over the period 2001 to 2009. 26

[48] Evidence was given by Mr Marshall, Mr Hodder and Mr Lucas that the practice of donating to the leave bank and working changes of shift is greatly appreciated by the firefighters who receive the benefit. The practice reduces the financial hardship for employees who have exhausted their personal leave. However, they gave evidence that the practice also creates some stress for firefighters. They are concerned that they might not have enough leave left for themselves if they become ill. The absence of adequate income protection also may lead to premature return to work when ill. Shane Lucas gave evidence that he returned to work prematurely for this reason and that this contributed to further illness and stress. Mr Marshall also gave evidence that a “charity” system leads to the recipients feeling guilty and feeling pressure to repay those who donated. Mr Marshall submitted that such pressures do not exist if there is an income protection insurance scheme.

[49] Mr Marshall gave evidence of a scheme whereby firefighters contribute a small amount each week towards an income protection insurance policy which was encouraged and supported by the UFU and the MFB. 27 This scheme is known as the “United Firefighters Union Sickness and Accident Scheme” or the “AXA scheme” which has been closed to new recruits to the MFB since 1999.

[50] There is also a scheme for temporary disability payments for emergency services workers through the ESSS superannuation fund of which firefighters are members but Mr McCormack and Mr Marshall gave evidence that this only applies in rare circumstances. 28 Mr McCormack gave evidence that for eligibility under the ESSS scheme the period of disability must exceed six months, claim assessment takes a minimum of one month and up to three months, all other sick leave and workcover entitlements must be exhausted, the employee must be less than 55 years of age and payments only apply for periods after the claim is assessed. The scheme only compensates up to a maximum of 70% of income when the employee has 30 years of service. For an employee with a short period of service with the MFB the compensation may be a small percentage of income. The benefit is payable for a maximum period of 12 months which may be extended for a further period of 12 months after an assessment.

[51] Mr Leigh Wicking who is not employed by the MFB, but who has had the benefit of income protection insurance due to his employment as an electrician under an agreement which provides for income protection insurance, gave evidence of its benefits and particularly the reduction in stress and pressure to prematurely return to work which aided his recovery from serious illness. 29

[52] Dr Charles Castle gave evidence of his considerable experience in working for employers and employees as an occupational physician or industrial medical consultant and of his qualifications. Dr Castle considers that income protection insurance is beneficial in rehabilitating injured or ill workers because it enables some workers to access some types of medical care which they would not otherwise be able to afford and it reduces financial hardship which exacerbates illness and related social stresses. He said that it also enables some workers necessary additional time to recover.

[53] Dr Castle gave evidence that there are some illnesses or injuries which may be regarded as work related and which might receive workers compensation but where disputes result in long delays before eligibility for workers compensation is determined. Dr Castle gave evidence that early and intensive treatment is often important to recovery and that some of the necessary medical supports are not fully covered by Medicare. Dr Castle pointed to the psychological consequences of having no income whilst off work due to illness or injury. It was his view that returning to work too soon for financial reasons before the injury/illness has completely healed, results in aggravation of an injury or illness and a lengthier period of absence from work. Dr Castle gave evidence that income protection substantially reduces these problems.

[54] Dr Castle gave evidence that he considered that the minimum level of income protection should be 75% of normal earnings. He regarded 90% as desirable. Dr Castle accepted that if an individual was not at work there was some reduction in their expenses.

[55] Dr Castle believes that there are benefits to employers from income protection insurance as early access to treatment results in less psychological problems and more rapid return to health and work. He does not regard the lack of incentive to return to work where normal income is paid has been a significant problem in hindering the return to work of employees.

[56] Mr Cameron McDonald who is an accident and illness underwriter for an insurance company provider of income protection insurance, gave evidence that income protection insurance allows the injured worker to focus on their recovery, leading to quicker return to work and a benefit to the employer. He also gave evidence about the advantages, including lower premiums, of group insurance rather than individual insurance when it comes to income protection. 30

[57] Mr McDonald gave some evidence of the nature of income protection insurance policies. Based on the experience with electricians he estimates a claims frequency of 4 to 5%. However, in his original statement he did not provide an estimate of the likely premium required for the level of benefits which is sought by the UFU. In his supplementary statement Mr McDonald suggests that the total cost to the MFB would be $1.5 million per annum. However, the benefit structure on which this estimate is based is more modest than the benefit structure in the UFU proposal (for example, a lower maximum weekly income cap for the weekly benefit and longer waiting periods).

