What is a “major change” triggering an obligation to consult?

16 November 2018

It is often said that the one constant in life is change. Employers in the health and welfare industry are well aware of that fact of life, given the frequency of regulatory change. One of the consequences of those sorts of changes for employers is that they often result in the need to modify or reshape the skills or qualification mix or working hours of the workforce.

Enterprise agreements must, and all modern awards do, include a consultation term which requires the employer to consult with employees to whom the award/agreement applies about major workplace changes that are likely to have a significant effect on them, which may include termination by reason of redundancy.

A failure to comply with those consultation obligations means that an employer:

  • will not be able to establish that a person’s dismissal was a case of “genuine redundancy” under s389(1)(b) of the Fair Work Act (FW Act) and therefore is at risk of an unfair dismissal claim;
  • may be required to participate in a dispute settlement procedure under the enterprise agreement if this is activated by a union/employees; and/or
  • may be ordered by a Court to pay penalties and/or compensation for breach of an award/agreement (in addition, interim orders may be made including temporarily preventing the employer from implementing any redundancies).

When does the obligation to consult over major workplace change arise?1

The obligation to consult under modern awards is triggered when an employer makes a definite decision to introduce major change to production, operation, structure or technology of the business, and the change is likely to have a significant effect on the employees. Discussions with the employees must then commence as early as practicable. This is reflected in the model consultation clause at Schedule 2.3 of the Fair Work Regulations (Regulations).

Enterprise agreements must include a consultation clause which requires the employer to consult employees about a “major workplace change that is likely to have a significant effect on the employees”. If an agreement does not contain a consultation clause which meets the requirements of the FW Act, the model clause is taken to be a term of the agreement.

As confirmed in a recent Federal Court decision discussed below, the fact that a major change might lead to one or more redundancies does not automatically trigger the obligation to consult.

What does “consult” mean?

If the obligation to consult arises, Award consultation terms typically require the employer to:

  • discuss with the employees affected and their representatives, if any, the introduction of the changes, the effects the changes are likely to have on employees and measures to avert or mitigate those adverse effects;
  • provide employees and their representatives, if any, with all relevant information (excluding confidential information) in writing about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees; and
  • give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.

The model consultation term for enterprise agreements contains the same obligations however employers should ensure they are familiar with all consultation provisions under their applicable enterprise agreement/s, as they can be either narrower or broader than the model term.

Consultation should be meaningful and engaged in before an irreversible decision to terminate has been made.2 It is not merely perfunctory and is about providing a person with “a bona fide opportunity to influence the decision maker.”3

It generally involves giving people a sufficient opportunity to express their views so the views can be taken into account when making a decision. It affords an opportunity for employees and unions to influence decisions, however it does not mean joint decision-making, nor that employees can veto an employer’s decision.

Federal Court decision – ANMF v Bupa Aged Care

The Federal Court recently clarified the scope of the obligation to consult employees regarding major changes in the decision of Australian Nursing and Midwifery Federation v Bupa Aged Care Australia Pty Ltd4.

Bupa Aged Care Australia Pty Ltd (Bupa) employed 3,000 employees at the relevant time. As part of a restructure due to reduced government funding, Bupa sought to replace 53 Care Manager and 25 Clinical Manager positions across its 26 aged care facilities with 55 new positions of Clinical Care Manager. The new Clinical Care Manager position encompassed duties performed by Care Managers and Clinical Managers. Bupa proposed to distribute other duties and administrative duties of Care Managers and Clinical Care Managers to employees in other positions.

The Union sought interlocutory and final orders to stop Bupa from implementing the restructure and also sought a declaration that Bupa had breached s55 of the FW Act by failing to comply with the consultation clause in its enterprise agreement on the basis that the redundancies constituted a major change.

The consultation clause in Bupa’s enterprise agreement substantially reflects the model consultation clause set out in the Regulations. To trigger the obligation to consult, Bupa’s clause requires:

  • a major change; and
  • if there is a major change, that change must be likely to have a significant effect on Bupa’s employees.

The Federal Court affirmed application of the following factors in Port Kembla v CFMEU5 as being relevant to its assessment of whether something is a major change that is likely to have a significant effect:

  • the number of proposed redundancies in relation to the total number of employees;
  • the seniority and importance of the positions;
  • the extent to which those employees work in an integrated or disconnected manner;
  • the consequences for continuing employees; and
  • the number of hours worked by the employees in the context of the business’ hours of, operation.

