Industrial Relations Commission New South Wales Medium Neutral Citation: New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utility Union v Kiama Municipal Council [2021] NSWIRComm 1080 Hearing dates: 21 October 2021 Date of orders: 21 October 2021 Decision date: 25 October 2021 Jurisdiction: Industrial Relations Commission Before: Commissioner Webster Decision: Consent orders made pursuant to s 18 of the Industrial Relations Act 1996 (NSW) Catchwords: Industrial dispute – consent orders – exemption from award entitlements – not contrary to the public interest – best interests of employer and employees – serious consequences if order not made Legislation Cited: Industrial Relations Act 1996 (NSW) ss 16, 130 Cases Cited: Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 State Wage Case 2020 (No 2) [2021] NSWIRComm 1079 Category: Principal judgment Parties: New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utility Union (Notifier) Development and Environmental Professionals' Association (Intervenor) Local Government Engineers Association (Intervenor) Kiama Municipal Council (Respondent) Representation: S Geddes (for the Notifier) I Robertson (for the Intervenors) A Dansie of Local Government NSW (for the Respondent) File Number(s): 2021/227603 Publication restriction: Nil decision 1. On 10 August 2021 the New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union, trading as the United Services Union ("USU") notified the Commission of a dispute pursuant to s 130 of the Industrial Relations Act 1996 (NSW)("Act") with Kiama Municipal Council ("Council") concerning salary progression under the Council's salary system and compliance with cl 7 of the Local Government (State) Award 2020 ("Award"). 2. The matter was listed for Compulsory Conference via telephone on 16 August 2021. Present during the Conference was Mr Geddes who appeared for the USU, Mr Robertson who appeared for both the Development and Environmental Professionals' Association ("depa") and the Local Government Engineers Association ("LGEA"), and Mr A Dansie from Local Government NSW ("LGNSW") who appeared for the Council. 3. The crux of the dispute was a decision taken by the Council to withhold performance bonuses and salary increases as conveyed by Council's Chief Executive Officer to staff, in a communication dated 5 August 2021, which included the following: "Given our financial position and my concern over the inequality of the current system, there will not be a performance payment or salary increase for this year to staff. I know this will be unpopular and you will be disappointed…" 1. Relevant to this dispute, Clause 7 of the Award provides: "7. SALARY SYSTEM (i) A salary system determines how employees are paid. An employee shall be paid the salary system rate of pay that recognises the skills the employee is required to apply on the job. (ii) The salary system shall have a structure that complements the entry level rates of pay and skill descriptors in the Award by identifying grades. Each grade shall contain a number of salary points/steps for progression that are over and above the entry level rates of pay. (iii) Positions shall be assigned a salary grade(s) within the structure. A position may extend across more than one grade in the employer's salary system or level as prescribed by Clause 5 Skills Descriptors of this Award. (iv) Progression through the salary system shall be based upon: (a) the acquisition and use of skills; or (b) employee performance, provided that progression beyond the award entry level based upon the acquisition and use of skills is also available. (v) Where skills based progression is not reasonably available within the salary range for the position, employees shall have access to progression based on the achievement of performance objectives relating to the position. Such performance objectives shall be set in consultation with the employee(s). (vi) Subject to subclauses (iv) and (v), skills for progression relevant to the position shall be assigned to each salary point/step within the grade, or set at the annual assessment provided that such criteria shall provide an opportunity to progress through the salary system. (vii) Except where otherwise provided, employees shall be assessed for progression through the salary range for their position at least annually or when they are required to use skills that would entitle them to progress in the salary system. (viii) The employer shall not be required to conduct annual assessments for those employees who have progressed through the salary system to the maximum point/step for their position, provided that if an employee on or above the maximum point/step for their position requests an annual assessment in writing, the employer will provide one. (ix) At the time of assessment, the employer shall advise the employee of the relevant skills and/or reasonably achievable performance objectives required for the employee to progress to the next salary point/step and shall review the employee's training needs consistent with clause 32. (x) The salary system shall include a process by which employees can appeal against their assessment. (xi) Employees shall have access to information regarding the grade, salary range and progression steps of the position. (xii) Where the employer changes its salary system structure, employees shall not suffer a reduction in pay or salary range. Further, employees shall not suffer a reduction in progression steps based on the acquisition and use of skill, unless otherwise agreed. 1. Subclause B of clause 10 of the Award states: B. INDIVIDUAL/TEAM (i) Enterprise key performance indicators may be used to develop performance targets for teams or individual employees. (ii) All employees need to know and have confirmed the role, accountabilities and performance standards that are expected of them. Role clarity, acceptance of goals and regular feedback are essential to effective performance. A key aim should be to provide a means of recognising and rewarding high performance and to provide an early assessment and response to substandard performance. A review system also provides a basis for identifying development needs for individuals, and can be used as an important input to promotion decisions. (iii) This Award recognises that all employees shall have on-going feedback about performance. The performance development process can be simplified to three stages: (1) joint development on objectives and performance standards; (2) progress reviews; and (3) a formal performance review which is followed by decisions and outcomes. 