Significant reforms in services such as kindergarten and aged care at the Victorian and Commonwealth levels of government respectively are driving a number of service reviews across regional and metropolitan Councils.

We have been advising Councils at all stages of these reviews, starting with the planning stage and then working through the myriad of complications that may arise during the consultation, redeployment and redundancy phases.

In this article, we outline the best practices for a considered and consultative service review process.

Consideration of the proposal and its industrial implications

As a first step before finalising and presenting a recommended proposal to Council, we recommend that officers consider whether the proposal involves:

• a transfer of business – that is, a direct arrangement between Council and a new service provider for the continuation of the service;
• a complete withdrawal from the relevant service area – for example, ending or not renewing a Commonwealth contract in respect of the provision of aged care services; or
• some other alternative proposal – such as a partial withdrawal of services, or concurrently running a new service while transitioning out the existing services.

Each of the above scenarios will have a different impact on a Council’s obligations under its Enterprise Agreement. Considering the industrial implications of the proposal at the outset will mitigate the risk of a challenge to the process or decision proposed to be taken by Council. Not considering these issues can lead to industrial unrest, disengagement, reputational damage, and community backlash, among others. Conversely, running a good process can lead to increased trust by employees (and their representatives), and ultimately an acceptance of the decision (even if it is not necessarily the option preferred by workers and their representatives).

Transfer of business

If the proposal will involve a transfer of business, there are a range of matters to consider. These will include:

• the impact of Council’s Enterprise Agreement transferring to the new service provider in respect of the transferring work and employees, and whether orders can (and should) be sought from the Fair Work Commission to change that outcome and if so, by whom;

• whether Council has obligations in its Enterprise Agreement to ensure the new provider recognises prior periods of service, makes offers of employment in a specific form and/or it holds ongoing redundancy liability;

• whether Council will require offers to potential transferring employees to be on 'terms and conditions substantially similar to, and, considered on an overall basis, no less favourable’ than their current terms of employment with Council – and how that may impact Council’s obligation to pay redundancy or severance entitlements;

• the transfer of ‘contingent’ entitlements such as personal leave and long service leave;

• whether Council’s Enterprise Agreement deals with ‘transmission of business’ as opposed to ‘transfer of business’, with the consequence that the clause may be engaged notwithstanding that the hallmarks of ‘transfer of business’ (such as a connection between Council and the new provider) under the Fair Work Act 2009 are not present;

• whether Council will pay out or transfer accruals for annual leave, redundancy pay and long service leave.

Consultation

Consultation obligations are contained in Council Enterprise Agreements, as well as in the Local Government Act 2020. Councils, and specifically the CEO (usually through their delegates), must always consult with employees before a final decision is made and before that decision is implemented. Generally speaking, if Council complies with its consultation obligations under the Enterprise Agreement, it will have also discharged its obligation under the Local Government Act 2020.

When considering how to consult, Councils should be guided by the Fair Work Commission’s (and its predecessors’) understanding of what constitutes genuine consultation, namely:

Consultation is providing the individual, or other relevant persons, with a bona fide opportunity to influence the decision maker… Consultation is not joint decision making or even a negative or frustrating barrier to the prerogative of management to make decisions.^[1]

In practical terms, this will mean the following steps should be taken:

• Council will need to hold several meetings with employees and their representatives to inform them of the proposed change, answer questions and receive feedback. For example, Council may consider holding:
  • small team meetings;
  • a larger, town hall type of meeting; and
  • Q&A sessions.

• Information should be provided verbally and in writing;

• Information should be consistent and written answers to individual questions shared with all staff;

• Council must give employees a reasonable period of time to consider the proposed change and provide feedback and/or alternative proposals; and

• Council must genuinely consider feedback and any alternative proposals with an open mind. If an alternative proposal is not feasible, Council must explain why and should explain this to all staff, not just the relevant individual. Most importantly, nothing must be said or done to suggest that Council has already decided to implement the proposal before the consultation process has ended. Carelessly worded internal emails have brought the genuineness of a number of consultation processes undone.

Further information about what consultation requires is set out in our article ‘Clarification of what consultation requires’, published 2 March, 2023.

Redeployment and termination of employment

Although all Enterprise Agreements effectively mandate participation in the redeployment process, it is worth considering allowing staff to ‘opt in’ to (or ‘out of’) the redeployment process. Often a Council will not have redeployment positions available for all affected staff and therefore it makes sense for those employees who wish to leave early to skip this process – but this must be at their preference. Council is not required to accept those preferences but should be guided by them.

Redundancy entitlements will be very specific to individual Councils and not all circumstances may be expressly addressed. There may be situations where, in the absence of clear direction in the particular Enterprise Agreement, Council may need to determine a reasonable and defensible method of calculating redundancy pay, such as where employees have recently moved from full-time to part-time hours or where an employee’s ordinary hours fluctuate from week to week.

If a transfer of business is occurring, Council should consider the interaction between the redundancy clause and the transfer of business clause, for example:

• What are Council’s obligations with respect to transferring employees? Do they receive a redundancy package as well as a job with the new provider?
• Is Council obliged to pay redundancy pay to employees who are offered but do not accept a suitable offer of employment with a new service provider?

Depending on the circumstances of their employment, specific groups of employees such as casuals and fixed term/maximum term employees may also be entitled to a redundancy package or redeployment. If they are impacted by the change, senior staff may be excluded from the Enterprise Agreement or at least the redundancy provisions contained in this instrument such that their entitlements are governed by their contract of employment and the Fair Work Act 2009.

Key takeaways for Councils

• Before commencing consultation, develop a plan for the proposed change with a full understanding of which Enterprise Agreement clauses will be triggered and what those clauses require

• Determine whether a transfer (or transmission) of business will occur under the proposed change

• Develop a consultation timeline and share information about key dates with employees and their representatives

• Until consultation is complete, all emails, reports, recommendations, and verbal presentations must reflect that what is being considered is a “proposal”, a “preliminary decision”, or a “provisional decision” only – that is, nothing is decided

• Consider redeployment opportunities throughout the organisation and consider allowing employees to opt in or out of the redeployment process
• Understand which employees are entitled to redundancy pay and the source of their entitlement

• Determine a defensible redundancy calculation methodology for unique circumstances, including long term casuals (if they are entitled to redundancy pay) and employees whose hours of work have fluctuated or recently changed