On 13 July 2015, a Full Bench of the Fair Work Commission made the Victorian Local Government Award 2015 (New Award). The New Award came into operation on 20 July 2015.

In addition and also of relevance to the Victorian Local Government sector, the same Full Bench also made the Nurses (ANMF – Victorian Local Government) Award 2015 (Nurses Award) – which commenced operation on 20 July 2015.

Below we provide our thoughts on a couple of strategic issues that arise for councils from the making and implementation of the New Award that are appropriate to comment on at this early stage.

MAJOR IMPACT: THE BOOT

The major impact of these Awards will be in the application of the Better Off Overall Test (BOOT) by the Commission when councils make enterprise agreements and submit them to the Commission for approval.

Any council doing so on or after 20 July 2015 needs to be aware it is the New Award, rather than the Victorian Local Authorities Award 2001 (Old Award), which will be applied by the Commission in assessing whether a new enterprise agreement passes the BOOT. The same applies to the Nurses Award where relevant.

Happily, the New Award is a fraction of the size and complexity of the Old Award. Whilst the Old Award has become as familiar as an old overcoat to the sector, incorporated into most councils’ enterprise agreements through the ‘Part B’ structure that most have followed, its complexities, rigidities and shortcomings are also well-known. The New Award follows the format of modern awards generally, and closely mirrors the Local Government Industry Award 2010, which has applied to those councils (if any) that are trading or financial corporations – although the approach of the Commission has been to treat all Victorian councils as State agencies that are not trading or financial corporations.

In any event, councils should now proceed on the assumption the New Award is the relevant award for local government in Victoria, given that the Commission has also terminated the Old Award which has continued to apply to non-constitutional corporation councils in its transitional capacity.

COVERAGE: STATUS QUO

Firstly, the New Award continues to exclude Chief Executive Officers (CEOs) from its coverage. On the other hand, it continues the status quo under the Old Award regarding Senior Executive Officers, including Senior Officers, irrespective of how much they are paid. That is, Level 11 positions under the New Award include Senior Executive Officers (other than the CEO). Senior Executive Officers include the sub-class of Senior Executive Officers defined as Senior Officers for the purposes of the Local Government Act 1989 (LGA).

The end result of this is, as is currently the case, all Senior Officers (excluding the CEO) have access to the unfair dismissal jurisdiction of the Commission, no matter how much they earn, and even though they will be employed under a maximum term contract pursuant to s 95A of the LGA. Nothing has changed here. For those Councils which have included Senior Officers within the coverage of their enterprise agreements, Senior Officers will have access to unfair dismissal. For those councils which have excluded Senior Officers from enterprise agreement coverage, they will still have access to unfair dismissal because of the New Award’s coverage of them, even though they may earn well in excess of the high income threshold for access to unfair dismissal generally, currently $136,700.

Councils should continue to ensure that where termination of a Senior Officer’s employment is contemplated, a valid reason exists and procedural fairness is applied.

COVERAGE: CHANGE TO UNDERLYING INSTRUMENT FOR NON-ENTERPRISE AGREEMENT COVERED EMPLOYEES

Given that the New Award applies to Senior Executive Officers (excluding the CEO), those councils that exclude Senior Executive Officers and/or Senior Officers from coverage of their enterprise agreements will need to review their current arrangements and ensure that such employees’ terms and conditions of employment comply with the New Award (rather than the Old Award).

In addition, contracts of employment that refer to the Old Award will need to be reviewed and updated. For example, clause 14.7 of the New Award provides for annualised salaries and is similar to the annualised salary provisions contained in clause 22 of the Old Award, but includes some different requirements (such as the need to specify performance pay and performance measurement indicators) and references to the Award provisions that are annualised will need to be updated. Maddocks is updating its award-based Senior Officer and Senior Executive Officer templates, and will advise any councils with a subscription when the new contracts will be available for download.

CONSTITUTIONAL LIMITATIONS

Another issue worth commenting on is the question of the application of the implied limitation on the exercise of Commonwealth power over local government, as expressed in the Fair Work (Commonwealth Powers) Act 2009(Referral Act) and/or the common law principles, the articulation of which is best known in Re AEU [1995] HCA 71. Practically speaking, this implied limitation means that for councils which are not constitutional corporations, a Federal award (such as the New Award or the Nurses Award) cannot limit such councils’ ability to make decisions about the number or identity of employees to be made redundant, as well as other potential limitations.

Interestingly, the Nurses Award expressly defines the ‘Victorian Referral’ with reference to the Referral Act, whereas the New Award does not.

Furthermore, the Nurses Award contains the following provision:

11.5 Clause 11 does not apply in relation to redundancies in relation to which legislative power is not referred to the Commonwealth Parliament by the Victorian Referral.

Since the same restrictions apply to councils in respect of redundancies under the Nurses Award or under the New Award, it is interesting there is no equivalent provision in the New Award, nor any reference to the ‘Victorian Referral’.

Notwithstanding this, unless and until the Referral Act is amended (which is highly likely in the next 12 months, given the Andrews’ Government’s public statements on the issue), it is still open to councils to argue that the Commonwealth has no capacity to deal with a council’s decision to determine the number and identity of persons it wishes to employ – that is, to hear disputes pertaining to redundancies, whether arising out of restructures or otherwise. This is, in our view, certainly the case if a council is not a trading or financial corporation (and therefore the Fair Work Act 2009 only applies to the extent of the Referral Act), but if a council is a trading or financial corporation then the Commission does have power where the council has freely entered into an enterprise agreement dealing with redundancies: see United Firefighters’ Union of Australia v CFA [2015] FCAFC 1. However, given that an award is a unilateral exercise of Commonwealth power, we think that the effect of clause 11 of the New Award is, in its application, subject to the same limitations as are expressed in clause 11.5 of the Nurses Award. That is, the clause cannot apply to redundancies if it involves the Commission dealing with a matter ‘pertaining to the number, identity or appointment’ of council employees. For councils with an enterprise agreement dealing with redundancies, it is of course unlikely the clause will be applicable to any dispute, so the point may well be somewhat theoretical.