Industrial Relations Commission New South Wales Medium Neutral Citation: Health Services Union NSW and Central Coast Local Health District re Regrade Policy [2013] NSWIRComm 44 Hearing dates: 27 May 2013 Decision date: 12 June 2013 Jurisdiction: Industrial Relations Commission Before: Harrison DP Decision: Pursuant to section 136(1)(d) of the Industrial Relations Act 1996 I Order that the Central Coast Local Health District amend its Grading Policy by deleting paragraph 5.3 and inserting in lieu thereof the following: 5.3 Displacement as a result of Restructure or Position Grading If the application for position grading or restructure is approved, the position must be filled in line with normal recruitment requirements. If there is a current incumbent who is affected by the application, the incumbent will be appointed directly if the incumbent meets the essential criteria of the regraded position and the regraded position is within one grade of the original grading of the position or if the salary difference between the commencing salary of the regraded position is within 5% of their current salary rate. For Health Manager positions, incumbents may be directly appointed to the regraded position if their current salary rate is within 5% of the minimum salary band of the regraded position. Where the new grading is greater than 5% of the incumbent's current salary the position will be advertised in accordance with current recruitment requirements. Catchwords: Industrial dispute pursuant to s130 - Salary Regrade Policy - interaction with Managing Excess Employees Policy - exclusion of 5% salary matching rule from Regrade Policy. Exclusion not required by Policy - not permitted by managerial prerogative. Proposed policy creates unfairness with potential to limit productivity and efficiency - Managerial prerogative limited to operational issues of productivity and efficiency - no warrant to treat employees unfairly. Application for order amending policy to core undertakings upheld - Orders made. Legislation Cited: Industrial Relations Act 1996 Cases Cited: Health Services Union and Ambulance Service of New South Wales re Changes to Demand Protocol [2008] NSWIRComm 1027 Category: Principal judgment Parties: Health Services Union NSW Central Coast Local Health District Representation: Mr J Murphy of counsel (Applicant) Mr T Saunders of counsel (Respondent) Sparke Helmore Lawyers (Respondent) File Number(s): IRC 1164 of 2012 DECISION 1This matter arises pursuant to a notification in accordance with s130 of the Industrial Relations Act 1996 ("the Act") by the Health Services Union NSW (HSU). 2The matter was subject to conciliation before Commissioner Stanton who issued a Certificate of Attempted Conciliation on 18 February 2013 and made directions to bring the matter to Hearing. 3Mr Murphy of counsel appeared for the HSU and brought evidence from Mr R Hull, an Officer of the HSU since 1999. Mr Saunders of counsel appeared for the Central Coast Local Health District (CCLHD) (the Respondent) and brought evidence from Mr Ian Arnold, Workforce Operations Manager. 4The dispute concerns the revision of the Respondent's grading policy with effect from 22 October 2012 ("the new policy") (exhibit 8 at attach. IAA). 5The objection of the HSU is that the new policy does not provide for what is described as a 5% salary matching provision for appointment of an incumbent in the event a position is regraded. 6Mr Arnold in his evidence (exhibit 8) describes the 5% salary matching provision applicable prior to introduction of the new policy, deposing (para 13): 13. Both the Former NSCCAHS Grading Policy and the Former CCLHD Grading Policy contained respectively at clause 5.3 the following clause: "If the application for position grading or restructure is approved, the position must be filled in line with normal recruitment requirements. If there is a current incumbent who is affected by the application, the incumbent will be appointed directly if the incumbent meets the essential criteria of the regraded position and if the salary difference between the commencing salary of the regraded position is within 5% of their current salary rate. For Health Manager positions, incumbents may be directly appointed to the regraded position if their current salary rate is within 5% of the minimum salary of the applicable salary band of the regraded position. Where new grading is greater than 5% of the incumbent's current salary the position will be advertised in accordance with current recruitment requirements." 7The HSU seeks reinstatement of the salary matching provision by Award, Order or Direction, being the form of remedy available pursuant to s136 of the Act. 8The practical effect of this provision is that when a position is subject to regrading and the increase in salary is 5% or less the incumbent employee remains in that position. 9Where the regrading produces an increase in excess of 5% the position becomes open and subject to advertisement in accordance with current recruitment processes. 10Current recruitment requirements include operation of the New South Wales Government Policy "Managing Excess Staff of the NSW Health Service" ("MES Policy") and associated Procedures (exhibit 8 at attach. IAE), 11The relevant provisions of the MES Policy and associated Procedures are: These procedures explain how excess staff members are managed in the NSW Health Service. This policy directive and attached procedures is intended to: (a) convey to managers the steps and approach that they are required to follow when considering whether staff members are excess and when any such staff members have been declared excess; and (b) provide information and guidance to excess staff members as to the employer's current policy and intended approach to managing them in relation to redeployment and redundancy. 