[58] Under cross examination Mr McDonald provided further information in respect to the costings and the basis of those costings provided to the UFU. Mr McDonald provided the UFU with estimates of the % of gross ordinary time income paid to firefighters which would be required as a total premium to support three different scenarios of group income protection insurance. The scenarios provided different levels of benefits. 31

[59] The first scenario closely corresponds with the outcome of the claim sought by the UFU in these proceedings except that the waiting period in the outcome sought by the UFU is 14 days whereas the waiting period in the scenario is 7 days. 32 The premium is estimated to be 2 to 2.5% of earnings for this first scenario. The scenario which most closely corresponds with the estimate of a $1.5 million cost to the MFB is the third scenario. The benefits in the third scenario are less beneficial to employees than the scenario used by Mr McDonald to calculate the $1.5 million cost estimate. This third scenario was estimated by Mr McDonald in the advice provided to the UFU to require a premium rate of 1 to 1.5% of gross ordinary time earnings.

[60] The UFU submit that income protection is becoming widespread in collective agreements. The evidence from Mr Okley for the MFB and from Mr McDonald for the UFU was that it was common in local government, plumbing, construction, maritime and manufacturing.

MFB evidence concerning the merits of the claim

[61] I have carefully considered the evidence and submissions of the MFB. I do not intend to canvass all of the evidence and submissions in this decision.

[62] The Chief Fire Officer, Shane Wright, gave evidence that the MFB rejected the claim for accident and illness policy, and income protection in particular, on 18 September 2009. The Chief Fire Officer gave evidence that the reason for the continued rejection of the claim during the bargaining process related to the fact that the cost of the claim was significant which he defined as costing more than $100,000 and that it was not demonstrated that the cost was adequately supported by productivity cost offsets.

[63] The Chief Fire Officer gave evidence as follows:

“There are a range of benefits and entitlements available to operational employees when they are ill or injured. These include:

(a) workers' compensation and accident make up pay benefits for work-related illness and injury;

(b) sick leave, personal leave and annual leave entitlements, and early access to long service leave entitlements for any approved absence due to illness or injury (whether or not work related);

(c) journey accident cover; and

(d) disability benefit pensions as part of the Emergency Services and State Superannuation (ESSS) scheme.

ln addition, approximately 856 operational employees have income protection insurance with AXA, called the 'United Firefighters Union Sickness and Accident Scheme'. While this is called a 'scheme', the policies are policies between AXA (originally T&G Mutual Life Society and then National Mutual Financial Services) and the individual MFB employee. The premiums for the policy are paid for by the individual employee. The scheme closed to new members in 1999, however, those employees who joined when it was available, continue to have the benefit of this insurance cover. When I joined the MFB as a recruit, I decided to take out the cover. It was a personal decision and one that I believe is up to each individual employee.

ln addition to the entitlements described above, the MFB has established processes for managing employees who suffer work-related illness and injury. These processes are overseen by the MFB's Health and Safety Department, and include identifying suitable employment options for return to work plans and monitoring the progress of individual employee return to work plans.

lf an employee suffers a non-work related illness or injury they can, of course, access accrued sick leave entitlements in the first instance. Where requested, the MFB will also make arrangements so that employees can access accrued annual leave and long service leave entitlements if the employee has exhausted their sick leave entitlements. While shift arrangements mean that programming of annual leave has less flexibility than would otherwise be the case, if an employee has accrued annual leave the MFB would, if requested, allow the employee to use that leave in circumstances of a nonwork related illness or injury. In circumstances where employees exhaust all their paid personal leave entitlements, the MFB has, upon request of either the UFU or an employee's colleague, administratively facilitated the use of a "leave bank".

The MFB takes a pro-active approach toward assisting employees who suffer non-work related illness or injury. For operational employees who are ill or injured, if their constraint allows them, the MFB is usually able to provide them with interim alternative duties. For example, they may be able to assist the Community Education Unit, which is responsible for community education programs. Assistance would include developing and reviewing training arrangements, and attending local fetes and events to discuss fire and community safety. Employees may also be able to participate in firefìghter training, or become involved with other regional departments, including in administration or project work. The alternative duties an employee may be able to undertake is, of course, determined by the capacity and the medical advice received in relation to that. ln circumstances where an employee's illness or injury is longer term, where possible, the MFB will assist an employee's early return to work. For example, if an operational employee broke their arm in a non-work related accident, and recovered from the immediate impact of the injury but was unable to perform full operational duties, the employee could contact their Manager/Commander or Supervisor/Officer in Charge (OlC) to set in train a process for return to work on alternative duties. The manager/supervisor would contact the MFB's Rehabilitation/Return to Work Coordinator about placing the employee in a non-operational role so that they could continue to work. In the normal course, this occurs in the early stages of an employee's recovery, and in accordance with the MFB's Rehabilitation and Return to Work Management Procedure No ORG 112 (RTW Procedure).

The RTW Procedure is automatically triggered where an employee has been on sick leave or WorkCover for more than four consecutive working days/shifts. In accordance with this procedure, operational employees are responsible for early notification to their Commander or OIC of any illness or injury, and Commanders or OlCs are responsible for early notification to the Rehabilitation / Return to Work Co-ordinator of any employee off work (other than for minor illness or injury) as well as the return of injured employees to work.