1. Mr Geddes submitted that the Award requires employers to have a salary system that provides for progression over and above the entry level rates of pay based upon: 1. the acquisition and use of skill; or 2. employee performance, provided that progression beyond the Award entry level based upon the acquisition and use of skills is also available. 1. Mr Geddes submitted that employers do not have a right to unilaterally decide to deny employees the opportunity to progress through the salary range for their position if they are eligible for progression. Mr Geddes was joined in this submission by the other unions represented. 2. Mr Dansie appropriately and helpfully conceded on behalf of Council that employers covered by the Award do not have a right to unilaterally decide to deny employees the opportunity to progress through the salary range for their position if they are eligible for progression. 3. Mr Dansie also made submissions regarding the Council's financial position, including that the Council has a significant operating deficit which will likely be further impacted by the COVID-19 pandemic, revenue reduction and staff related costs. 4. A further conciliation was conducted on 21 October 2021. Mr Dansie provided an update on the progress of the dispute and advised the Commission that the parties have reached agreement to resolve the dispute by way of consent orders. 5. Mr Dansie outlined the terms of the agreement between Council and the unions as follows ("Terms of Agreement"): "Terms of Agreement For the 2020-21 salary advancement, the following will apply in lieu of the salary progression rules under Council's Competency and Performance Review Protocol ("Protocol"): (i) The performance process for the 2020-21 period will not use performance indicators as these were not developed in 2020-21, are unknown to staff, and the application of sudden assessment criteria for performance at this point would not be reasonable management practice. (ii) In lieu of performance indicators for 2020-21, two-way conversations between staff and supervisor to discuss performance over the past twelve months can still occur and will be undertaken this year. As feedback on work is vital to sustained performance, the proposed form to be used for this year will be shortened and more practical. (iii) Eligible employees on salary grade steps one (1) to three (3) will continue as per the Protocol's competency assessment process (Skill based progression). (iv) Performance based progression will vary from the Protocol as follows: eligible employees on salary grade steps four (4) to eight (8) will receive a one-step salary increase (Performance based progression). employees on salary grade step nine (9) will be entitled to two (2) days of additional annual leave, to be used in conjunction with one (1) week's annual leave before 30 June 2022, in lieu of a performance payment (Performance based progression), subject to the following: Where use of the two (2) days additional leave has not been operationally viable or readily accessible for an employee prior to 30 June 2022, the employee may request two (2) days' pay in lieu of the two (2) days of additional leave and such request will not be unreasonably refused by Council; and Employees will not be required to take one (1) week's annual leave to receive the additional two (2) days' pay if the taking of such leave results in the employee having an accrued annual leave balance of less than four (4) weeks. 1. Mr Dansie asked the Commission to make an order pursuant to s 18 of the Act exempting the Council from its obligations under cl 7 of the Award (to the extent that it relates to salary progression) and the Council's Competency and Performance Review Protocol until 30 June 2022, and in lieu thereof, requiring the Council to apply the salary progression arrangements contained in the Terms of Agreement. 2. Mr Dansie submitted that s 18 of the Act empowers the Commission to grant employers an exemption from the whole or any part of an award if it is satisfied that it is not contrary to the public interest and specified circumstances exist. The section is expressed as follows: "18 Exemptions from awards (1) The Commission may, on application, grant an exemption from the whole or any part of an award if it is satisfied that it is not contrary to the public interest and that— (a) it is in the best interests of the employees and employers concerned, or (b) the operation of the award (or part of the award) would result in significant unemployment or other serious consequences for the employees and employers concerned. (2) An exemption may be granted for a period not exceeding 3 years at any one time. (3) The Commission may, on application or on its own initiative, review any exemption, and may confirm, vary or revoke the exemption." 1. Mr Dansie read the affidavit of Ms Jane Stroud, Council's General Manager sworn 12 October 2021 (Ex 1). 2. Ms Stroud states in her affidavit that the Council is experiencing serious economic adversity due to the effects of the COVID-19 pandemic. Kiama is a coastal town approximately 120 kilometers south of Sydney in the Illawarra region of New South Wales. The local economy is heavily reliant on tourism, which includes tourist attractions such as the Kiama Blowhole, several popular surfing beaches and caravan parks, and numerous alfresco cafes and restaurants. Kiama's proximity to the south of Sydney makes it an attractive destination for many day-trippers and weekenders. However, due to the COVID-19 pandemic, NSW was in lockdown for several months in 2021, which has had a serious and detrimental impact on the local economy and on Council's revenue streams. The Council is projecting an operating deficit of $2.78 million for the 2021/2022 financial year. 3. Mr Dansie submitted that a temporary and partial relaxation of the salary progression rules under its Competency and Performance Review Protocol is warranted to reduce the impact of staff related expenditure on the Council's deteriorating financial position and to help safeguard jobs. 4. Mr Dansie submitted that the proposed consent orders will result in up to 87% of employees on salary grade steps four (4) to eight (8) receiving a salary grade step increase, whereas under the Council's Competency and Performance Review Protocol only 25% of these employees would receive a step increase. Further, all eligible employees on salary grade step nine (9) will be entitled to two (2) days additional leave, whereas under the Council's Competency and Performance Review Protocol, only about one third of employees would have received a performance bonus. 