Bupa gave unchallenged evidence that:

  • all administrative duties of the Care Manager and Clinical Manager positions would be allocated to the Administration Officers and General Manager, so that the new position remains focussed on the residents and not administrative duties;
  • the proposal would have no impact on the residents, their safety and wellbeing, nor the safety and wellbeing of staff, nor would it affect workloads of nurses or carers;
  • benefits of the proposal included removal of overlap, removal of conflicting advice/interactions, returning senior nurses to a care and clinical focus, removing administrative duties to other positions to enable the new position to focus on developing and supervising nurses and carers;
  • there would be no impact on nurses or carers, including no impact on their roles/duties, training required for their roles, hours or location of work, nor reporting lines;
  • “…the only difference will be that a person will occupy the Clinical Care Manager position in lieu of the two previous positions…There will be one person to consult with about care and clinical work, not two”;6
  • Bupa consulted with the Care Managers and Clinical Managers (including by providing information statements and an FAQ page, providing an opportunity for employees to ask for more information or feedback via individual meetings with their manager and by email);7
  • whilst a decision had been made by Bupa to implement change, it remained a proposal and said “I wish to receive the benefit of the views [of] affected employees” during consultation and that “consultation is continuing.”8

The Union advanced the following arguments, but it did not lead any or sufficient evidence about them for the Court to consider:

  • it was a major change in part because it would affect the consultation and supervision functions of the relevant employees and that the redundancies would have possible impact “more broadly”; and
  • the major change was likely to have a significant effect on Bupa’s enterprise because it would be a major change to the composition, operation or size of the workforce, the skills required of employees, and would lead to the elimination or diminution of job opportunities (including reducing opportunities for promotion or tenure) by reducing the number of roles above the level of nurses.

Both the model clause and Bupa’s consultation clause state that a major change is likely to have a significant effect if it results in, for example:

  • termination of employment;
  • major change(s) to the composition, operation or size of the workforce; or
  • diminution of job opportunities (including for promotion or tenure).

The Union’s arguments focussed on the seniority of the positions rather than the number of positions as a portion of Bupa’s overall workforce as demonstrating that the change constituted a “major workplace change”.

Justice O’Callaghan dismissed the Union’s application on the basis that Bupa’s proposed restructure did not amount to a major change within the meaning of the consultation clause in Bupa’s enterprise agreement, and that it was not likely to have a significant effect on Bupa’s employees.

Lessons for employers

As Bupa’s consultation clause substantially reflects the model consultation clause, this decision has implications for many employers in respect of their agreement and award-covered employees.

When proposing to introduce workplace change, employers should carefully consider whether the obligation to consult will be or has been triggered. If it has, it is necessary to strictly comply with those obligations as breaches can lead to an injunction preventing or delaying implementation as well as damages and penalties.

The principles in the case are also relevant to unfair dismissal in that a dismissal might be unfair if an employer cannot demonstrate that a redundancy is a genuine redundancy. Section 389 of the FW Act provides that a dismissal will be a genuine redundancy if, among other things (which includes an obligation to consider reasonable deployment options), an employer has complied with any obligation in an enterprise agreement or modern award to consult.

If a decision to make an employee(s)’ position redundant is not a major workplace change, an employer might not be obliged to consult in order for the redundancy to be genuine (but it will still depend on the terms of the enterprise agreement/award).

However even if an employer has no obligation to consult about a redundancy, a prudent employer will do so because, in addition to seeking to avoid an argument about whether or not the obligation was triggered, it can assist an employer to:

  • meet other obligations (eg to consider redeployment options);
  • make its decision, because employee(s)/Union(s) might have valuable suggestions; and
  • avoid or mitigate the negative effects of redundancy, including on the morale of remaining employees.

If you would like advice or assistance with the introduction of workplace change and/or implementation of redundancies, please contact a member of our Workplace Relations team.

 

1 There is also a separate obligation in modern awards and enterprise agreements to consult about changes to employees’ regular rosters or hours of work which should be noted but is outside the scope of this article.

Construction, Forestry, Mining and Energy Union v Newcastle Wallsend Coal Company (1998) 88 IR 202.

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia vVodafone Network Pty Ltd (unreported, AIRC, Smith C, 14 November 2001) PR911257 at [25].

4 [2017] FCA 1246

Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union (2016) 248 FCR 18.

Australian Nursing and Midwifery Federation v Bupa Aged Care Australia Pty Ltd [2017] FCA 1246 at [13].

7 Ibid at [14].

8 Ibid

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