The MFB cannot guarantee that an alternative position can be found in every instance. This is, of course, dependant upon the employee's capacity and the medical advice received in relation to that capacity. That said, the organisation makes all reasonable efforts to assist employees and in most cases has been able to find alternative duties for the employee to perform.” 33

[64] The evidence concerning the level of support provided to promote employee health and safety and to assist ill or injured workers was reinforced by Mr Philip McInerney. Mr McInerney pointed to the fact that the Agreement provides for the maintenance of 100% of pre-injury earnings for 52 weeks in the case of journey to work accident or workplace injury.

[65] Mr McInerney confirms the accuracy of the summary of the ESSS superannuation scheme temporary disability benefit given in evidence by Mr McCormack except that Mr McInerney says that there is no requirement to exhaust sick or personal leave or workcover. In practice this occurs because the disability benefit is paid at a lower rate than sick or personal leave or workcover benefits. Mr McInerney also suggests that waiting times for the processing of applications may be less than suggested by Mr McCormack on some occasions.

[66] Under cross examination Ms Schroder accepted that the relevant statute which establishes the ESSS scheme for emergency services workers requires that firefighters must first apply for the permanent disability pension before they are eligible to access the temporary disability benefit. She accepted that this is only available if the firefighter is seeking to be retired on the grounds of permanent disability and is unable to ever perform work duties. If after assessing this application the ESSS scheme are of the view that the firefighter is not permanently disabled but is likely to recover then, and only then, is the temporary disability pension payable. Firefighters are not eligible for the temporary disability pension if they are over 55 years of age and they cannot apply unless the illness has extended for a period of more than six months.

[67] If a firefighter is permanently disabled or suffers from ill health such that return to firefighting duties is not possible an ill heath retirement pension may be payable under the ESSS Super defined benefit scheme.

[68] If employees choose to make additional contributions to the ESS Super accumulation plan then they can also contribute to an income protection insurance cover scheme. 12 firefighters have income protection insurance through this scheme.

[69] Mr McInerney gave evidence that the United Firefighters Sickness and Accident Scheme (the AXA Scheme) covers almost 50% of operational employees all of whom were engaged before 1999. The benefits are up to 75% of earnings for up to 52 weeks after all sick leave is exhausted. The average annual premium paid by each firefighter is blocked (number removed - commercially sensitive). Blocked (number removed - commercially sensitive) employees have made a total of blocked (number removed - commercially sensitive) claims since March 2001. I calculate that this amounts to an average annual claims rate of less than blocked (number removed - commercially sensitive) per annum. The actual figure would be significantly less than this because the numbers covered by the AXA scheme have declined each year since 1999 by natural attrition. The policy for each individual firefighter is renewed on an annual basis. Ms Schroder gave evidence that the insurer can refuse to renew the policy and has on occasion done so. She accepted this was more likely in the case of a person whose sick leave was exhausted. The premium varies between individuals depending upon factors such as age, service and amount of accumulated sick leave.

[70] Mr McInerney accepts the evidence of the UFU that firefighters cannot work with open wounds or with large wounds with deep stitches or if they are otherwise unable to perform operational firefighter duties. 34 Mr McInerney gave evidence that many operational firefighters have substantial sick leave accrued entitlements. About half of operational employees (984 employees) have more than 500 hours of sick leave accrued.35

[71] Ms Schroder, Mr Wright and Mr McInerney gave evidence that where possible the MFB arrange light duties for employees who have suffered long term work and non-work related injury and illness. They provided some examples. Ms Schroder and Mr Wright gave evidence that to their knowledge light duties were provided for all firefighters on long term illness whose personal leave was exhausted and who were able to perform such work but who were not able to perform normal duties. Mr Wright and Ms Schroder could not think of any examples where this had not been done in recent times. 36 The UFU did not produce any evidence to the contrary.

[72] Ms Schroder gave evidence that the “leave bank” arrangements referred to in the evidence of the UFU had been accessed by 10 to 15 employees over the past ten years. 37 This evidence was not challenged by the UFU.

[73] Ms Schroder accepted that firefighters on shift work do not generally accumulate annual leave and so this is not generally available to assist workers who are ill or injured and whose personal leave is exhausted. Day workers may and do accumulate annual leave. Ms Schroder gave evidence that 92% of firefighters are on shift work at the present time.

[74] Ms Schroder and the Chief Fire Officer agree that the matter of Accident and Illness Policy was pursued in the negotiations after 18 March 2010 and that the parties agreed at the time the Agreement was finalised that the matter of the Accident and Illness Policy claim would be subject to private arbitration.

[75] Ms Schroder gave unchallenged evidence that during the negotiations Mr Marshall had explained the rationale for the income protection claim and that he said words to effect that “the UFU wanted everybody to have the type of cover enjoyed by those employees who had cover through AXA.” 38 In cross examination Ms Schroder clarified the “type of cover” she understood the UFU was seeking.

