[29] The outsourcing provision in the First Draft, which was based upon the outsourcing provision in the proposed Enterprise Agreement which Essential Energy put to a vote of employees in May 2016, was as follows:

6.1 OUTSOURCING

(1) Basic Principles

Outsourcing or contracting out will not diminish the working conditions of this Workplace Determination.

(2) Work will only be outsourced or contracted out when it can be demonstrated that:

(a) peak workloads cannot be met by Essential Energy's workforce including reasonable overtime; or

(b) where specific expertise, not available in Essential Energy's workforce, is required. Where recurring work requires such expertise, Essential Energy will make efforts to obtain this expertise by training and/or reorganising its existing workforce. Essential Energy will keep the relevant union(s) informed about such training and reorganisation; or

(c) the use of outsourcing or contracting out the work is commercially the most advantageous option taking into account safety, quality, performance, and cost.

(3) The following circumstances apply when Essential Energy is examining outsourcing or contracting out of work activities:

Phase 1: Testing the Market

(a) When Essential Energy is considering an outsourcing proposal and proposes to test the market through RFI processes or otherwise a consultation committee shall be formed comprising appropriate representation from Essential Energy and the applicable unions. The purpose of the committee will be to serve as a forum for Essential Energy to inform and consult the Unions and their members on the proposal, the reasons for the proposal and the intended process.

(b) During this period and in the consultative committee Essential Energy and the Unions will investigate whether it is viable for an internal proposal to be developed.

(c) The Phase 1 consultation process shall be completed within 28 days of Essential Energy notifying the Unions of its intention to commence consultation.

Phase 2: Go to Market

(a) If after assessing all of the relevant data, Essential Energy makes a decision to proceed to a request for proposal or tender it will notify the Unions and provide them and any employee with the appropriate time (relevant to the nature of the proposal which will be 28 days unless Essential Energy decides otherwise), to respond with suitable proposals in respect of possible alternative arrangements to outsourcing or contracting out.

(b) Assistance will be provided to employees to prepare an EOI or tender, and where necessary external assistance will be engaged at the cost of Essential Energy.

(c) expressions of interest or tenders when advertised shall be timed so as to provide the employees with an opportunity to submit a conforming expression of interest or tender. If an employee generated conforming expression of interest or tender is submitted, it will be evaluated together with external submissions consistent with the tendering and probity procedures of Essential Energy.

(4) When a decision is made by Essential Energy to outsource/contract out work not already outsourced or contracted out, or in a review of existing contracts, Essential Energy will consider a contract to a contractor that demonstrates:

(a) Contractor(s) undertaking the outsourced /contracted out work will have wages and conditions that are no less favourable than that provided for in their relevant industrial instrument.

(b) It has established appropriate industrial relations policies and practices which promote harmonious employee relations and minimise the risk of industrial disputes and that it complies with appropriate safety standards, environmental standards and quality standards to a level commensurate with the standards Essential Energy expects.

(c) If after engagement of a contractor a party to this Workplace Determination provides sufficient evidence that a contractor is not providing its employees with correct statutory entitlements, Essential Energy will use an independent organisation to audit compliance with these entitlements. If the audit confirms that there is a breach of the statutory entitlements of the Contractor's employees, Essential Energy will take appropriate action.

(5) In the event that Essential Energy has determined to outsource or contract out work, affected employees will have access to the full range of options available under all relevant Essential Energy policies which apply at the time. These options will include training and/or retraining.

(6) Either party may refer this process to the Dispute and Grievance Resolution Procedure in this Workplace Determination.

(7) The parties will comply with their obligations under clauses 1.13 and 1.14 of this Workplace Determination prior to enacting the above. Nothing in this clause diminishes the parties' obligations under clauses 1.13 and 1.14.

[30] In response to the above draft provision, Essential Energy and the unions again maintained their respective primary positions but advanced alternative positions which addressed confined aspects of the provision. Essential Energy submitted that clause 6.1(3) could not be included in the determination because it established a requirement to consult with a consultative committee which was inconsistent with the model consultation clause, which contained no such requirement. It also submitted that clause 6.1(7) was either superfluous or inconsistent with the model consultation term. The unions submitted only that clause 6.1(4)(a) should be amended to delete the words “… their relevant industrial instrument” and replace it with the words “… this Workplace Determination”, in order to ensure that the employees of any entity to which work was outsourced would pay to their employees for performing that work the wages and conditions provided for in the determination.

