Australia: Terminating enterprise agreements to remain competitive and sustainable

IN BRIEF - MURDOCH UNIVERSITY DECISION HAS SIGNIFICANT IMPLICATIONS FOR HIGHER EDUCATION SECTOR

In a recent decision in the Fair Work Commission case Murdoch University [2017] FWCA 4472, Murdoch University successfully argued that its enterprise agreement covering 3,558 employees should be terminated because it inhibited the financial and operational performance of the university.

FAIR WORK COMMISSION HEARS EVIDENCE OF MURDOCH UNIVERSITY'S POOR FINANCIAL POSITION

The Murdoch University Enterprise Agreement 2014 (Agreement) covered approximately 1,661 academic staff and 1897 professional staff. Of those employees, 1091 employees were permanent, 2059 were casual and 408 fixed term. The Agreement was lengthy and prescriptive, containing 110 clauses, 6 schedules and was 188 pages long.

Prior to and subsequent to the nominal expiry of the Agreement on 30 June 2016, the university had been engaged in extensive bargaining with three unions, including the National Tertiary Education Union (NTEU), for a replacement agreement. The parties held 23 bargaining meetings, but had effectively reached an impasse.

After making various other applications in the Fair Work Commission to facilitate the bargaining process, the university lodged an application under section 225 of the Fair Work Act 2009 (Cth) to terminate the Agreement. The NTEU resisted the application.

Evidence relied upon by the university highlighted that the last 10 years have seen Australian universities experience many stressors. For example:

  • funding has been reduced
  • student demands and expectations have changed
  • technology has rapidly evolved
  • student expectations and university operating models have changed
  • industry demands have become greater, and
  • there are unprecedented levels of national and international competition for the higher education market

Detailed evidence was also given of the university's poor financial position. While the NTEU claimed that this was a consequence of poor management, Murdoch linked its increasingly dire financial situation back to provisions in the Agreement which it said increased costs and reduced flexibility.

MURDOCH UNIVERSITY HIGHLIGHTS PROBLEMATIC CLAUSES IN AGREEMENT

Murdoch submitted that to meet its aims and objectives and return to surplus on a long-term sustainable basis it needed to: reshape its workforce, alter staff behaviour, control staff costs, reduce bureaucracy and improve workplace culture.

The university took issue with 24 of the Agreement's 110 clauses in a range of areas. Murdoch's overall view was that:

  • if it is to reshape its workforce, the Agreement's clauses dealing with consultation, grievances, disputes and redundancy are likely to hinder its aims and objectives
  • if it is to alter the behaviour of its workforce, the Agreement's clauses dealing with misconduct and unsatisfactory performance are likely to impede its aims and objectives, and
  • if it is to effectively control staff numbers then various clauses relating to staffing numbers and fixed-term contracts would obstruct its aims and objectives

Murdoch argued that terminating the Agreement containing the problematic clauses would improve workforce flexibility and make the university more agile. If Murdoch was able to reform and effectively alter its business model then it was confident revenue would increase.

FAIR WORK COMMISSION ACCEPTS THAT AGREEMENT'S PROBLEMATIC CLAUSES CONTRIBUTED TO UNIVERSITY'S POOR FINANCIAL POSITION

After a three week hearing in the Fair Work Commission, which included 50 witnesses, Commissioner Williams accepted the university's submissions and terminated the enterprise agreement. The Commissioner said (at [423]):

It is entirely appropriate that a university in a poor financial situation look into all aspects of its business for improvement. There is no reason why the employment arrangements, particularly when these were negotiated some years ago, should not now be reviewed as part of striving for improvement.

The Commissioner accepted that the constraints and limitations the Agreement imposed on Murdoch had contributed to the university's poor financial circumstances, and that removing a number of "overly prescriptive and unwieldy" clauses would assist the university to return to surplus.

The university gave undertakings to preserve certain financial entitlements of employees for at least six months after the Agreement was terminated, providing a bridging arrangement to the negotiation of a new agreement.

IMPLICATIONS OF MURDOCH DECISION FOR EMPLOYERS AND HIGHER EDUCATION SECTOR

A number of important implications arise from the Murdoch decision:

  • Although a drastic step, employers are finding creative ways of dealing with unsustainable enterprise bargaining demands from unions as an alternative to accepting inflexible terms in enterprise agreements.
  • Termination of an enterprise agreement does not stop employees and unions bargaining for a replacement enterprise agreement. However, if a new enterprise agreement cannot be negotiated, the terms and conditions of employees will be the minimum safety net contained in modern awards. In the higher education sector these are the Higher Education Industry Academic Staff Award 2010 and the Higher Education Industry General Staff Award 2010.
  • The termination of the Murdoch University Agreement will undoubtedly influence union negotiations at other institutions in the higher education sector, particularly in the lead up to 30 June 2018 when a number of enterprise agreements with similar problematic clauses nominally expire.
Paul O'Halloran
Workplace relations
Colin Biggers & Paisley

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