“You talk in paragraph 25 of your statement about a meeting with the negotiating team and you say in the third sentence, you recall Mr Marshall expressing concern that some operational employees who were absent due to illness or injury would not have accident and illness cover through AXA?---That's correct.

And you understood that that's what - not the AXA policy but something like that to cover accident and illness was what the union was claiming?---Correct.” 39

[76] Mr Okley gave evidence that, based on the assumptions and information provided to him, the UFU claimed income protection insurance would entail a premium cost of approximately 2 to 2.5% of MFB operational firefighter payroll or close to $5 million per annum. 40 Under cross examination some doubts were raised about these estimates. Mr Okley revealed that a lower costs estimate had been given by another insurer which he had not included in his statement. It also became clear that the % had been applied to the total wages bill and not the normal firefighters’ income. Mr Okley agreed that the % to calculate the premium should include the same payments that are included in the benefit payment to firefighters.41 The calculation had been based on a total wages bill of $198 million. However, the MFB confirms that wages plus overtime amounts to $168 million of which $16 million is overtime. Therefore, I conclude that using Mr Okley’s assumptions and the higher insurance provider estimate he obtained, the relevant premium is $3 million to $3.75 million not $5 million.

[77] Mr Okley challenged some aspects of Mr McDonald’s evidence. In particular he challenged the statement that it was common for the union to be the holder of the policy and for the employer to pay the premium to the union. He said that it was also common for the employer to be the policy holder. Mr Okley accepted that a claims rate of 4 to 5% for electricians was probably correct and that this was a reasonable basis for premium estimates in the absence of more detailed data relating to MFB firefighters. Mr Okley agreed that additional data in respect to accumulated sick leave and claims under the AXA Scheme would assist in reaching better estimates. 42

[78] The MFB submitted that the UFU was seeking a “gold standard income insurance benefit”. The MFB submit that the cost of this “gold standard” is prohibitive in the context of the requirement that bargaining outcomes conform to government wages policy.

[79] The MFB submitted that the existing protections are generous and adequate including:

• Generous sick and annual leave entitlements.



• Half the workforce have access to the AXA insurance policy which provides up to 75% of income for up to 52 weeks after sick leave is exhausted.



• All employees have access to temporary disability pension under the ESSS Superannuation Scheme in certain circumstances. This benefit provides for up to 70% income protection for up to 52 weeks which may be extended to 104 weeks. However, the benefit may be significantly less for those firefighters with a short period of service with the MFB and older firefighters are excluded.



• Those employees who make salary sacrifice superannuation contributions to the ESS accumulation plan can also purchase income protection insurance.



• Access to workers compensation including make up pay for 52 weeks.



• Access to journey accident coverage for up to 52 weeks.



• Access to a generous and comprehensive light duties and return to work policy.

[80] The MFB submitted that the number of employees not protected by this safety net was small.

[81] The MFB argue that:

“when it comes to protection against the potential adverse financial consequences of non-work related illness or injury, the role of personal responsibility looms larger as a matter of all round industrial fairness.” 43

[82] The MFB argue that the evidence that income protection insurance will deliver better management of absences and illness and facilitate return to work in the longer term is inadequate. They also argue that this must be balanced against the likelihood that 100% income protection may act as a disincentive for employees to return to work. They argue that there is also a risk that claims and premiums may escalate.

[83] The MFB during proceedings also referred to Clause 86.6 of the Agreement which provides a commitment to the management of excessive sick leave and an undertaking for the MFB to consider making a contribution to the leave bank in the event that these strategies result in improvements in the management of excessive sick leave. Mr Marshall gave evidence that this had not been acted on and that Clause 86 is related to short term sick leave and not to the longer term illnesses and accidents which income protection is designed to address.

[84] The MFB submitted that the type of income protection sought by the UFU was a sledge hammer to crack a nut given the small size of the problem compared to the cost proposed for the solution.

[85] The MFB submitted that there may be other more cost effective solutions and gave some suggestions. The suggestions raised in the event that I concluded that there was a problem and that the MFB should bear some responsibility for the resolution of that problem were:

• A voluntary group income protection insurance scheme facilitated by the parties where the premium was paid by the employee.



• Direct funding by the MFB of income protection for the small number of individuals who were not able to be supported by the existing support measures.



• Utilisation of Clause 86 of the Agreement whereby an attendance management plan should be implemented and in return the MFB should make contributions to the leave bank.



• Extending the application of Clause 91 of the Agreement to non-work related injuries where sick leave is exhausted. This clause requires the employer to assign Occupational Support Group positions without loss of pay to injured workers.

[86] I regard the last of these suggestions as a particular method for implementation of the second of the suggestions. After consideration I do not regard the third of the suggestions as providing a fair and effective solution. I do further consider the first two suggestions.