1.2 Key definitions Affected Staff: are staff members whose positions have been deleted, altered or relocated as a result of organisational change and who will become excess if they are not placed in a position within the new structure. ... ... Excess Staff: means members of staff of the NSW Health Service who are advised in writing that they no longer have a substantive position in the Division of the NSW Health Service in which they are employed and where no suitable vacant permanent or temporary positions are available. Once an excess staff member is appointed to a permanent position, that staff member is no longer considered excess. ... ... Suitable position: is a position where the excess staff member can meet the selection criteria for the position, or is likely to perform adequately in the position in a reasonable period of time, given access to appropriate training and support, and the position is of equivalent salary to the excess staff member's former substantive position (or lower, if the staff member consents); and the position is located within reasonable commuting distance, or at any other location agreed to by the excess staff member. ... ... 4. DECLARING A STAFF MEMBER EXCESS During organisational change there are often affected staff members whose positions have been deleted, but who may yet be placed within the new structure. Organisations are to inform those staff members in writing that they are affected, and that the staff member will be granted priority access to suitable vacancies across NSW Health, provided that: * excess staff will have priority over affected staff * affected staff will have priority within their current Health service over other affected staff from other Health Services. Affected staff with priority status who wish to be considered for vacancies in Health Services other than their own will be expected to be actively engaged in identifying those opportunities. Those affected staff members are not to be declared excess until all suitable vacant positions within the new structure have been filled. Organisations must ensure that all placement processes associated with the organisational change, or the relevant phase of the organisational change, are completed before any residual staff members are declared excess. ... ... 4.4 Notice of forced redundancy Upon declaring a staff member excess, the employer must also provide the staff member with written notice of the intention to make the staff member forcibly redundant if: (a) the excess staff member refuses the offer of voluntary redundancy; and (b) the excess staff member is not redeployed by the conclusion of the three month retention period. 12The relevant provisions of the Recruitment and Selection of Staff Policy Directive are: 2.3 Action prior to advertising Prior to advertising vacancies, the following actions must take place, where applicable: 2.3.1 Redeployment Any decision to redeploy an injured or displaced / excess staff member to a vacancy must be based on a fair and unbiased assessment of the candidate's individual circumstances and suitability for the position. Therefore, it is recommended that an assessment committee be established to interview the candidate(s). Any decision in relation to the redeployment of a staff member must be appropriately documented. ... .... Displaced / excess staff In accordance with NSW Government and NSW Health policy, the NSW public health system must take any reasonable steps to assist displaced / excess staff to be redeployed into meaningful employment as soon as possible. The current NSW Health policy on managing displaced staff outlines the processes for this, including any provisions for priority of employment. 13The relevant provisions of the MES Procedures are: 6.1 Scope of the retention period The retention period commences from the date on which the voluntary redundancy offer is declined by an excess staff member, or the voluntary redundancy offer closes without being accepted by an excess staff member. The retention period runs for three calendar months. In exceptional circumstances only, an employer may seek approval from the Director-General to extend the retention period. ... ... 6.2 Redeployment within the retention period The purpose of the retention period is to allow excess staff members to pursue redeployment to a permanent position in the NSW Health Service. Excess staff members may be placed in any suitable vacancy without advertising. Section 116C of the Health Services Act 1997 is the mechanism by which excess staff members may be redeployed. During the retention period, excess staff members are to be provided with priority access to redeployment opportunities across the NSW Health Service. Where a potentially suitable position match is identified, excess staff members are entitled to priority assessment for vacancies before any other applicants. Where two or more excess staff member apply for the same vacant position, selection is based on merit between the excess staff members. ... ... 6.3.3 Salary matching As a general principle, excess staff members are to be matched to positions of equivalent salary. Equivalent salary is within 5% of the staff member's existing salary. The maximum salary in the award classification salary range of the matched position must be within 5% of the maximum salary of the award classification salary range of the excess staff member's former substantive position. This provision must not be used to circumvent the principles of merit selection or to effect indiscriminate promotions within a staff member's award. [Emphasis added] 14I note that clause 4 of the MES Procedures affords excess staff a priority to appointment and at clause 6.3.3 the benefit of the 5% salary matching provision. 15The evidence of Mr Arnold is that the new policy allows for an organisational regrade and a personal regrade. An organisational regrade is broadly understood to be one initiated by management and a personal regrade is one initiated by the employee. 