Industrial Relations Commission of New South Wales CITATION: Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and Department of Corrective Services [2009] NSWIRComm 111 NOTIFIER (Matter Nos IRC 1371 & 2141 of 2008)/RESPONDENT (Matter No IRC 187 of 2009)/APPLICANT (Matter No IRC 223 of 2009): Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales PARTIES: RESPONDENT (Matter Nos IRC 1371 & 2141 of 2008 & IRC 223 of 2009)/NOTIFIER (Matter No IRC 187 of 2009): Department of Corrective Services RESPONDENT (Matter Nos IRC 1371 of 2008 & IRC 223 of 2009) The Department of Premier and Cabinet FILE NUMBER(S): IRC 1371 of 2008; IRC 2141 of 2008; IRC 187 of 2009; IRC 223 of 2009 CORAM: Walton J Vice-President CATCHWORDS: INDUSTRIAL DISPUTE - award application - outsourcing of management and operation of Parklea Correctional Centre - conciliation - relevance of other outsourcing arrangements - Direction made. LEGISLATION CITED: Industrial Relations Act 1996 HEARING DATES: 18/05/09, 26/05/09, 28/05/09, 22/06/09, 26/06/09, 6/07/09, 8/07/09 DATE OF JUDGMENT: 10 July 2009 NOTIFIER (Matter Nos IRC 1371& 2141 of 2008)/RESPONDENT (Matter No IRC 187 of 2009)/APPLICANT (Matter No IRC 223 of 2009): Mr A Hatcher of counsel W G McNally Jones Staff LEGAL REPRESENTATIVES: RESPONDENTS (Matter Nos 1371 & 2141of 2008 & IRC 223 of 2009)/NOTIFIER (Matter No IRC 187 of 2009): Mr J Murphy of counsel Crown Solicitor's Office JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: WALTON J, Vice-President Friday 10 July 2009 Matter No IRC 1371 of 2008 Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and Department of Corrective Services Notification under section 130 of the Industrial Relations Act 1996 by Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales of a dispute with Department of Corrective Services Matter No IRC 2141 of 2008 PUBLIC SERVICE ASSOCIATION AND PROFESSIONAL OFFICERS' ASSOCIATION AMALGAMATED UNION OF NEW SOUTH WALES AND DEPARTMENT OF CORRECTIVE SERVICES Notification under section 130 of the Industrial Relations Act 1996 by Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales of a dispute with Department of Corrective Services Matter No IRC 187 of 2009 Department of Corrective Services and Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales Notification under section 130 of the Industrial Relations Act 1996 by Department of Corrective Services of a dispute with Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales Matter No IRC 223 of 2009 Crown Employees (Department of Corrective Services - Protection of Conditions of Employment) Award Application by Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales under section 11 of the Industrial Relations Act 1996 for a new award DIRECTION [2009] NSWIRComm 111 1 Such are the vexed nature of the proceedings presently before the Commission that it is important at the outset of this Direction to delineate between that issue which is its subject and those which are not. 2 The issue or question to which the Direction is addressed is what conditions of employment or employment arrangements should properly be afforded employees of the Department of Corrective Services ('the Department') who may be affected by the contracting out of the management and operation of the Parklea Correctional Centre (a Correctional Centre currently owned and operated by the Department) ('the issue'). 3 The proceedings do not concern any question as to the appropriateness, as a matter of policy or otherwise, of any decision to contract out the operation of the Parklea Correctional Centre. The New South Wales Government remains steadfast in its intention to contract out the administration and operation of the subject Centre. The union party to the proceedings, the Public Service and Professional Officers Association Amalgamated Union of New South Wales ('the PSA') has consistently maintained a robust opposition to that outsourcing or, for that matter, the outsourcing of any other part of the Department's operations, but has accepted for these proceedings that the announced intention of the New South Wales Government is not justiciable as an industrial matter before the Commission. It was in this light that the PSA directed its attention in these proceedings to what it described as the amelioration of "the detrimental consequences for the employees of the intended outsourcing". 4 The provision of some background information will assist in clarifying both those issues and their resolution. 5 On 8 July 2008, the New South Wales Government Cabinet Standing Committee on the Budget approved a number of strategies as part of the Way Forward workplace reform process to be implemented by the Department. 6 Strategy 2 of the Way Forward workplace reforms was to market test the contracting out of the management and operation of two existing Correctional Centres, being Parklea and Cessnock Correctional Centres. 7 The intention was (and remains) that any Correctional Centre affected by the contracting out would remain in what may be loosely described as 'public ownership'. The Department intended that it would maintain the Correctional Centre itself and monitor the contractor during the duration of any contract. 8 On 18 August 2008, the PSA notified the existence of a dispute (Matter No IRC 1371 of 2008) as to the reform strategies including, the intention of the New South Wales Treasury to "market test the management and operation of Parklea Correctional Centre...". 9 In November 2008, the New South Wales Government handed down the Mini Budget 2008/2009, which required the Department to implement the Way Forward Workplace Reforms. These Reforms ultimately included the contracting out of the operation of Parklea and Cessnock Correctional Centres. 