Consideration and conclusions

[87] Having carefully considered all the evidence and the submissions I accept that the work of firefighters is particularly strenuous and dangerous and that firefighters are at a higher risk of being unable to perform work when injured or ill outside of work than workers in most industries. I consider that this is a strong reason why firefighters’ incomes should be protected when they suffer from illness or injury which has not been accepted as entitling the worker to workers compensation payments.

[88] I also accept that the requirements of the Agreement and the MFB rostering system mean that firefighters generally do not have large amounts of accrued annual leave which can be utilised in situations where personal leave is exhausted.

[89] I accept the evidence and submissions of the MFB that there are a number of existing measures which reduce the incidence of firefighters suffering a large reduction in income in the case of illness or injury which has not been accepted as entitling the worker to workers compensation payments. The provision of accident make up pay under the Agreement also reduces the incidence of loss of income in the case of illness or injury which has been accepted for workers compensation. However, I accept the evidence and submissions of the UFU that these benefits are not always guaranteed or readily accessible to all firefighters and that they provide differential benefits to firefighters depending upon their years of service, age, length of illness and initial employment date.

[90] Only half of the workforce have access to the AXA Scheme as it has been closed since 1999. The AXA Scheme is an individual insurance scheme and the insurer may and has on occasion refused to renew the policy of an individual.

[91] The partial disability benefit in the ESSS defined benefit superannuation scheme has very restrictive eligibility criteria and the level of benefits is lower than 70% of normal income for some categories of employees. Employees over 55 are not eligible and the duration of the disability must exceed six months. Employees must first apply for the total and permanent disability pension and be rejected for this pension. The relatively low incidence of take up of the benefit in my view illustrates its very limited effectiveness in providing income protection to firefighters. Mr McInerney gave evidence that six firefighters have been successful in the last five years in obtaining twelve month temporary pensions. 44

[92] I do not consider access to the income protection scheme through the ESS Super Accumulation scheme to be a major consideration given that employees have to make additional superannuation contributions in order to be eligible to contribute to the income protection scheme. I note the submission of the MFB that the very low take up of this option by firefighters may be attributable to lack of marketing. Having regard to all of the evidence I do not regard this as a significant causal factor.

[93] I accept the evidence and submissions of the MFB that the return to work and light duties policies and practices of the MFB also reduce the risk of firefighters being unable to maintain their income in cases of illness and injury. However, these matters are not fully enforceable under the Agreement for non-work related injuries. They are good management practice which should be recognised and applauded but they are not guarantees of protection. However, I do accept that they are significant in lowering the incidence of situations where employees suffer major loss of income during periods of illness and injury. I accept the evidence that shift workers may earn somewhat less than normal when on light duties particularly due to lesser overtime but I am confident that their earnings will not be less than they would be under income protection insurance.

[94] Although I accept that there are a number of arrangements in place which significantly reduce the incidence of firefighters suffering loss of income protection in the case of illness and injury I cannot conclude that these arrangements are sufficiently equitable, fair or comprehensive. The existence of the leave bank scheme illustrates the inadequacies of the current arrangements. The low incidence of use of the leave bank scheme illustrates that the existing arrangements significantly reduce the incidence where firefighters suffer major loss of income in the case of illness and injury. The low incidence however does not remove the anxiety faced by firefighters in situations where illness or injury threatens to exhaust their personal leave entitlements.

[95] I accept the evidence of the UFU that the provision of income protection at levels of between 75% and 90% of normal income has a number of important benefits to the employee and to the employer. The situations where income protection is most likely to be relevant are ones where other benefits are exhausted and therefore they are ones where illness or injury is serious or leading to or likely to lead to prolonged absence from work. I accept the evidence and submissions that these situations are particularly stressful for workers and those who are close to them. Concerns about financial uncertainty and actual financial hardship significantly add to this stress. I also accept the evidence and submissions that in some cases this will exacerbate illness and or delay recovery or return to work. I am also satisfied that in some cases it will lead to premature return to work which can also exacerbate illness and stress and potentially lead to further and possibly longer absence from normal duties. I am satisfied that there are significant benefits to the employer in improved productivity and employee wellbeing where these problems are reduced by income protection. The benefits to employees are more obvious.

[96] Having considered the submissions and evidence I am satisfied that income protection at levels less than 75% of normal income is not likely to overcome the problems of financial stress exacerbating illness and or leading to premature return to work.

[97] I accept the submissions of the MFB, which receives some support from UFU and MFB witnesses, that where income protection is at 100% of normal income and where illness or injury and payment of benefits is long term the benefits to the employer might be lessened. Of course in most cases employees are very keen to return to work; it is important to their pride, dignity and well being. However, there is insufficient evidence before me to reject the MFB submission that it is possible that in some cases employees on long term illness might have a lessened incentive to return to work if income protection support is at 100% of normal income over a long period of time.

[98] Much of the advantage of income protection comes from employees having knowledge that it is available to them as a safety net. I accept the evidence and submissions of the UFU concerning the advantages of consistent and collective arrangements over individual arrangements for income protection. The overall costs are lessened and the overall benefits are also increased. Equity considerations also favour this approach.

