Industrial Relations Commission of New South Wales CITATION : Notification by Teachers Federation Health Limited of a dispute with New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union [2004] NSWIRComm 168 NOTIFIER: PARTIES : Teachers Federation Health Limited RESPONDENT: New South Wales Local Governement, Clerical, Administrative, Energy, Airlines and Utilities Union FILE NUMBER: 1168 of 2004 CORAM: Sams DP Industrial dispute - breakdown in enterprise bargaining negotiations - health insurance industry - wage increases - claim to remove shopping time provision - Union bargaining fee clause - parties agree to accept Commission's recommendation. CATCHWORDS : Held, wage increases of eight percent over two years - shopping time claim referred to Consultative Committee - further proceedings may be necessary - claim for Union bargaining fee clause refused - recommendations made. LEGISLATION CITED : Industrial Relations Act 1996 Lend Lease Investments Pty Ltd & Ors, Re Cannon & Ors (1986) 14 IR 301 Review of the Principles for Approval of Enterprise Agreements 2002, Re [2002] NSWIRComm 342 Safety Net Review - Wages May 2004 [Print PR002004] CASES CITED : State Wage Case 2004 [2004] NSWIRComm 148 AWARDS: Clerical and Administrative Employees (State) Award 296 IG 619 HEARING DATES: 05/17/2004; 05/25/2004 DATE OF JUDGMENT: 06/11/2004 APPLICANT: Mr M Want (Union Secretary) LEGAL REPRESENTATIVES: RESPONDENT: Mr A Umansky, Deacons Solicitors JUDGMENT: - 16 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS DP 11 June 2004 Matter No IRC04/1168 Notification by Teachers Federation Health Limited of a dispute with New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union re negotiations for enterprise agreement RECOMMENDATION [2004] NSWIRComm 168 1 Proceedings in this matter commenced by way of a s130 notification of an industrial dispute lodged on 8 March 2004, by the Teachers Federation Health Limited ('the employer'). The dispute concerned work bans imposed by members of the New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union ('the Union') following a breakdown in the negotiations for a new enterprise agreement. 2 The dispute was listed for compulsory conference on 11 March 2004. Mr A Umansky appeared for the employer and Mr M Want appeared for the Union. After Mr Umansky outlined the nature of the bans imposed by the employees, Mr Want announced that all bans had been lifted in order for the Union and its delegates to respond to the dispute notification. 3 The Commission was then appraised of the details of the negotiations for the new agreement; the negotiations having been conducted through the best part of 2003. Mr Want submitted that there remained three outstanding issues which the parties could not resolve. These were: i. the quantum of wage increases during the life of the two year agreement; ii. a proposal by the employer to remove the provision of three hours a month shopping time for employees in exchange for a two per cent wage increase; and iii. the inclusion of a Union bargaining fee for non union employees. I shall detail the parties' respective positions on each of these matters in due course. 4 The Commission convened compulsory conferences on two occasions and despite various offers and counter offers, the three issues referred to above remained outstanding. As a means of resolving the impasse I proposed that the Commission would hear the parties' respective arguments on each matter and issue a recommendation. The parties concurred with the proposal and agreed to abide by the Commission's recommendations. Helpful submissions and documentary material were put by Mr Umansky and Mr Want on 17 and 25 May 2004. Relevant Background 5 The New South Wales Teachers Health Fund employs about one hundred staff. Clerical and administrative employees are covered by the terms of the Staff Agreement ('the Agreement') negotiated with the Union. The existing two year Agreement expired on 30 June 2003. About 68 per cent of the employees covered by the Agreement are Union members. 6 As might reasonably be expected, the Agreement provides for wages significantly higher than the relevant Award (Clerical and Administrative Employees (State) Award 296 IG 619). In addition the Agreement provides for certain benefits and conditions which are in excess of the Award entitlements and which might obviously be described as being at the higher end of the market; for example, employees are entitled to six weeks' annual leave, sixteen days' accumulated sick leave per annum, access to performance bonuses and generous flexitime arrangements - of which the shopping time benefit is a component. It was generally understood that the effect of the flexitime arrangements allows employees access to a nine day fortnight; although it is not specifically referred to in the Agreement. 7 I turn now to the respective claims and offers of the parties and their arguments in support. I shall deal with each issue separately and make a recommendation accordingly. Wage Increases 8 Firstly, I note that both parties agreed on the operative date of the two proposed increases, twelve months apart. The Union claimed that the employer's offer of a 3 per cent increase from 1 January 2004 and a further 3 per cent from 1 January 2005 was unacceptable. While not precisely identifying the quantum of increases the Union sought, Mr Want referred to the 4.2 per cent increase under private sector Federal agreements in the September 2003 quarter and the 4.2 per cent movement in the CPI for the same period. Mr Want highlighted that even non union agreements averaged 3.55 per cent over the relevant period. One might reasonably assume therefore, that the Union's claim was, for all practical purposes, 4 per cent from 1 January 2004 and 4 per cent twelve months later. 