[31] Accordingly, it is necessary for us to determine the contested issues concerning redundancy and outsourcing in order to finalise the workplace determination which the FW Act requires to be made.

Considerations relevant to the disputed issues of redundancy and outsourcing

[32] Section 275 of the FW Act, which we have earlier set out, requires us to take into account a number of specified factors in determining the content of the workplace determination to be made. Discussed below are the matters arising from the evidence and submissions which we consider to be of significance to the determination of the disputed issues of redundancy and outsourcing and relevant to the s.275 factors.

Regulatory framework

[33] Critical to the determination of these outstanding issues is an assessment of the regulatory framework within which Essential Energy operates.

[34] Essential Energy is, as earlier stated, a State-owned corporation. It was constituted under s.7 of the Energy Services Corporations Act 1995 as an energy distributor. Section 8 of that Act identifies the principal objectives of energy distributors established under the Act as follows:

(1) The principal objectives of an energy distributor are as follows:

(a) to be a successful business and, to this end:

(i) to operate at least as efficiently as any comparable businesses,

(ii) to maximise the net worth of the State’s investment in it,

(iii) to exhibit a sense of social responsibility by having regard to the interests of the community in which it operates,

(b) to protect the environment by conducting its operations in compliance with the principles of ecologically sustainable development contained in section 6 (2) of the Protection of the Environment Administration Act 1991,

(c) to exhibit a sense of responsibility towards regional development and decentralisation in the way in which it operates,

(d) to operate efficient, safe and reliable facilities for the distribution of electricity and other forms of energy,

(e) to be an efficient and responsible supplier of electricity and other forms of energy and of services relating to the use and conservation of electricity and other forms of energy,

(f) to be a successful participant in the wholesale and retail markets for electricity and other forms of energy and for services relating to the use and conservation of electricity and other forms of energy.

[35] The objectives in s.8(1) involve a mix of commercial, social and environmental considerations. Section 8(2) provides that each of these principal objectives is of equal importance.

[36] Essential Energy’s electricity distribution function involves it building, augmenting, maintaining and repairing powerlines, power poles, streetlights, distribution substations and zone substations. At the time of the hearing it employed approximately 3,200 employees in total, consisting of those discharging office, management and administration functions, engineers, field trades and non-trades employees, and technical employees providing support to the building and maintenance of the network. Essential Energy’s head office is located at Port Macquarie, but its employees are otherwise located at over 100 depots and locations across regional and rural NSW and parts of Southern Queensland.

[37] The shareholders of Essential Energy are the NSW Treasurer and one other State Minister nominated by the NSW Premier. The two shareholders have the power to appoint and remove the Board of Directors. The Chief Executive Officer is appointed by the Board after consultation with the shareholders, but may be removed by the Governor on the recommendation of the portfolio Minister (the Minister for Energy) at any time for any or no reason. Under the State Owned Corporations Act 1989, the Board is accountable to the shareholders, and Essential Energy is subject to the control and direction of the Minister for Energy and is required to comply with any public sector policy as notified by the Minister. The NSW Treasury’s Financial Distribution Policy for Government Businesses, which applies to Essential Energy, requires Essential Energy to pay an ordinary dividend equal to 70% of net profit after tax.

[38] Essential Energy operates in the National Electricity Market (NEM) under the National Electricity Law, which is given effect in NSW by the National Electricity (New South Wales) Act 1997. Under that legislative scheme, the Australian Energy Regulator (AER) has the function of the economic regulation of the distribution and transmission networks in the NEM and, as part of that function, regulates the amount of revenue distributors such as Essential Energy can recover from their customers. It does so by way of revenue determinations applying to five-year regulatory control periods. The economic theory underlying this regulatory scheme is that, because the distributors are effectively monopolies and face no competition, it is necessary for an external regulator to ensure that they do not charge more than is necessary for the safe and reliable delivery of services. In setting the revenue which distributors may derive from customers, the AER is required to undertake a “building block” approach which takes into account a number of factors including return on assets, forecast operating costs, forecast capital expenditure, depreciation and tax. Critically, operating costs are assessed on the basis of what are efficient costs, and previous reductions in operating costs are taken into account in assessing the future revenue that will be recoverable. Network prices are approved on an annual basis by the AER in line with the current operative determination. An “unders and overs” approach is taken to revenue over the five year period of a determination, so for example where the approved prices for a particular year result in revenue in excess of the revenue cap in the determination, prices must be set the following year on the basis that the excess revenue is returned to customers.