10 On 1 May 2009, the Honourable John Robertson, MLC, Minister for Corrective Services, announced that the Government was not proceeding to outsource the operation of Cessnock Correctional Centre. 11 On 5 May 2009, a Request for Tender (RFT) was issued to the corporations that had submitted an Expression of Interest (EOI) for the operation of Parklea Correctional Centre. 12 The RFT stated that the successful tenderer must invite existing employees at Parklea Correctional Centre to participate in a merit selection process for available positions at Parklea Correctional Centre. Where a Departmental employee was of equal merit to another candidate who was not a Departmental employee, the successful tenderer was required to select the Departmental employee in preference to the other candidate. Where the successful tenderer recruited an existing Departmental employee, the employee was required to resign from the Department and was to be paid all outstanding recreation and extended leave entitlements. The Department was to pay the successful tenderer a Recruitment Support Payment which comprised an amount representing the difference between the ordinary time base salary "including compulsory superannuation contribution" which would have been payable under the industrial instrument applicable to the employee if that person had worked ordinary hours of work as an employee of the Department and the base remuneration (including compulsory superannuation) paid by the successful tenderer to a staff member for those hours of work. 13 The RFT also stated that the Recruitment Support Payment was payable during the first twelve months of the contract and that the successful tenderer will be required to pay each former employee of the Department directly recruited by the tenderer the Recruitment Support Payment in addition to the employee's ordinary time wages or salary for ordinary hours of work. 14 There were significant differences between the parties as to the provisions of the RFT during the course of these proceedings. In addition to the conditions arising from the RFT, the Commissioner of Corrective Services gave a guarantee of ongoing employment with the Department. The terms of the guarantee were also in issue, although were somewhat less contentious. 15 Between 19 August 2008 and 3 April 2009, Marks J listed the dispute (in Matter No IRC 1371 of 2008) for compulsory conference on 16 occasions. Whilst those conferences, no doubt, dealt with broader issues than considered in this Direction (they considered the broad range of matters associated with the Way Forward process and industrial disputation), they also concerned the outsourcing of Parklea Correctional Centre. Additional aspects of the broader dispute, which included matters connected with the contracting out of the management and operation of Parklea Correctional Centre, were also dealt with by Marks J in the course of two other dispute matters, IRC 2141 of 2008 and IRC 187 of 2009. The extent of these listings before his Honour demonstrate the volatility of the matters presently under consideration. 16 Ultimately, the issues relating to the contracting out of the management and operation of Parklea Correctional Centre were not resolved by conciliation conducted during the course of various dispute proceedings, with the result that the PSA commenced proceedings for a new award filed on 20 February 2009 (Matter No IRC 223 of 2009). That application sought the establishment of award provisions for consultation and the protection of conditions of employment in relation to "contracting out/privatisation", which do not warrant further attention in this Direction. 17 The award proceedings were commenced on 15 May 2009, and after continuing part heard to 18 May 2009, were again adjourned to conciliation (an earlier conference, in that respect, under the award proceedings having been unsuccessful). That conciliation process was, thereafter, listed on seven further occasions before the Commission as presently constituted. On 8 July 2009, the two industrial dispute proceedings, with the consent of the parties, were joined to the award proceedings for the purposes of conciliation. A further dispute was joined on 10 July 2009. This Direction emerges from the conciliation of the issue in those joined proceedings. As these proceedings concern a mixture of award and dispute matters, it should be noted that the Direction is made pursuant to the provisions of s 134(2) of the Industrial Relations Act 1996 ('the Act'). 18 Before turning to the subject matter of the dispute between the parties, it is important to observe that the Commission has chosen to issue a Direction in this matter for two reasons. First, the parties remain sharply divided as to some longstanding and significant issues. If the Commission is to intervene to resolve the dispute at this stage it is appropriate that it take a more definite step than the making of a Recommendation. Secondly, the Commission has, before conducting the conciliation, had the benefit of receiving material adduced in fully prepared arbitral proceedings (which are part heard) and, during the conciliation process, has had the assistance of counsel for the PSA and the Department and the Department of Premier and Cabinet in dissecting and analysing the issue in exquisite detail. There will be no better opportunity to identify and propose a resolution to that intractable issue through conciliation than presently exists. There is a very real prospect that all outstanding justiciable issues regarding employment arrangements for the contracting out of the Parklea Correctional Centre will be resolved by the giving of a Direction. 