9 In developing his submissions, Mr Want tendered statistics from the Department of Employment and Workplace Relations and also relied upon the recent $19.00 safety net adjustment awarded by the Australian Industrial Relations Commission in the Safety Net Review - Wages May 2004 [Print PR002004] (now adopted in the NSW jurisdiction in State Wage Case 2004 [2004] NSWIRComm 148). Mr Want emphasised that the $19.00 increase represented a 4.23 per cent per cent increase in the Federal minimum wage. In view of these outcomes, Mr Want submitted that there were no good reasons why the average of around 4 per cent should not be recommended by the Commission. 10 In addition Mr Want relied on the Teachers Health Fund Report for the year ended 30 June 2003 and highlighted the following extracts from the Chairperson's Review: ...With benefits paid and provided to members increasing to a record $129.1 million, the year 2002/3 was indeed a successful one... With both hospital and ancillary tables offering excellent value for money, it was not surprising to find membership increasing 3.7per cent to a record 68,971. This increase was well above the average for the health insurance industry. Out of the 40 health funds in Australia, Teachers Federation Health in the 9th largest. ... By holding contributions at the lowest level possible it was not a surprise to record a very small surplus of $263,634 for the year. The Fund continues to show its strong financial standing. Standard and Poors, the International Rating Agency, gave Teachers Federation Health the highest A rating. No other fund received as high a rating and Teachers Federation Health was the only Health Fund to received this A rating 3 years in a row. Teachers Federation Health continues to meet the solvency and capital adequacy levels required by PHIAC and the Department of Health. Members would be pleased to note that management expenses were kept well under control at 6.6per cent. This is approximately half the industry average. By keeping management expenses low, members are able to receive higher benefits or lower contributions, or both. ... I congratulate Management and Staff on their high level of performance. The transition to new computer software posed a number of difficulties, which were handled with the professionalism exhibited by a well-trained group of people. 11 Mr Want put that there had been no increase in hospital contribution rates for four years and his members rejected this "contribution hold" at the expense of reasonable wage increases. Nevertheless, it was Mr Want's submission that the Health Fund's financial performance was "extremely healthy" and his members were only seeking a fair share in the ongoing profitability of the Fund. 12 Mr Umansky submitted that the employer's wage offer was very generous, particularly when no productivity or efficiency offsets were sought. It was 3 per cent from 1 January 2004 and 3 per cent from 1 January 2005 with additional compensation for the loss of shopping time. The offer, however, was part of a package which totalled around 9 per cent over two years. Mr Umansky stressed that the wages paid to the employees were in the high quartile of the industry and well above the Award wages. 13 He tendered a document which demonstrated that with a 3 per cent increase in wages, employees would be paid well in excess of comparative funds such as Manchester Unity, HCF, Grand United, Commonwealth Bank Health and Lysaghts. This was the true measure of the Fund's competitiveness and efficiency, he said. 14 Mr Umansky agreed that the Fund's financial position was sound, but that it would risk its competitive advantage if wages paid to employees were too far in excess of the industry norms. The Fund, he said was a non profit fund. The Fund's reserves, which fluctuate from time to time, are required to be maintained by the Government regulator. The extent of the Fund's reserves was not therefore, a relevant consideration. 15 Mr Umansky also highlighted some of the other benefits available to employees under the Staff Agreement and noted, in particular, that employees have access to additional increases for performance. In 2001-02 7 per cent of employees received an additional 4 per cent and 69 per cent of employees received an additional 1.5 per cent. While in 2002-03, 13.6 per cent of employees received an additional 4 per cent and 53 per cent received 1.5 per cent. Bonuses will continue to be available. 16 In reply, Mr Want said that the performance bonus only applied to a limited number of employees and was a "one off" payment. Mr Want submitted that a comparison to the Award was irrelevant as it was a minimum rates Award. Mr Want further noted that the expense ratio for the Fund was about half that of the comparable funds. In respect to productivity and efficiency, Mr Want pointed to the Workplace Committee which was always willing to discuss such matters. 17 Mr Want rejected Mr Umansky's reference to comparable funds as containing glaring omissions, such as Medibank Private, Medicare and MBF. The comparison was not "like with like" as some of the funds were non union or had different salary structures. Recommendation 18 The Commission proposes to recommend that there be a 4 per cent increase from 1 January 2004 and a further 4 per cent wage increase from 1 January 2005. I have arrived at this conclusion for the reasons that will shortly follow. 