[39] As a regulated distributor Essential Energy is therefore required simultaneously to maximise its commercial returns to the NSW Government, operate within the efficient revenue constraints imposed by the AER, and meet its service and community obligations. The regulatory framework therefore places considerable pressure on Essential Energy to engage in ongoing efficiency improvements.

[40] That pressure has particularly manifested itself in the current 2014-19 regulatory control period. The AER initially made a “placeholder determination” of a transitional nature for the period 1 July 2014 to 30 June 2015. The process for the making of the determination for the whole of the five year period then proceeded. It is not necessary to describe this in detail except to say that the revenue levels contained in the final determination issued by the AER on 30 April 2015 were calculated on the basis of a 30% reduction in operating expenditure compared to Essential Energy’s proposal, which had itself involved significant productivity savings. This reduction was calculated retrospectively to the beginning of the five-year period on 1 July 2014. The allowance for operating expenditure was $1.6 billion, compared to the $2.3 billion in Essential Energy’s final proposal to the AER and the $2.05 billion allowed in the determination made for the previous 2009-14 period. Compared to the previous regulatory control period, there was also a reduction in the allowance for capital expenditure from $3.826 billion to $2.401 billion.

[41] On 31 May 2015, Essential Energy applied to the Australian Competition Tribunal for a merits review of the AER’s determination. On 26 February 2016 the Tribunal issued a decision in which it set aside the AER’s determination and remitted the matter back to the AER to be re-determined in accordance with the Tribunal’s directions. On 24 March 2016 the AER applied for judicial review of the Tribunal’s decision, and this application was heard by the Federal Court in late October 2016. There is no realistic prospect of a final determination for the 2014-2019 period being remade until sometime in 2017 at the earliest.

[42] In the interim Essential Energy is operating under an enforceable undertaking made to the AER which expires on 30 June 2017. Its effect is to allow an increase in network charges of an average of 3.64%. Essential Energy’s management expects that any final determination for the 2014-2019 period, although it may not involve reductions to the allowance for operating expenditure of the size of the determination issued by the AER on 30 April 2015, will still involve significant reductions to operating expenditure compared to the 2009-14 determination and previous Essential Energy proposals.

[43] The regulatory framework is directly relevant to the interests of Essential Energy for the purposes of s.275(c). The requirements upon it to reduce its operating expenditures so that it may comply with the revenue cap imposed by the AER and at the same time render a commercial rate of return to the NSW Government make it necessary that the workplace determination to be made not prevent it from achieving the necessary reduction by reducing the size and cost of its workforce. The control of electricity prices charged to consumers through the proper operation of the NEM and the capacity of Essential Energy to return profits to the NSW Government are also matters which bear upon the public interest under s.275(d), and must be taken into account in the same way. Likewise the regulatory framework makes it imperative that Essential Energy achieve improvements in productivity and is relevant under s.275(e). It is also relevant to the general merits of the case before us under s.275(a).

Redundancy and outsourcing in Essential Energy and its predecessor

[44] The current arrangement whereby Essential Energy is prohibited from implementing involuntary redundancies appears to have had its origin in a memorandum entitled “M1996-05 Managing Displaced Employees” issued by the NSW Department of Premier and Cabinet on 20 February 1996. This memorandum set out a policy for the management of displaced employees - that is, employees whose positions had become redundant – in the NSW public sector. It emphasised the redeployment of such employees, identified circumstances in which voluntary redundancy could be offered, and prohibited involuntary redundancy. The voluntary redundancy payments provided for in the policy, were, in addition to any payment in lieu of notice, severance pay at the rate of two weeks’ pay year of service to a maximum of 26 weeks, with an additional payment of up to eight weeks’ pay for acceptance of voluntary redundancy within two weeks. The policy applied to all the State-owned electricity distributors which existed at that time.