[99] I accept the evidence and submissions of the UFU that a group policy approach will produce lower premiums because the risk is spread and there is a more predictable premium income to the insurer.

[100] I am satisfied that group income insurance also produces more equitable and fairer outcomes than individual insurance because the premium does not depend upon the profile of each individual worker. In an individual approach those who most need the insurance have to pay the highest premium or are refused insurance. I consider that these benefits of a group approach can only be realised if there is a universal right of access. It does not require 100% of employees to elect to participate but it does require a reasonable expectation that a large proportion will participate. Given the history of the AXA Scheme, the leave bank and other collective arrangements at the MFB such an expectation is reasonable in this case.

[101] During the proceedings considerable attention was paid to the likely cost of income protection insurance. I consider that the level of inconsistency in the assessment of costs provided by Mr Okley for the MFB and Mr McDonald for the UFU was much more apparent than real.

[102] Mr Okley agreed with Mr McDonald’s assessment that the premium cost for income protection for firefighters is likely to be 2 to 2.5% of the normal income of firefighters for the high level benefits such as in the UFU claim and is likely to be 1.5% for the lower benefits level of the sort outlined by Mr McDonald in his supplementary statement.

[103] In calculating the likely cost of the lower benefit scenario Mr Okley and Mr McDonald agreed that, in the absence of claims history, a 4 to 5% claims rate was a reasonable assumption or 90 firefighters per year. They also agreed that a 20% profit margin and a 15% administration and brokers margin should be allowed and that 20% is required to be paid for stamp duty and GST. They disagreed about whether or not there should be an additional allowance for uncertainties. The major difference was that Mr Okley estimated the average length of claims incidents was 8 to 10 weeks beyond a two week waiting period whereas Mr McDonald estimated it was 7 weeks beyond a three week waiting period. If Mr McDonald’s estimate of the length of the claim incident is used then Mr Okley agrees with Mr McDonald’s $1.5 million premium cost estimate. If Mr Okley’s estimate of the length of the claim incident is correct then the estimate is up to $1.9 million.

[104] If the % of normal firefighter income is used as the basis to estimate premiums the cost of income protection insurance based on the scenarios presented by Mr Okley and Mr McDonald will range from 1% to 2.5% depending on the benefits level and the risk profile. This amounts to an annual cost of $1.5 million to $3.75 million. The UFU claim will be towards the upper end of this range and the lower benefits option will be towards the lower end of this range.

[105] I accept the submissions and evidence of the parties that given the range of existing measures available to firefighters to avoid absence due to illness or injury without income there is a relatively low incidence of situations where firefighters currently fall through the safety net of income protection. The generous return to work and light duties policies and the AXA Scheme are major contributors to this. I consider that it should be possible to achieve more equitable, fair and comprehensive protection at less additional cost than would be required in a situation where these existing measures were not present.

[106] Mr Okley under cross examination agreed that a good light duties program would affect the premium in a positive manner.

“If the fact is that a particular employer has a very good record of rehabilitating people and getting them back to work on light duties and thus reducing the length of claims and the amount of money due under claims, that would be a factor that would be taken into account in setting the premium, would it not?---Yes.” 45

[107] Also Mr Okley and Mr McDonald gave evidence that claims history would be taken into consideration in settling premiums and if low claims history and high sick leave balances could be demonstrated this would reduce premiums. 46 As observed earlier, MFB firefighters have high levels of accumulated personal leave. Both Mr Okley and Mr McDonald agreed that a high level of accumulated personal leave would affect the premium in a positive manner.

[108] There is considerable evidence of claims history available to any potential insurer. The AXA fund has historically covered most firefighters over a long period and still covers almost half the firefighters. The annual claims rate under the AXA fund over the last decade has been less than blocked (number removed - commercially sensitive). Both Mr McDonald and Mr Okley based their calculations on a 4 to 5% annual claim rate. Based on the AXA experience of a claims rate over ten years of considerably less than half this rate a considerably lower premium might be expected. I assume that the AXA policy is commercially viable or AXA would have closed it down given that we know policies for each individual are renewed or not renewed each year. The premium rate for the AXA policy is an average of blocked (number removed - commercially sensitive) per year which is blocked (number removed - commercially sensitive) of average normal gross firefighter income excluding overtime. This is considerably less than the 1 to 2.5% range referred to by Mr McDonald and Mr Okley based on electricians claims experience. I accept that the risk profiles of those in the AXA Scheme and those outside it might be somewhat different and this would affect the final premium.

[109] Both Mr McDonald and Mr Okley agree that the three most important benefit variables which affect the premium are the % of income payable as a benefit, the length of the waiting period and the level of capital benefits (lump sums for death or disablement). Mr Okley says that the most important influence is the waiting period, followed by the % income, followed by the level of capital benefits. 47 Mr McDonald says that the most important influence is the % income, followed by the waiting period and the capital benefits.48

[110] I consider it would be commonplace in situations where income protection is bargained for the first time for employees to already have the support of:

• Personal leave and other accumulated leave.