19 Firstly, an 8 per cent wage increase over the life of a two year agreement would not, in my judgement, be outside reasonable community and industrial expectations. Secondly, a figure of around 4 per cent from 1 January 2004 would appear to be both consistent with private sector movements in agreements generally and within the range of increases in the health fund sector (See Exhibit B). 20 Thirdly, the recent safety net adjustment of $19.00 in the Federal minimum wage and New South Wales Award Review Classification Rate was 4.23 per cent. Fourthly, there was no serious dispute with the proposition that the Fund's financial position remains strong and sound. 21 Fifthly, comparisons based on other benefits in the Agreement such as annual leave and sick leave are not appropriate. Such comparisons do not reflect the reasons why such benefits were introduced and whether they related to other trade offs agreed to at the time. Moreover, there is a well accepted industrial principle that a payment, benefit or condition designed or intended for a particular industrial purpose or objective should not be offset against another benefit, payment or condition designed for a different and distinct industrial purpose. See Lend Lease Investments Pty Ltd & Ors; Re Cannon & Ors (1986) 14 IR 301. Shopping Time 22 The existing clause in respect to shopping time is found at cl35 of the Agreement: Each permanent employee, after three months permanency, on application, shall be granted on a roster basis, approved by the Manager, three (3) consecutive hours shopping time for each calendar month or one day in two calendar months (with one hour made up) to be taken within that period. All staff to take their half day December shopping time on the day prior to the Christmas break, this being a compulsory closure of the Fund except when Christmas Eve falls on a Monday, the staff will then work the full day on the Friday prior to Christmas Eve and close for the full day on Christmas Eve. 23 The employer proposed two options in respect to the shopping time issue: Option 1 Our proposal is that shopping time ceases from 1/1/04. Salaries increase by 3% from 1/1/04 making the offer 6% from 1/1/04.. Applies to all staff entitled to shopping time. Does not apply to casual staff or management or executive staff. The 6% increase becomes base salary and all retirement benefit calculations, e.g. holiday pay and long service leave are calculated at the higher (+3%) rate. Superannuation contributions are also 3% higher. Option 2 Current permanent staff may choose to keep shopping time or receives (sic) an allowance of 2% in lieu of shopping time. All new staff after 1/1/04 receive the 2% allowance. New Staff after 1/1/04 do not have the option of shopping time. Current staff may choose the 2% allowance anytime. It is an allowance and is not part of base salary and is not used in the calculation of holiday pay and LSL. Having chosen the allowance, staff may not revert to the shopping time alternative. This option gives all current permanent staff their choice. Is a fair payment for 2% more work time. Will continue until all current permanent staff have ceased employment. 24 Mr Dudley Wrigley, General Manager of the Teachers Federation Health Fund, provided a statement which traced the background of the shopping time benefit. He deposed: To the best on my knowledge, Shopping time was introduced to TFH or its predecessor in the late 1960's. In or about 1966, TFH shared premises with and leased premises from the New South Wales Teachers Federation at Phillip Street in Sydney. At about the time when the two organisations moved premises from Phillip Street to Bathurst and Sussex Street in Sydney, employees of TFH and New South Wales Teachers Federation were granted shopping time, pursuant to a claim by employees and their union that the move restricted employee access to shopping facilities in the central business district, at a time when extended shopping hour such as Thursday, Saturday and Sunday were non-existent. 25 Mr Wrigley gave evidence that he had contacted about 27 other health funds and none of them offered shopping time benefits for their employees. The benefit has also been removed for employees of the Teachers Federation. Mr Wrigley agreed that the Agreement does not refer to a nine day fortnight. However, it is what occurs in practice for most employees. Any time worked outside seven hours a day can be overtime or flextime. 26 The employer argued that the shopping time benefit should be viewed in the context of other benefits in the Agreement and the ability of the employees to access a nine day fortnight through flexible working hours. Mr Umansky submitted that the shopping time benefit created difficulties for rostering and coverage and, in any event, was an historical anomaly. 27 Mr Umansky stressed that the employer's response to the Union's opposition had been more than accommodating. He tendered a bundle of correspondence which demonstrated the Fund's flexible response to the issue. It had proposed that no existing employee would lose the benefit and may choose to trade off the three hours a month for a two per cent wage increase. A second option was for a two per cent allowance to be paid for all existing and future employees as an offset for the three hours. 28 Mr Umansky said the value of removing shopping time for all employees was two per cent. However the Fund had proposed an amount of three per cent. Mr Umansky submitted that the Union had offered no alternative suggestions, save for strident opposition. 29 Mr Want strongly opposed the removal of the shopping time benefit. He said his members had enjoyed this benefit for over 30 years and were strongly opposed to its removal; even where existing employees were unaffected. 