[45] Country Energy, the immediate predecessor to Essential Energy, was constituted on 1 July 2001. It consisted of the electricity distribution network in regional and rural NSW, a significant electricity retail operation and a natural gas network. The majority of Country Energy’s employees were initially covered by the Country Energy Enterprise Award 2001, a consent award made by the Industrial Relations Commission of NSW on 23 September 2003 under the Industrial Relations Act 1996 (NSW). That award contained no provision directly relating to the subject matter of redundancy. However it did contain, in clause 51, a provision concerning salary maintenance which stated:

“Employees whose positions have been identified as being no longer required and who elect to remain with the organisation will be subject to the salary maintenance provisions of Country Energy’s Salary Maintenance Policy from the date of being informed in writing that their position is no longer required.”

[46] The reference to an employee electing to remain with Country Energy is clearly predicated on the NSW Government policy that there be no involuntary redundancies being applicable.

[47] The 2001 Award also contained an outsourcing provision which, in broad terms, required extensive consultation with a formally-constituted Consultative Committee in relation to any proposed outsourcing of work; allowed outsourcing to occur only where there were insufficient internal resources to meet work demands, where the failure to complete the work in a reasonable time would jeopardise public safety or adversely affect system performance, or where it was the most commercially advantageous option; and required any contractor engaged to undertake to comply with industry safety, environmental and quality standards and with all Acts, Awards and agreements affecting the contractor’s employees; and to enter into an enterprise agreement with relevant unions except if the contractor was a sole trader.

[48] Subsequent Country Energy Enterprise Awards made by the NSW Commission in 2004, 2005, 2007 and 2009 contained outsourcing provisions to the same effect as that described in the 2001 Award, except that from the 2005 Award onwards the requirement for contractors to have an enterprise agreement with relevant unions was removed and replaced with a provision to the following effect:

“The Contractor will have in place employee relations practices and policies to ensure sound employee relations and minimize risk of industrial disputation. Country Energy will negotiate and agree with the relevant union to identify those contractors who have sound employee relations policies and practices.”

[49] The salary maintenance provision also remained but evolved over time. The salary maintenance provision in the 2005 Award contained an additional sentence: “The parties agree that Salary Maintenance and Redeployment policies shall not be altered without consultation and the agreement of the Union parties to this Award.” The provision in the 2009 Award (now entitled “Redeployment and Salary Maintenance”) also contained this provision (as subclause (iii)), with subclauses (i) and (ii) providing:

(i) Employees whose positions have been identified as being no longer required or restructured/redesigned to a lesser value and who elect to remain with the organisation will be subject to the provisions of Country Energy’s Redeployment Policy.

(ii) In conjunction with the provisions of the Redeployment Policy employees who have elected to remain with the organisation will also be subject to the provisions of Country Energy’s Salary Maintenance policy from the date of being informed in writing that their position is no longer required.

[50] In 2010 Country Energy’s natural gas network and retail division were sold to private businesses, and the remnant electricity distribution business was rebranded as Essential Energy on 1 March 2011. On 31 October 2011 this Commission approved the Essential Energy Enterprise Agreement 2011 (2011 Agreement), an enterprise agreement made under the FW Act, and noted that the unions were covered by it. 5 The 2011 Agreement contained (in clause 6.1) an outsourcing provision substantially the same as those contained in the previous Country Energy awards, with the major change being that the requirement for contractors which was added in the 2005 Award was removed and replaced with a simple requirement that any contractor “demonstrate it has established appropriate industrial relations policies and practices”. The Redeployment and Salary Maintenance provision of the 2011 Agreement (clause 3.6) largely reflected the equivalent provision in the 2009 Award, except that the applicable redeployment and salary maintenance policies were more specifically identified, and reference was made to those policies “as varied from time to time in accordance with subclause c)” - that is, by consultation and agreement with “the Union parties to this Agreement”.

[51] The 2013 Agreement contained a redeployment and salary maintenance provision (clause 3.6) in essentially the same terms as that in the 2011 Agreement, but also contained a new redundancy provision (clause 3.7). The terms of clauses 3.6 and 3.7 were as follows:

3.6 REDEPLOYMENT AND SALARY MAINTENANCE

a) Employees whose positions have been identified as being no longer required or restructured/redesigned to a lesser value and who elect to remain with the organisation will be subject to the provisions of Essential Energy’s Redeployment Policy (CEC1083) as varied from time to time in accordance with subclause c) of this clause.

b) In conjunction with the provisions of the Redeployment Policy employees who have elected to remain with the organisation will also be subject to the provisions of Essential Energy’s Salary Maintenance Policy (CEC1026) as varied from time to time in accordance with subclause c) of this clause, from the date of being informed in writing that their position is no longer required.

c) The parties agree that Salary Maintenance and Redeployment policies will not be altered without consultation and the agreement of the Union parties to this Agreement.”