• Workers compensation including in some cases accident make up.



• Journey accident protection in some cases.



• Death and disability insurance through the superannuation scheme.



• Limited access to light duties particularly in cases of workers compensation.



• A limited number of individuals may have their own private insurance arrangements.

[111] In the situation before me all of the above applies, however, there are two differences of significance. The light duties and return to work arrangements of the MFB are more extensive than is commonplace and almost half the employees are members of an insurance scheme promoted by the employer and the union and to which employees contribute. But for a decision of a third party, the insurer, almost all firefighters would be members of an income protection scheme where the contributions are made by the employee.

[112] I should not ignore these factors.

[113] There was no evidence from the UFU or the MFB of any complaints about the AXA Scheme or of any perceived inadequacies in the benefits provided by the AXA Scheme. The inclusion of the union’s name in the title of the scheme clearly indicates the historical endorsement given to it by the UFU. However, the UFU was understandably critical of the following features: the scheme is closed; it is not universal; it is individual and not group based; an individual could be refused coverage; and premiums vary based on individual risk. In closing submissions the UFU also suggested that the requirement to exhaust all personal leave was a concern because employees might then return to work without any accumulated personal leave buffer. However, a waiting period has a similar effect and in some cases it would have a more significant effect particularly for those employees with limited service or with limited accumulated personal leave. I am not satisfied that a requirement to exhaust all personal leave is an unreasonable precondition for access to income protection insurance benefits unless it is combined with a long minimum waiting period after personal leave is exhausted.

[114] I note that approximately half of the firefighters currently contribute on average blocked (number removed - commercially sensitive) per annum towards income protection insurance. I cannot require other employees to make a contribution as this would be contrary to the Agreement as it would lessen the entitlements for those employees under the Agreement.

[115] Given the history of the AXA Scheme, the leave bank scheme and other arrangements I am satisfied that it is appropriate that the UFU should have a strong role in any income protection scheme at the MFB.

[116] I consider it appropriate that the problems of lack of equality of access to the right to income protection at a consistent minimum level and a consistent cost should be resolved. I consider that a collective rather than an individual approach should be adopted. I consider it appropriate that the MFB has some responsibility for improving income protection. In the particular circumstances of this case I cannot see any fair or equitable reason to change the established practice whereby employees contribute to the provision of their income protection. I consider that any additional cost to the MFB should be limited for a number of reasons including that this matter was clearly not the highest priority for the parties in the process of bargaining for the Agreement.

The resolution of the dispute

[117] This decision shall operate until the Agreement is replaced or terminated. The matter was agreed to be determined in the context of the current Agreement therefore any determination only applies whilst the current Agreement operates.

[118] Having regard to the fact that the costs have not been included in the current MFB budget and to allow adequate time to resolve outstanding issues, any outcome should operate from 1 July 2012. In the event that the UFU concludes that it is impractical to achieve income protection within the parameters set out in this determination they may, by written notification to the MFB and FWA, defer implementation so that it would become a matter to be resolved during the bargaining for the next Agreement.

[119] I have concluded that there should be an income protection scheme available to all firefighters in respect to non-work related injuries or illnesses. Provided that it is achievable within the cost parameters I establish, the level of that protection should be consistent with that available under the current AXA Scheme; that is 75% of normal income for up to 52 weeks. Access to benefits should be subject to the following conditions:

• The benefits should not be available until or unless personal leave entitlements have been exhausted.



• The benefits should not be available where the injury has been accepted as being covered by workers compensation. Protection in these circumstances is provided for in the other relevant provisions of the Agreement.



• The benefits should not be available where the injury arises from a journey to work accident. Protection in these circumstances is provided for in the other provisions of the Agreement.



• The benefits should not be available where the employee is offered and is fit to perform alternative duties under the MFB rehabilitation and return to work policies and procedures.



• The benefits should not be available where the employee is eligible for and obtains a temporary or permanent disability pension under the ESSS Superannuation scheme.



• Other conditions as outlined below.

[120] The minimum income protection benefit should be provided by one of two methods:

• The MFB and the UFU to establish an enhanced “leave bank” scheme. Employees who wish to participate in the scheme shall contribute 0.375% of normal weekly income (excluding overtime) to the MFB leave bank. The leave bank shall pay 75% of normal weekly income for up to 52 weeks. The benefits shall only be payable in respect to an illness or injury which has led to an accumulated absence of more than 14 working days. The MFB shall make contributions to the leave bank so that all employees who contribute can receive this level of benefit. However, the cost of the MFB contributions to the leave bank shall not exceed the total cost of employee contributions in any financial year. In the first year this shall apply on a quarterly basis. Where the leave bank is likely to be exhausted there shall be consultation between the UFU and the MFB. The UFU may arrange additional employee contributions or benefits may be reduced. The parties should seek to implement the provisions of Clause 86 of the Agreement to enhance the leave bank. An employee who elects not to contribute does not have the benefit of the leave bank. The parties should commit to strongly encourage participation. Based on the history of the AXA scheme and the nature of the industry one could expect a high proportion of employees will participate; or