30 Mr Want relied on cl 39 of the Award and the obligation on an employer to discuss changes to the hours of work with the employees and their Union. The employer had a duty to discuss change. The Union was willing to do so. Mr Want said it was not an acceptable industrial practice to punish employees because of work absences. It was a management responsibility to manage absences and counsel employees. 31 Mr Want proposed that if management had problems with absences and rostering, then his members stood willing to participate with an open mind in a consultative process to identify any difficulties and come up with solutions. He said that to date the employer had provided no evidence of any problems. Mr Want proposed a consultative process of three months and should the matter be unable to be resolved, it could be brought back to the Commission. 32 Mr Want submitted that the issue of flexitime and the nine day fortnight was very confusing and the proper mechanism for examining the issues was the Committee proposed by the Union. Recommendation 33 For the moment, without expressing a concluded view on the matter, I am persuaded to accept the Union's suggestion that a Consultative Committee be established to identify the concerns of management as to shopping time. The Committee should determine whether the benefit should continue, with a view to reaching an agreed position on the matter. However, I am concerned that this consultative process should not be prolonged and, accordingly I recommend a time frame of one month. Should there be no agreement after that time, liberty to apply is available to both parties in order for the Commission to determine a final recommendation on the matter. I would emphasise that the parties should enter into the consultation process with open minds and with no preconceived view as to the result. 34 I have been persuaded to this course firstly, by the obvious lack of specific detail of the problems said to be created by shopping time. Secondly, this issue is obviously a vexed and emotional one for the employees. In these circumstances it would be best resolved by an outcome both parties can agree upon, rather then an outcome imposed (recommended) by the Commission. 35 Thirdly, Mr Wrigley appropriately in my view, did not rule out such a consultative process when he said in a letter to the Union on 18 February 2004: We have considered your proposal for the formation of a committee to ensure appropriate staffing levels, however we believe that any such discussion cannot be meaningful if it does not involve a review of Shopping Time. Furthermore, management will not agree to participate in such a committee whilst work bans are in place. As the consultative process must involve a review of shopping time and no bans are in place, it would relevantly appear that the management's impediments to accepting the Committee have now been removed. Union Bargaining Fee 36 The Union proposed the following clause be included in the Agreement: The Teachers Federation Health Management (TFHM) shall advise all existing employees that a Union Bargaining Fee of $331.55 per annum, to be amended on 1 January in each year in accordance with Rule 18 Subscriptions (1)(a) paragraph 1, is payable to the United Services Union (USU) on or prior to 1 January each year, commencing this year 2004. TFHM will provide to all current employees who are not members of the USU an authority to deduct Union bargaining fees from their wages on a fortnightly basis. The deduction is to operate from the date that the Commission determines the agreement is to be operative. TFHM shall also advise all new employees that prior to commencing work for TFHM that a Union Bargaining Fee of $331.55 per annum, to be amended on 1 January in each year in accordance with Rule 18 Subscriptions (1)(a) paragraph 1, is payable to the USU on or prior to 1 January each year. The TFHM will provide to all new employees an authority to deduct Union Bargaining Fee from their wages before commencement of employment on a fortnightly basis. The relevant employee to whom this clause shall apply pay the Union Bargaining Fee to the (sic) USU on a fortnightly basis for any time which the employee is employed by the TFHM. 37 Mr Want relied on the decision of the Full Bench in Review of the Principles for Approval of Enterprise Agreements 2002, Re [2002] NSWIRComm 342. That decision introduced a new principle in the Enterprise Bargaining Principles: Where the proposed enterprise agreement includes a provision as to payment of an agency or union bargaining fee, the Commission shall consider whether the proposed provision is consistent with the provisions of the Industrial Relations Act 1996, and, where applicable, the rules of any relevant registered organisation. 38 Mr Want put that the Union's proposal was entirely consistent with the Full Bench decision as supported by the Labor Council of New South Wales and its affiliaties, including the Teachers' Federation. 39 Mr Want submitted that it was unfair and unreasonable for non union members to enjoy the benefits of a very good union negotiated agreement with superior benefits, without making a contribution. 