19 The issue may be broken down into three broad areas. The first cluster of issues concern the arrangements that may be properly made for employees who elect to remain in the service of the Department either in the Sydney metropolitan area or outside of it, or in some other employment within the New South Wales Public Sector (including engagement as an excess officer). The second area concerns issues associated with employees who may take up employment with the successful tenderer. The last area concerns those employees who may request voluntary redundancy as a result of the contracting out process. 20 Whilst, as earlier noted, the conciliation canvassed, in detail, each of these areas, it is not appropriate in this Direction to express a view about each disputed item. That would exceed the limits of the conciliation process and may, in fact, be counterproductive to a final settlement of issues. 21 There is, however, one issue of principle which has infected most matters dividing the parties about which the Commission should make some observation. 22 That matter concerns whether, and to what extent, the package of benefits afforded employees, the subject of a proposed privatisation of New South Wales Lotteries, should be provided to employees, the subject of contracting out arrangements for the Parklea Correctional Centre. 23 The disagreement in this respect may be simply stated. The Department suggested that the New South Wales Lotteries' arrangements could not constitute any benchmark against which negotiations in the present matter could properly be conducted because of the significantly different approach adopted in bringing about the private administration of the formerly public function in the New South Wales Lotteries when compared to the outsourcing of the Parklea Correctional Centre. The PSA insisted on the applicability of the New South Wales Lotteries' model because it represented a current standard for the privatisation or outsourcing of aspects of the public sector and was directly relevant to the present outsourcing context. 24 There is, ultimately, some merit in both propositions. 25 It would seem that the New South Wales Lotteries' package does, broadly speaking, represent the modern approach to the provision of benefits for employees affected by the transfer, by whatever means, of public facilities to private enterprise. 26 However, the Department has made good its proposition that some departure from that package would be appropriate in the present case because the Parklea contracting out model places greater emphasis on the retention of employees with the Department by an employment guarantee (with a reasonable prospect of placing officers at a nearby Correctional Centre) or resolves the employment of correctional officers by voluntary redundancy. In contrast, under the New South Wales Lotteries' privatisation, employees who elected to remain in the public sector will be transferred to the New South Wales Department of Arts, Sport and Recreation and managed as excess employees under the relevant Public Sector policy. No voluntary redundancy arrangements are available. 27 In my view, a fair balancing of the competing positions of the parties for the purposes of this conciliation should result in the adoption, so far as is relevant in the light of those differences, of the provisions of the New South Wales Lotteries' package in the arrangements for the outsourcing of the Parklea Correctional Centre. The Commission has, in this regard, also to considered questions of cost. Further, the Direction will deal with reasonable arrangements for those employees retained in service or electing for voluntary redundancy. 28 An example of this approach is the Direction concerning Retention Support Payments. 29 The Commission will direct the Recruitment Support Payment be structured in such a way that the payment will be made to employees from the Parklea Correctional Centre, who are successful in being employed by the successful tenderer, for a period of three years from the commencement of their employment with the new operator, but will result in an essentially cost neutral outcome when compared with the proposals advanced by the Department. The detail of those arrangements are set out in the Direction. 30 As the Direction deals with all outstanding issues between the parties as to the outsourcing of the Parklea Correctional Centre in Commission proceedings, the acceptance of it should result in the cessation of any industrial action regarding those matters. Accordingly, the Direction contains a provision for the cessation of any such industrial action, should it continue to exist. Its acceptance should also lead to the conclusion of the award proceedings as well as those parts of the dispute proceedings concerning the outsourcing of the Parklea Correctional Centre. 31 In all those circumstances, the Commission makes a Direction under s 134(2) of the Act in terms of Annexure 'A' hereto. The Direction is issued to all parties to the proceedings before the Commission and relates to all employees presently employed at the Parklea Correctional Centre or affected by the outsourcing of that Centre. The matters will be listed at 9.30 am Friday 17 July 2009 to formally receive the parties' response to the Direction and consider the disposition of the respective matters. The parties shall communicate, in writing, their response to the Direction by no later than 12 noon Thursday 16 July 2009. _______________________ _______________________ _________________________ 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.