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The floodgates are open…or are they?


The Murdoch University decision and the future of enterprise agreement bargaining in Australia

The Fair Work Commission’s recent decision to terminate the Murdoch University Enterprise Agreement 2014 (the Agreement) has commentators and unions declaring that the floodgates are open, with the Financial Review’s David Marin-Guzman stating:

“The decision opens the way for about 30 universities across the country, many in the middle of bargaining, to remove union controls over management decisions, fixed-term contracts and rules over disciplining staff.” Financial Review, 30 August 2017

The National Tertiary Education Industry Union (NTEU), the Community and Public Sector Union (CPSU) and United Voice (collectively, the Unions) opposed the termination for multiple reasons, including the argument that if Murdoch were successful in terminating their agreement, all other Australian universities would be successful in applications to terminate theirs.  This would presumably leave the universities’ staff out in the proverbial cold, with nothing but the relevant modern Award or a conservative agreement to keep them warm.

While it is tempting to see the Murdoch decision as a watershed moment, this decision and the line of decisions it follows suggests that the floodgates are not open-ended, instead, it is more of a controlled flow.

Background

The Fair Work Act states that once an enterprise agreement is past its nominal expiry date, the employer, an employee or a relevant union can apply to the Fair Work Commission to have it terminated. The Commission must terminate the agreement if they are satisfied it is not contrary to the public interest and the Commission considers it appropriate (taking into account the views and circumstances of all parties).

It is the phrase “not contrary to the public interest” which has been the subject of the employer’s arguments to terminate enterprise agreements in several big-name cases in the recent years: Communication, Electrical, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126 (Aurizon) and AMWU v Griffin Coal Mining Company Pty Ltd [2016] FWCFB 4620 (Griffin Coal).

The instinctive first reaction of many was to assume that terminating an enterprise agreement that provides good pay, conditions and systems of work for employees will naturally be “contrary to the public interest”, because these things work in favour of employee’s interests.  However, in Aurizon, the Full Bench found that there was nothing inherently inconsistent with terminating an enterprise agreement that has passed its nominal expiry date and the public interest.

In Griffin Coal, Griffin successfully argued that the terms of the enterprise agreement were so onerous that, if change did not occur, the company would be run into the ground.  While a cut to pay and conditions was not what the employees wanted, the Commission accepted the argument that the loss of a major enterprise, employer and tax-payer would be contrary to the public interest.  Griffin were successful in terminating the agreement, resulting in the prospect of its workforce being forced back onto the Black Coal Award Mining Industry Award 2010, all of which has the potential to reduce pay rates by up to 43% for its employees.  The unions were unsurprisingly outraged, accusing the Commission of upsetting the status quo in bargaining between employers as employees.

The Murdoch Dispute

The Murdoch Agreement passed its nominal expiry date on 30 June 2016 and a tumultuous bargaining process began in April 2016. Murdoch made the application to terminate the Agreement on 8 December 2016 under s225 of the Act.  No doubt anticipating a Griffin-level fight about the status of Murdoch’s finances and future, both Murdoch and the Unions commissioned experts to produce independent reports on the university’s financial circumstances.

Murdoch’s expert, Martin Langridge of Deloitte, gave evidence that the university and its associated entities had gone from a surplus of $35.9 million in 2013, to deficits of $4.8 million in 2015 and $5.4 million in 2016. Over all, employee costs made up 60% of the total spending.  Mr Langridge reported that if Murdoch failed to take appropriate action to arrest the current trend of income and expenditure, its asset position would continue to deteriorate.

Murdoch argued that terminating the existing Agreement would allow them to reshape their workforce, alter staff behaviour, control staff costs, reduce bureaucracy and improve workplace culture. While the unions argued that the termination would have a negative effect on the WA and national economy, Murdoch went further, saying that terminating the Agreement and allowing it to improve the quality of their offerings to students would improve the human capital of WA.

The Unions raised concerns that the termination and proposed new clauses would limit the academic freedom of staff, with the Agreement defining “misconduct” in a way that did not include imminent or serious threats to the reputation, viability or profitability of the university. In response, Murdoch argued that the Agreement was inflexible and inhibited productivity and its procedural obligations were costly and restricted Murdoch from changing and evolving to overcome its financial restraints and meet new challenges.  Commissioner Williams found there was evidence “that there would be a small positive, but not significant impact for the state and national economies and so small a benefit, but not significant, to the public interest if the Agreement was terminated.”

Conclusion

Despite Commissioner Williams ultimately finding in favour of Murdoch and terminating the agreement, it would be a mistake to think that this decision means other universities currently negotiating agreements, will find the Commission a sympathetic ear.  Murdoch needed to prove not only that they were in serious financial strife, but that it was linked to the cost impact of existing legacy clauses in the Agreement and that financial strife would continue if the Agreement was left in place.

Each case before the Commission is considered on its own merits. So, contrary to David Marin-Guzman’s view that this case opens the floodgates to other universities, it remains a brave man indeed who tries to predict the future of the university workplace. 

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

Murdoch University Enterprise Agreement 2014 [2017] FWCA 4472