5. Under the proposed consent orders, employees on step 9 of the Council's Competency and Performance Review Protocol will be entitled to (2) days of additional annual leave, to be used in conjunction with one (1) weeks' annual leave before 30 June 2022, in lieu of a performance payment. Where use of this leave has not been operationally viable or readily accessible for an employee prior to 1 July 2022, the employee may request two (2) days' pay in lieu of the two (2) days of additional leave and such request will not be unreasonably refused by Council. The provision of leave, in lieu of a performance payment, will result in a cost saving to Council and will assist the Council with addressing its financial position. As a further safeguard, it has been agreed that employees will not be required to take the one (1) week's annual leave to receive the additional two (2) days' pay if the taking of such leave results in the employee having an accrued annual leave balance of less than four (4) weeks. 6. Mr Dansie also referred the Commission to Principle 12 [Economic Incapacity] and Principle 8.4 [Special Case Considerations] of the Commission's Wage Fixing Principles in State Wage Case 2020 (No 2) [2021] NSWIRComm 1079. 7. Principle 12 [Economic Incapacity] states: "12. Economic Incapacity 12.1 Any employer or group of employers bound by an award may apply to, temporarily or otherwise, reduce, postpone and/or phase in the application of any increase in labour costs determined under the Principles on the ground of very serious or extreme economic adversity. The merit of such an application will be determined in the light of the particular circumstances of each case and any material relating thereto shall be vigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are significant factors to be taken into account in assessing the merit of any application. 12.2 Such an application will be processed according to the Special Case Principle. 12.3 Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this Principle." 1. Principle 8.4 [Special Case Considerations] states: "8.4 Special Case Considerations A claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles, and which is not based on work value and/or productivity and efficiency pursuant to this Principle, will be processed as a special case in accordance with the principles laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to in that case at [165]-[168]." 1. Mr Dansie submitted that, consistent with the principles laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to in that case at [165]-[168], the matter presently before the Commission has "special attributes" and is "out of the ordinary" so as to take it outside the restrictions which may otherwise apply under the wage fixing principles. Further, as the matter proceeds by way of consent of the parties, an arbitrated case is not required under the wage fixing principles. 2. The parties worked diligently and constructively to find resolution in these proceedings. Mr Geddes and Mr Robertson each confirmed the consent of the organisations they represented to the making of consent orders in the terms described by Mr Dansie during the proceedings. 3. I am satisfied that the proposed consent orders are not contrary to the public interest and that, arising from the COVID-19 pandemic and its impact on the Council, the matter presently before the Commission has "special attributes" and is "out of the ordinary" so as to take it outside the restrictions which may otherwise apply under the wage fixing principles. I am also satisfied that the proposed consent orders are in the best interests of the employees and employer concerned, and that if they were not made, there would be serious consequences for employees and the employer. 4. For these reasons, I decided to make the consent orders sought by the parties when the matter was listed for hearing before the Commission on 21 October 2021. This decision constitutes my reasons for the decision to make the consent orders. CONSENT ORDERS 1. The Commission makes the following orders by consent of the parties: 1. Pursuant to section 18 of the Industrial Relations Act 1996, Kiama Municipal Council ("Council") is granted an exemption from clause 7 of the Local Government (State) Award 2020 (to the extent that the clause relates to salary progression) and the Council's Competency and Performance Review Protocol until 30 June 2022. 2. In lieu of the requirements of clause 7 of the Local Government (State) Award 2020 (to the extent that the clause relates to salary progression) and the Council's Competency and Performance Review Protocol, the Council must apply the following salary progression arrangements for the 2020-2021 salary advancement period: (i) The performance process for the 2020-21 salary advancement period will not use performance indicators as these were not developed in 2020-21, are unknown to staff, and the application of sudden assessment criteria for performance at this point would not be reasonable management practice. (ii) In lieu of performance indicators for 2020-21, two-way conversations between staff and the relevant supervisor to discuss performance over the past twelve months can still occur and will be undertaken. The form to be used for the 2020/21 salary advancement period will be determined by Council following consultation with unions. (iii) Eligible employees on salary grade steps one (1) to three (3) will continue as per the Protocol's competency assessment process (Skill based progression). (iv) Performance based progression will vary from the Protocol as follows: Eligible employees on salary grade steps four (4) to eight (8) will receive a one-step salary increase (Performance based progression). Employees on salary grade step nine (9) will be entitled to two (2) days of additional annual leave, to be used in conjunction with one (1) week's annual leave before 30 June 2022, in lieu of a performance payment (Performance based progression), subject to the following: 1. Where use of the two (2) days additional leave has not been operationally viable or readily accessible for an employee prior to 30 June 2022, the employee may request two (2) days' pay in lieu of the two (2) days of additional leave and such request will not be unreasonably refused by Council, and 2. Employees must not be required to take one (1) week's annual leave to receive the additional two (2) days' pay if the taking of such leave results in the employee having an accrued annual leave balance of less than four (4) weeks. 3. This order shall remain in place until 1 July 2022. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 October 2021