Industrial Relations Commission of New South Wales CITATION: Australian Medical Association (NSW) Limited v Minister for Health [2007] NSWIRComm 263 APPLICANT: Australian Medical Association (NSW) Limited PARTIES: RESPONDENT: Minister for Health FILE NUMBER(S): ARB 189 of 2007 CORAM: Walton J Arbitrator CATCHWORDS: Arbitration - Health Services Act - Consent - Jurisdiction - Meaning "Have Regard To" - Meaning "Established Principles" - Economic circumstances - Industrial merit - Operative date - Determinations made. Commission for Children and Young People Act 1998 Health Services Act 1997 LEGISLATION CITED: Independent Contractors Act 2006 (Cth) Industrial Relations Act 1991 Industrial Relations Act 1996 Public Hospitals Act 1929 NSW Department of Education and Training v Cassis (unreported) Matter No IRC 2410 of 2006, 11/9/07 Re Transport Industry (State) Award (2002) 120 IR 151 CASES CITED: R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 State Wage Case 2007 (2007) 163 IR 253 Visiting Medical Officers Case 1991-93, 25/3/93. HEARING DATES: 20 September 2007 DATE OF JUDGMENT: 23 October 2007 APPLICANT: Solicitor: Mr S Chapman TressCox Lawyers LEGAL REPRESENTATIVES: RESPONDENT: Mr R Kenzie QC & Mr T J Dixon of counsel (at the hearing of the matter) Mr D Chin of counsel Solicitor: Mr A Berendsen Department of Health JUDGMENT: ARBITRATOR APPOINTED PURSUANT TO SECTION 90 OF THE HEALTH SERVICES ACT 1997 CORAM: WALTON J Tuesday 23 October 2007 Matter No ARB 189 of 2007 AUSTRALIAN MEDICAL ASSOCIATION (NSW) LIMITED v MINISTER FOR HEALTH Application by Australian Medical Association (NSW) Limited for a determination under Part 2 of Chapter 8 of Health Services Act 1997 in relation to Visiting Medical Officers' service contracts REASONS FOR DETERMINATION [2007] NSWIRComm 263 1 This matter concerns the application by the Australian Medical Association (NSW) Limited ("AMA") for a determination under Pt 2 of Ch 8 of the Health Services Act 1997 in relation to Visiting Medical Officers ("VMOs") service contracts. The AMA sought separate Determinations for Sessional Contracts and Fee-For-Service Contracts as defined in the Health Services Act. 2 The AMA applied for the appointment of an arbitrator under s 89 of the Health Services Act by letter to the Minister for Industrial Relations dated 8 August 2006. 3 Pursuant to s 90 of the Health Services Act, on 12 February 2007 that appointment was made by the Minister for Industrial Relations by an Instrument of Appointment, after a nomination by the President of the Commission. 4 On 27 February 2007, an offer to settle the AMA's claims was made on behalf of the Minister by the Director General of the NSW Department of Health. 5 On 28 March 2007, the AMA formally accepted the offer. 6 On 20 and 24 September, the parties were heard as to their consent arrangements. In support of their joint submission, the parties relied upon a Statement of Agreed Facts and the evidence of Ms Fiona Davies, the Director Workplace Relations and Human Resources, of the A.M.A., and Mr Kenneth Barker, the Chief Financial Officer of the New South Wales Department of Health. 7 Having considered the submissions and evidence, Determinations known as the Public Hospitals (Visiting Medical Officers Sessional Contracts) Determination 2007 and the Public Hospitals (Visiting Medical Officers Fee-For-Service Contracts) Determination 2007 were made by consent on 25 September 2007 ("the Determinations"). The Determinations are annexed. 8 These are the reasons for the making of those Determinations. Consideration 9 Two preliminary questions emerged in the proceedings which were the subject of submissions made on 8 March 2007 and later dealt with by an interlocutory ruling. Those questions were as follows: (a) Was there jurisdiction to arbitrate the dispute notwithstanding that a consent position had been reached; and (b) If there was jurisdiction to arbitrate the dispute, was there any utility in making a determination following the passage into law of the Independent Contractors Act 2006 (Cth). 10 It was contended, in a joint submission made by the AMA and the Minister for Health, that both questions should be answered in the affirmative. 11 Following the submissions of the parties on 8 March 2007, the Commission announced the following decision in relation to these matters: Having reviewed the relevant legislation and law and helpful submissions provided by counsel for the Minister, Mr R C Kenzie QC and Mr T J Dixon of counsel and the solicitor for the applicants, Mr S Chapman , noting that the submissions were conservatively drawn, I have determined that the answer to each question should be 'yes'. In reaching this conclusion, I have proceeded upon the relatively conservative assumption, as to the second question, that the relevant provisions of the Health Services Act will have operation only because of the transitional provisions of the Independent Contractors Act. I leave open the question as to whether, upon proper construction of that Act, it would actually exclude the arbitration jurisdiction conferred by the Health Services Act . Submissions and Evidence 12 As to the substance of the matter, the parties provided detailed joint submissions in support of the application. It is unnecessary to summarise those contentions here, but reference will be made to them during the balance of the reasons for determination. However, some brief reference should be made to the evidence of the two witnesses called by the parties. The application was supported by evidence which may be briefly summarised as follows: i) Ms Davies deposed that no distinction was drawn between men and women in the relevant parts of the Health Services Act , the 1994 Sessional VMOs Determination and the 1995 Joint Agreement in relation to fee for service VMOs. Further, the sessional VMOs and fee for service VMOs Determinations contained equal remuneration and other conditions of engagement for men and women providing services of equal or comparable value. In a separate statement Ms Davies stated that, in the AMA's capacity as an industrial representative for VMOs, there had been significant consultation with AMA membership, the VMOs membership and VMOs generally in relation to the proposed Determinations and that the majority of VMOs agreed to the proposed Determinations; ii) Mr Barker stated that, with regard to the economic consequences of the proposed determination, it was not considered that any adverse economic consequences would arise from the terms of the agreement in relation to the remuneration of sessional and fee for service VMOs. This evidence covered both macro-economic and financial matters. As to the latter consideration, Mr Barker gave evidence that the New South Wales Treasury had taken into account the additional costs involved in the Determinations in future revenue projections. Arrangements had been made to ensure that the costs arising from the increases in remuneration in the Determinations were fully funded in terms of the New South Wales Treasury budgetary planning process. Relevant Legislative Provisions 13 Section 92(2) of the Health Services Act states that, in making a determination, the arbitrator must have regard to certain factors as follows: (2) In making a determination under this Part, the arbitrator must have regard to the following matters: a) the economic consequences of the proposed determination; and b) the established principles of the Industrial Relations Commission in connection with the determination of remuneration under awards made under the Industrial Relations Act 1996. 'Have Regard To' 14 Before turning to the specific requirements of s 92(2)(a) and (b) of the Health Services Act, it is appropriate to consider the meaning of the words "have regard to" in the preamble to that sub-section. 15 In the Visiting Medical Officers Case 1991-93 (unreported, Reasons for Determination, 25 March 1993), Hungerford J, (as he was then) considered the terms of s 29N(2) of the Public Hospitals Act 1929, the predecessor provision of the s 92(2) of the Health Services Act. Section 29N(2) of the Public Hospitals Act 1929 provided as follows: (2) The arbitrator is making a determination shall have regard to- (a) the economic consequences of the proposed determination; ... (c) the principles of wage fixation for the time being adopted as a general ruling or declaration of principle, by that Commission, in connection with awards made under that Act. 16 In the Visiting Medical Officers Case 1991-93 Hungerford J (as he then was) construed the words "shall have regard to" in that section as meaning (at page 116): ...the arbitrator is required in making a determination to consider the matters specified and to accord them such weight, if any, as should be given in light of all the circumstances but consistent with the overall functions to be governed by equity and good conscience. 17 In R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329, Mason J held that where the statute being considered in that case directed the relevant Permanent Head to have regard to particular matters "...it requires him to take [the matters] into account and to give weight to them as a fundamental element in making his determination". 18 The expression "must have regard to" was considered in the recent decision of the Commission in NSW Department of Education and Training v Nabil Cassis (unreported, Wright J, President, Walton J, Vice-President, and Harrison J, Deputy President, Matter No IRC 2410 of 2006, 11 September 2007). There the meaning of "must have regard to" was discussed in the context of s 44(2) of the Commission for Children and Young People Act 1998. 19 The Full Bench held at [64]: We consider that the provisions relevant here to which regard must be paid are also expressed in general terms although, in that context, the welfare of children must be accorded a paramount consideration in the decision-making process. Accordingly, although weight must be given to the considerations earlier referred to in s 44(2) as requiring consideration because of their being specified as matters to which regard must be had, and as fundamental elements in making the relevant determination, that does not mean that those matters are necessarily decisive or determinative of the process of decision-making. Nevertheless, because Grayson DP failed to give any weight to the s 44(2) considerations, legal error occurred. That does not however mean that the employment screening carried out under the relevant Part of the CCYP Act is decisive or determinative of any s 84 application to which the CCYP Act applies. 