40 Mr Want also put that there had been a history in recent years of members resigning from the Union when they don't accept the decision of the majority. This has caused unrest and discontent. A better, more harmonious industrial environment would be created by the introduction of a Union bargaining fee. 41 Mr Umansky opposed the inclusion of a Union bargaining fee clause on the following grounds: (a) Such a provision would be inconsistent with the objects of the Act. (b) The claim has not been seriously pursued. (c) The form of the proposed clause did not appear to be referrable to any work actually performed by the Union. (d) There was no evidence of such a provision being common in industry generally and not at all in the health insurance sector. (e) The conditions referred to in the Full Bench decision do not exist in these circumstances. 42 Mr Umansky noted that the Union acknowledged that the employer was "union friendly" and encouraged Union membership. He highlighted a number of clauses in the Agreement to demonstrate this proposition; in particular cl 27. TFH and the staff union representatives highly recommend that all employees be members of the F.C.U. 43 He said there was no evidence that a Union bargaining fee would facilitate or enhance the Union's ability to service its members at the workplace. Mr Umansky said that as a matter of merit the Commission would not, in the circumstances, approve of a Union bargaining fee clause. In any event, such arrangements were not a feature of this industry, nor of industry generally. The employer had a real concern that some employees, with very strong feelings about the issue, might leave their employment. 44 In reply, Mr Want said the claim for a Union bargaining fee was in the Union's original log of claim. He agreed it did "go off the table" for a time, but the issue became more focused when a number of members who received the $663.00 per annum bonus (cl 36), resigned from the Union. Mr Want accepted that the employer was pro union, but he said it was unfair for non members to benefit from a very good agreement, particularly in respect to cl 36. He proposed that if the Commission was minded to recommend the proposal, a meeting of all employees would still be necessary. Recommendation 45 While I have some sympathy with the arguments advanced by Mr Want, I would reject the inclusion of a Union bargaining fee clause in the Agreement. I do so for the following reasons. 46 Firstly, the employer is opposed to the clause. In my view, it is not strictly correct to rely on the decision in Review of the Principles for Approval of Enterprise Agreements. That decision introduced a new principle which the Commission must consider when it is asked to approve an enterprise agreement containing a union bargaining fee clause. In other words, where the parties agree to such a clause. The position here is fundamentally different to the approval process per se. The employer opposes the clause and consequently there is no agreement which the Commission is asked to test in accordance with what the Full Bench said in para 28 of the decision. 47 Secondly, not surprisingly, the employer here is not only "union friendly," but acts in a positive and proactive way in encouraging Union membership. The Union acknowledged as much and accepts that it enjoys a good working relationship with the employer. So much can be seen by the relevant provisions of the Agreement referred to by Mr Umansky. That being said, I do not share Mr Umansky's view that some employees with strong feelings about the matter, might leave their employment if a bargaining fee was forced upon them. 48 What I find most extraordinary (and I raised it a number of occasions during the proceedings) is that employees who are Union members are eligible to become members of the Health Fund. By so doing they attract a discount in health fund contributions of $633.00 per annum - almost double the Union membership fee. It beggars belief why anyone would not wish to be a Union member with that level of attraction. That being said, I raised with the parties as to what happens if a Union member joins the Fund, but subsequently resigns Union membership? While I was not given a clear and unequivocal answer, it is sufficient to note that this situation is the source of some understandable discontent and disharmony. 49 For my own part, I wish to make this observation. I do not see, as a matter of principle and practicality, why a person joining the Fund under certain conditions, who then fails to meet those conditions, is able to remain in the Fund - let alone attract a $663 benefit. As I was not asked to determine this matter, and I am not acquainted with the rules of the Fund, I take this matter no further; suffice to note that I am assured the issue is being addressed at Board level. 50 Thirdly, there was no evidence that Union bargaining fee arrangements are a feature of the health fund industry or that such a provision is, at this stage, widespread in industry generally. In light of the current environment, I would be loathe to recommend such a provision on non-consenting parties. Summary of Recommendations 51 In accordance with the agreement of the parties to this dispute to accept my recommendations on the outstanding issues, I recommend as follows: 1. A 4 per cent wage increase for all employees from 1 January 2004 and a further 4 per cent from 1 January 2005. 2. The establishment of a Consultative Committee to identify and review the concerns of management as to shopping time, and whether such benefit should continue. The consultative process should last no longer then one month. Should there be no agreement after that time, liberty to apply is available to both parties in order for the Commission to determine a final recommendation on the matter. 3. The new Staff Agreement should not include a Union bargaining fee clause. 4. The new Staff Agreement should operate for a period of two years. Peter J. Sams AM Deputy President 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.