3.7 REDUNDANCY

The redundancy policy for the term of this Agreement is the Essential Energy Redundancy Policy (Management of Surplus Employees) dated 20 November 2013.

The application of this policy will be subject to Clause 1.13 (Consultation and Communication) of the Essential Energy Enterprise Agreement.

[52] It was not in dispute that the Redundancy Policy referred to in clause 3.7 above did not permit involuntary redundancies. The policy emphasised redeployment and voluntary redundancy, stating at the outset that “…the Company believes that positions become redundant, people do not become redundant”. To facilitate this, the policy among other things allowed for a “mix and match” process whereby, with Essential Energy’s permission, an employee whose role had become redundant could take the position of another employee who was prepared to accept voluntary redundancy. The redundancy payments provided for in the policy were, in addition to any payment in lieu of notice, two weeks’ pay per year of service, with an additional eight weeks’ payment for early acceptance of voluntary redundancy. There was a cap of 52 weeks’ pay on the total payment inclusive of payments in lieu of notice and for early acceptance.

[53] The outsourcing provision in the 2013 Agreement contained some substantial differences to the 2011 Agreement. It provided:

6.1 OUTSOURCING

6.1.1 Basic Principles

Outsourcing or contracting out will not diminish the working conditions of this Agreement.

6.1.2 Work will only be outsourced or contracted out when it can be demonstrated that:

(a) peak workloads cannot be met by Essential Energy's workforce including reasonable overtime; or

(b) where specific expertise, not available in Essential Energy's workforce, is required. Where recurring work requires such expertise, Essential Energy will make efforts to obtain this expertise by training and/or reorganising its existing workforce. Essential Energy will keep the relevant union(s) informed about such training and reorganisation; or

(c) the use of outsourcing or contracting out the work is commercially the most advantageous option taking into account safety, quality, performance, and cost.

6.1.3 In circumstances where Essential Energy is examining outsourcing or contracting out of work activities:

(a) Contracting Consultation Committee (CCC) shall be formed comprising appropriate representation from Essential Energy and the applicable unions. The purpose of the CCC will be to serve as a forum for Essential Energy to inform and consult the Unions and their members on all contracting and outsourcing proposals;

(b) utilising the CCC - Essential Energy will consult the employees and their union(s) and provide them the appropriate time (relevant to the nature of the proposal) to respond with suitable proposals in respect of possible alternative arrangements to outsourcing or contracting out;

(c) prior to expressions of interest or tenders being called, where employee generated alternatives are received, such alternatives will be considered;

(d) expressions of interest or tenders when advertised shall be timed so as to provide the employees with an opportunity to submit a conforming expression of interest or tender. If an employee generated conforming expression of interest or tender is submitted, it will be evaluated together with external submissions consistent with the tendering and probity procedures of Essential Energy.

6.1.4 When a decision is made by Essential Energy to outsource/contract out work not already outsourced or contracted out, or in a review of existing contracts, Essential Energy will consider a contract to a contractor that demonstrates:

(a) Contractor(s) undertaking the outsourced /contracted out work will have wages and conditions that are no less favourable than that provided for in their relevant industrial instrument.

(b) It has established appropriate industrial relations policies and practices which promote harmonious employee relations and minimise the risk of industrial disputes and that it complies with appropriate safety standards, environmental standards and quality standards to a level commensurate with the standards Essential Energy expects.

(c) If after engagement of a contractor a party to this agreement provides sufficient evidence that a contractor is not providing its employees with correct statutory entitlements, Essential Energy will use an independent organisation to audit compliance with these entitlements. If the audit confirms that there is a breach of the statutory entitlements of the Contractor's employees, Essential Energy will take appropriate action.

[54] In the course of 2015, a dispute arose between Essential Energy and the unions concerning whether clause 3.7 of the 2013 Agreement was to be interpreted as limiting the operation of the prohibition on involuntary redundancy derived from the Essential Energy Redundancy Policy to the period ending on 30 June 2015, when the nominal expiry date of the 2013 Agreement was reached. This dispute was referred to the Commission for resolution pursuant to the dispute resolution procedure in the 2013 Agreement. In a decision issued on 2 November 2015 6 the Commission (Hatcher VP) determined that the operation of the prohibition in clause 3.7 did not end on 30 June 2015 (as contended by Essential Energy) but continued whilesoever the 2013 Agreement had legal effect.