20 There does not appear to be any relevant distinction, for present purposes, between the use of the word "shall" in the former sub-section and the word "must" in s 92(2) (and in the provisions considered in Cassis). It follows from the aforementioned authorities, that the effect of the words "have regard to" in s 92(2) of the Health Services Act, are that weight must be given to considerations referred to in the section as matters to which regard must be had. They are fundamental elements in making the determination. However, this does not mean that those matters are necessarily decisive or determinative of the process of decision making. That is, the matters referred to in the section must be considered and be given weight, according to all of the circumstances. The arbitrator, in having regard to those matters, as observed by Hungerford J, is governed by equity and good conscience. Established Principles 21 Section 92(2)(b) of the Health Services Act requires that the arbitrator have regard to "the established principles of the Industrial Relations Commission in connection with the determination of remuneration under awards made under the Industrial Relations Act 1996". The parties submitted that the relevant reference point for these established principles is the wage fixing principles established by the Industrial Relations Commission of New South Wales. 22 In the Visiting Medical Officers Case 1991-93 there was a contest as to whether the terms of s 29N(2)(c) required the arbitrator to apply all the elements of the Commission's wage fixing principles as enunciated in the applicable State Wage Case decision. Hungerford J stated that the wage fixing principles were applicable to independent contractors, by virtue of that section of the Public Hospitals Act 1929, even though they were not under industrial awards. His Honour observed (at 135): In doing so I recognise that VMOs are independent contractors and not employees, but it seems to me where rates of remuneration are to be fixed, included the bases therefore and together the terms and conditions of work, principles applied to employees under industrial awards performing work under contracts of service are most apt to apply to independent contractors performing work under contracts for services. I mention in support of that approach the adoption of the various Commonwealth Medical Fees Enquiries of the principles of wage fixation in determining the net income component of fees for Medicare Benefit purposes. The result is that the appropriate principles to take into account are those formulated in the State Wage Case-May 1991, and specifically, those principles relating to structural efficiency, work value changes, existing allowances and superannuation. The nature of the claims here and the circumstances in which they arise require processing as a special case. Consistent also with the purpose and intent of the principles, I propose to follow a policy of restraint, particularly having in mind the economic consequences as earlier referred to, thereby enabling the monitoring of costs in an environment to achieve increased efficiency and productivity. 23 Hungerford J was clearly of the view that s 29N(2)(c) required the arbitrator to have regard to the provisions of the wage fixing principles then operating with respect to awards made under the then Industrial Relations Act 1991 when making a determination. With respect, I agree with his Honour's conclusion. 24 No different result should follow in this matter. The change in the applicable considerations from 'wage fixing principles being adopted as a general ruling or declaration of principle by the Industrial Relations Commission in connection with awards in s 29N(2)(c) to one of the arbitrator having regard to 'established principles of the Industrial Relations Commission in connection with the determination of remuneration under awards made under the Industrial Relations Act' in s 92(2)(b) does not materially alter the conclusion reached by Hungerford J. 25 The expression 'established principles' is wider in scope than the expression used in the former provision and ample in its dimensions to capture, in my view, wage fixing principles having general application to awards made under the Industrial Relations Act 1996, whether derived from State Wage Case Decisions made in consequence of National Decisions (s 50(1) of that Act ) or the making of State Decisions (see s 51(1) of that Act). Without finally deciding the question, the expression in s 92(2)(b) most likely also extends to other principles established by the Industrial Relations Commission from time to time as a result of statutory requirements to make such principles or test cases. 