16A personal regrade is limited to circumstances where an Award provides for a regrade process which may include provision to move through an incremental scale. 17Appendix 2 to the new policy (exhibit 8 at attach IAA) identifies 23 Awards, said to have grading committee provisions and award personal regrade/progression provisions. 18Employees covered by these Awards have the capacity to be successful in a regrade process without risking a competitive selection process for the re-evaluated position. Mr Hull's evidence challenges the inclusion of three of those awards in appendix 2, however, this is not a material consideration to the issue to be determined here in respect to the inclusion/exclusion of the 5% flexibility rate in the policy as those Awards, whether including the three challenged or not, do not cover all employees. 19Employees covered by other industrial instruments who form a view that they are being required to perform work of a value greater than their current rate of pay may progress a claim through the disputes procedure. 20Success in such a claim would, on Mr Arnold's evidence, result in the position becoming open with preferential rights to appointment by an excess employee. 21Mr Arnold acknowledged that a proper construction of the policies is that an excess employee would have the advantage of a 5% salary matching latitude for placement in that position but the incumbent of a position reviewed would not. 22Mr Saunders tendered flow chart diagrams (exhibit 9) to demonstrate the decision process for regrading of positions which he submitted revealed: * Personal regrade: No change for a personal regrade as defined by award process * Organisational Regrade: The introduction of the priority of excess employees over affected employees as provided for in the MES policy. 23Mr Saunders submitted that this application by the HSU is founded upon a misunderstanding of the policy and how it will operate. This submission is supported by the evidence of Mr Arnold that the new policy and the MES policy ("the policies") will not be applied to the detriment of employees who will be treated fairly. 24Mr Arnold's evidence is put genuinely and in good faith, however, is founded upon an optimism and good intention that is not found in the policy. 25In any event, inclusion of the 5% salary matching provision in the new policy is not inconsistent with the good intentions deposed by Mr Arnold and removes any question of misunderstanding or uncertainty. 26Mr Saunders put that the policies read together defeated the 5% salary matching rule for the incumbent. 27Mr Murphy submitted that to read the policies in the way contended by the Respondent is both wrong and unfair. 28Mr Murphy submitted that the Respondent is the NSW Director General of Health and that the CCHLD holds no warrant to treat its employees differently from all other employees of the NSW Director General of Health in other districts. 29In this submission Mr Murphy relied upon Mr Hull's evidence that this is the only Area Health District to apply the policies to exclude the 5% salary matching flexibility to the employee in a position subject to organisational regrade. 30A newsletter was issued by the HSU (exhibit 6) seeking comments from members on a Draft Grading and Regrading Policy promulgated by the Western Sydney Local Health District which includes the term: Where a position with a substantive occupant is regraded at a higher level A regraded position must be advertised if it is considered a promotion. A regrading is considered a promotion when it results in: * An immediate salary increase of over five percent (5%) of the employee's current salary and / or * An increase of two (2) grades or more. Where a substantive occupant competes for the position at the new grade, normal recruitment processes apply. Should the substantive occupant not obtain the position, normal redeployment processes occurs and salary maintenance provisions apply. Where the regraded position results in a higher level with a salary increase of less than 5% and the substantive occupant is performing satisfactorily in the position, the substantive occupant will remain in the newly regraded position and receive the corresponding salary increase. For Health Manager positions' the substantive occupant may be directly appointed to the regraded position if their current salary is within 5% of the minimum salary of the applicable salary band of the regraded position. An Award based personal regrading or personal regrading does not require advertising. 31Mr Hull's evidence is that: "...the differences in applying the Managing Excess Staff Policy rather than the previous Regrade Policy would: * * Place the staff member at risk of losing their position; * Place the staff member at risk of losing their employment; * Place the staff member at risk of retaining their current rate of pay; * Place the staff member at risk of being redeployed to another workplace further away from their home 32Where an excess employee exists the MES Policy will result in the appointment of that person to the position and displacement of the incumbent, that is the successful applicant for a regrade. 33The anomaly is that in matching an excess employee so defined the excess employee has the benefit of the 5% salary matching provision set out in clause 6.3.3 above, the incumbent does not. 34Where an excess employee is put in the position by operation of the MES Policy, the displaced incumbent faces the prospect of moving to the status of affected employee, then excess employee and after three months without placement, forced redundancy. 35This sequence of events leads to the probability that a willing and co-operative employee who, at the direction of management or application of endorsed initiative, grows in the job and seeks justifiable salary recognition, ends up redundant. 36While it might be said the probability is low, the possibility cannot be eliminated. 