• An income protection insurance scheme or schemes to be introduced. Employees shall contribute a minimum of 0.375% of normal weekly income (excluding overtime). If the premium exceeds this level the employees and the MFB shall contribute equally to the premium beyond 0.375% up to 1%. The cost of any premium beyond 1% shall be met by employees. To avoid doubt, the MFB shall not contribute more than 0.3125% of the total normal weekly income (excluding overtime) for the group of employees covered. There may be an alternative structure of employee contributions provided it raises the same total contribution to overall premium cost. An employee who elects not to contribute does not have the benefit of the minimum income protection. The parties should commit to strongly encourage participation. Based on the history of the AXA scheme and the nature of the industry one could expect a high proportion of employees will participate.

[121] For a number of reasons I have not reached a conclusion on a number of other details at this stage. I believe that a range of options should be explored to ensure the most effective outcome.

[122] In achieving income protection which meets these criteria a number of matters including the following must be resolved:

• Whether leave bank or income protection insurance is to be the approach adopted and the future role of the AXA scheme, if any, under either approach?



• If the leave bank approach is adopted what is the method for its implementation/administration?



• What is the claims approval and review process under either option?



• What is the nature of any exclusions under either option?



• If an insurance scheme is adopted, whether the employer or the UFU should be the policy holder of the scheme?



• If an insurance scheme is adopted, who should provide the insurance and administration?



• If an insurance scheme is adopted, whether or not there should also be a minimum waiting period where employees have low levels of accumulated personal leave at a particular time and if so what should be the length of that period?



• If an insurance scheme is adopted, the nature of any additional benefits such as lump sum benefits for death or disability?



• If an insurance scheme is adopted, the possibility of differential additional benefit levels depending on different levels of employee contributions or of benefits lower than 75% for 52 for weeks if the parties agree lower premium levels are required?

[123] The parties should consider the costs and benefits of various options.

[124] The parties are required to resolve the outstanding matters within two months. In the event that there are matters which cannot be resolved then they can if necessary be arbitrated at the conclusion of the two month period or earlier with the agreement of both parties. If necessary the Tribunal can assist through conciliation during the two month negotiation period.

COMMISSIONER

Appearances:

Mr W Friend and Ms K Bowshell for the UFU.

Mr R Dalton and Mr J Tuck for the MFB.

Hearing details:

2012
Melbourne
30 & 31 January 2012

 1   PR501990.

 2   Exhibit UFU 12.

 3   Exhibit MFB 2.

 4   Exhibit UFU 9.

 5   Exhibit UFU 1.

 6   Exhibit UFU 2.

 7   Exhibit UFU 3.

 8   Exhibit UFU 4.

 9   Exhibit UFU 5.

 10   Exhibit UFU 6.

 11   Exhibit UFU 7.

 12   Exhibit UFU 10.

 13   Exhibit MFB 5.

 14   Exhibit MFB 4.

 15   Exhibit MFB 1.

 16   Exhibit MFB 3.

 17   Exhibit UFU 1, Attachment CL 1.

 18   Ibid, Attachment CL 2.

 19   Exhibit MFB 1 at para 39 and Exhibit UFU 1.

 20   Exhibit UFU 11.

 21   Ibid.

 22   Exhibit UFU 2, Attachment SM 1.

 23 159 CLR 1984 at page 168.

 24   Exhibit UFU 9 at paras 5 and 6.

 25   Ibid at para 7.

 26   Ibid and Exhibit UFU 4.

 27   Ibid at paras 5 and 6.

 28   Exhibit UFU 2 at paras 7 to 14.

 29   Exhibit UFU 5.

 30   Exhibits UFU 6 and UFU 7.

 31   Exhibit UFU 8.

 32   Exhibit UFU 2, Attachment SM 2.

 33   Exhibit MFB 5 at paras 36 to 43.

 34   Exhibit MFB 4 at para 59.

 35   Ibid at para 61.

 36   PN1091 and PN1491.

 37   Exhibit MFB 1 at para 46.

 38   Ibid at para 27.

 39   PN1083 to PN1084.

 40   Exhibit MFB 3 at paras 41 and 42.

 41   PN1195 to PN1197.

 42   PN1210 to PN1211, PN1274 to PN1275 and PN1303 to PN1308.

 43   Exhibit MFB 2 at para 27.

 44   Exhibit MFB 4 at para 42.

 45   PN1302.

 46   PN1210 to PM1211, PN1274 to PN1275 and PN1303 to PN1308.

 47   PN1192.

 48   PN524.

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<Price code G, PR519916>