26 The wage fixing principles applicable to the present matter are those enunciated by a Full Bench of the Industrial Relations Commission in the State Wage Case 2007 (2007) 163 IR 253. The question is what are the implications arising from those principles for the present matter. The answer to that question derives centrally from the consent nature of this application. 27 Clause 2 of the Wage Fixing Principles (State Wage Case 2007 at 347) sets out the circumstances in which an award may be made without the application requiring consideration as a special case. As consent has been reached in the current context, the application for the Determinations is subject to Clause 2(e) of the Principles which is in the following terms: (e) where the application is consented to by the parties it will be dealt with in terms of the Act (see Re Transport Industry (State) Award (2002) 120 IR 151 at [6] - [8]). 28 Thus, the Principles direct attention to the provisions of the Industrial Relations Act 1996. The relevant provisions which, for present purposes, elucidate the established principles of the Commission in connection with the determination of remuneration under awards are, ss 10 and 163(1). Section 10 is in the following terms: The Commission may make an award in accordance with this Act setting fair and reasonable conditions of employment for employees. Section 163(1) is as follows: (1) The Commission: (a) is not bound to act in a formal manner, and (b) is not bound by the rules of evidence and may inform itself on any matter in any way that it considers to be just, and (c) is to act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms (see also s 17(3) (a) of the Industrial Relations Act ). 29 In my view, the application meets the requirements of both s 10 and s 163 of the Industrial Relations Act (if the terms of those sections are adjusted for the present arbitral context). The Determinations generally improve working conditions for VMOs and clarify aspects of their engagement. In doing so, they provide fair and reasonable conditions and reflect the appropriate industrial principles of equity and good conscience. Economic Consequences 30 Section s 92(2)(a) of the Health Services Act requires that the arbitrator have regard to the economic consequences of the Determinations. 31 The parties' oral submissions, the statement of agreed facts and joint submissions and the evidence of the Chief Financial Officer of New South Wales Health require a conclusion, on the evidence, that there are no adverse macro economic consequences as a result of the proposed Determinations. 32 Further, the evidence of Mr Barker shows that the items included in the consent agreement with the AMA were considered and endorsed by the NSW Government and that appropriate arrangements were in place through the budgetary allocation process between NSW Treasury and NSW Health. 33 In the light of this evidence, I consider that no adverse consequences will result from the Determinations. Industrial Merit 34 Both parties made submissions on industrial merit. In view of the submissions advanced by the parties in this respect, I propose to briefly rule on that question without finally deciding whether this is a factor which bears upon the making of a Determination under the Health Services Act. 35 One aspect, in this respect, is that the Determinations were negotiated by consent. This bears upon the merits of the application, as the settlement of "industrial" issues is highly desirable in collective negotiations. By this means parties have the opportunity of tailoring outcomes which are closest to their respective needs. This is, however, a relevant factor but not determinative. 36 Further, it is substantially in the public interest that the parties adjust the remuneration and conditions of these important medical professionals commensurate with the duties they perform and the circumstances in which they perform them. It is also important that VMOs receive proper remuneration to ensure the proper functioning of the health system. Operative Date 37 The parties agreed the Determinations would operate from 9 October 2007, and I have made the Determinations accordingly. I note that adjustments to remuneration under the Determinations were made retrospective by administrative action. 38 The parties had initially sought that the Determinations operate retrospectively, but considered that such a course may be inhibited by the terms of s 91(1)(b). It is not clear why that statutory limitation should operate, particularly when past experience has indicated that arbitral processes and even negotiations leading to consent arrangements may be lengthy and when the public interest may be served, on some occasions, by the making of a retrospective order. I make this observation for future consideration by the legislature. Conclusion 39 I confirm the making of the Public Hospitals (Visiting Medical Officers Sessional Contracts) Determination 2007 and the Public Hospitals (Visiting Medical Officers Fee-For-Service Contracts) Determination 2007. 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.