37This is a wholly unsatisfactory set of circumstances which not only offends all notions of industrial justice and fairness, is contrary to the objects of the Act which state in section 3: 3 Objects The objects of this Act are as follows: (a) to provide a framework for the conduct of industrial relations that is fair and just, (b) to promote efficiency and productivity in the economy of the State, ... ... (f) to prevent and eliminate discrimination in the workplace and in particular to ensure equal remuneration for men and women doing work of equal or comparable value, ... ... (h) to encourage and facilitate co-operative workplace reform and equitable, innovative and productive workplace relations. 38Mr Murphy put that these circumstances would act as a disincentive for employees to seek a regrade or to contribute initiative to the organisation as the result could be retrenchment. 39Mr Arnold's evidence is that he has not noticed a reduction in applications for organisational regrades, which he deposed continue at unchanged levels month on month. 40Mr Arnold was not pressed to distinguish between those organisational regrades initiated by management compared to those initiated by individuals. The level of regrade applications may be no more than an indication of the dynamics of the organisation and industry and is of no assistance in determining this matter. 41Mr Arnold accepted that where employees chose not to apply for a regrade for fear of losing their position, that would not be seen. 42Mr Hull's evidence is that in his experience most applications for regrade are submitted by individuals in an attempt to have additional duties and responsibilities recognised, not as a consequence of organisational change. 43Mr Arnold's evidence is that the MES Policy does not compel the removal of the 5% flexibility/salary matching rule from the CCHLD's grading policy, explaining that the CCHLD was obliged to follow the MES Policy. Mr Arnold confirmed that, as the new policy and the MES Policy operated in advancing the placement of a person in a vacant position, the affected and excess employee would have the benefit of the 5% latitude in salary matching, but the incumbent employee would not. 44In cross examination Mr Arnold conceded that application of the 5% salary matching rule in the Regrade Policy had not created any administrative or management problems which need to be addressed (TR 27/5/13 p60) . 45Mr Saunders submitted that the removal of the 5% salary matching provision from the new policy arises from the need to comply with the MES Policy Directive (exhibit 8 at attach IAE) and the Recruitment and Selection of Staff in the NSW Health Service Policy Directive (exhibit 8 at attach IAF) and as a matter of management prerogative. 46Mr Saunders relied upon a decision of Commissioner Stanton in Health Services Union and Ambulance Service of New South Wales re Changes to Demand Protocol [2008] NSWIRComm 1027 of 12 February 2008 in which a discussion of the jurisprudence of managerial prerogative is found. 47Mr Murphy put that reliance on the decision above is misdirected as it dealt with managerial prerogative in respect to operational efficiency, not fairness and equity between employees. 48 Mr Saunders submitted that no unfairness arising from removal of the 5% salary matching rule had been demonstrated and that the Commission should not intercede unless or until such unfairness is manifest. 49I do not accept this submission. The real potential unfairness should, as a matter of principle, be avoided not allowed to occur before it is cured. 50The arguments advanced in respect to managerial prerogative are misplaced. 51There is no managerial prerogative to permit management to treat employees unfairly or in an improperly discriminative manner. Indeed the vast body of workplace law is directed against management practices which are unfair, harsh or unjust. 52Mr Murphy submitted that the policies do not direct the CCHLD to remove the 5% salary matching provision and that the argument in respect to managerial prerogative is misplaced as the matters referred to dealt with a question of operational efficiency not industrial fairness. 53For the reasons discussed above I find in favour of the arguments advanced by the HSU. 54The consideration of the "new policy" proposed by the Central Coast Local Health District is grossly unfair and holds strong potential to act as an impediment to co-operation and productivity in the workplace as employees withhold discretionary effort for fear it would lead to a regrade and redundancy. 55The remedy sought by the HSU is an appropriate cure and is properly effected by order pursuant to s 136(1)(d). 56Orders are made herewith. ORDERS (1)Pursuant to section 136(1)(d) of the Industrial Relations Act 1996 I Order that the Central Coast Local Health District amend its Grading Policy by deleting paragraph 5.3 and inserting in lieu thereof the following: 5.3 Displacement as a result of Restructure or Position Grading If the application for position grading or restructure is approved, the position must be filled in line with normal recruitment requirements. If there is a current incumbent who is affected by the application, the incumbent will be appointed directly if the incumbent meets the essential criteria of the regraded position and the regraded position is within one grade of the original grading of the position or if the salary difference between the commencing salary of the regraded position is within 5% of their current salary rate. For Health Manager positions, incumbents may be directly appointed to the regraded position if their current salary rate is within 5% of the minimum salary band of the regraded position. Where the new grading is greater than 5% of the incumbent's current salary the position will be advertised in accordance with current recruitment requirements. I so Order. R W Harrison 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. Decision last updated: 12 June 2013