[55] Notwithstanding the operation of this prohibition, Essential Energy has successfully achieved a major reduction in the size of its workforce covered by the 2013 Agreement in recent years, primarily by means of voluntary redundancies. As at 30 June 2012, Essential Energy had 4,288 full time equivalent staff (FTEs) covered by the then-applicable 2011 Agreement. By 30 June 2016 the number had been reduced to 2,869 FTEs. Of the reduction of 1,418 FTEs, there were 995 employees who had accepted voluntary redundancy. These reductions were initially undertaken as part of a process of organisation reform conducted by Networks NSW, which was an organisation established by the NSW Government in 2012 to drive reform and reduce electricity charges in Essential Energy and the other two NSW distributors, Ausgrid and Endeavour Energy. Networks NSW ceased in 2015, but in the same year Essential Energy embarked upon a modernisation of its business known as the Essential Energy Transformation Program. The Transformation Program is intended to place the business on a more sustainable financial basis. Approximately 500 of the reduction in total staff numbers has been the result of the Transformation Program. Essential Energy is currently well ahead of its staff reduction target.

[56] A major feature of the Transformation Program is a move to the greater use of contractors to carry out major functions of Essential Energy. The major outsourcing exercise to date carried out under the Transformation Program has been in relation to meter reading. Essential Energy previously engaged 165 FTEs to perform this function, but this has now been entirely outsourced to a contractor.

[57] Voluntary redundancy has not led to all employees whose roles have become redundant leaving the organisation. At any given time Essential Energy has had a number of employees whose roles have been abolished and who cannot be redeployed into an alternative position but decline to accept voluntary redundancy. They are referred to by the parties as “redeployees”. At 30 June 2016, there were approximately 50-70 redeployees 7. In October 2015 a dispute arose because Essential Energy directed redeployees to either “no longer attend for work, as there is no meaningful work for you to perform”, or complete a four-week career transition program. This direction was contested by the unions as being inconsistent with Essential Energy’s Redundancy Policy (and therefore clause 3.7 of the 2015 Agreement), which required redeployees to be “placed into a meaningful work placement” pending an appropriate permanent position being found for them. The matter was referred to the Commission for determination, and in a decision issued on 24 December 20148 the Commission (Johns C) upheld the unions’ position and ordered Essential Energy to provide the redeployees with meaningful work. Essential Energy has complied with this order, but the evidence is that the work the redeployees have been allocated to perform as a consequence is not work which Essential Energy has a business requirement to be performed. For example, in some cases it has two persons, one of whom is a redeployee, performing tasks which could safely and appropriately be done by one person.

Essential Energy’s current and future financial position

[58] In the 2015 financial year, in which it was not impacted by the AER’s 30 April 2015 determination, Essential Energy made a net profit after tax of $266.3 million. It budgeted for a loss for the 2016 financial year of $77.3 million, with the actual figure for the half-year to 31 December 2015 being a loss of $24.2 million. It is likely that the actual full-year figure for the financial year 2016 will be close to break-even. Essential Energy has projected very significant losses for the 2017 and 2018 financial years before returning to profit in the 2019 financial year. An analysis of past projected and actual profit and loss outcomes by Dr Lynne Chester of the University of Sydney demonstrated that Essential Energy’s projections of its results have been conservative and that its actual outcomes have always been significantly better than the projections. That being the case, there is good reason for scepticism that Essential Energy will actually incur losses of the size projected over the next two financial years. However it remains the position that Essential Energy is not currently profitable and is unlikely to be so for some years.

[59] The current uncertainty about the revenue cap to be determined ultimately by the AER with the likelihood that there will be significant reductions, the obligation for Essential Energy to generate an acceptable financial return for the NSW Government, the need for Essential Energy to meet its service and community objectives (including minimising its contribution to electricity process), and significant and ongoing changes to the electricity market (including changes to customer behaviour and demand and the introduction of contestability into certain aspects of electricity distribution work) means that, from Essential Energy’s perspective, there is a need for it to continue with its Transformation Program, improve productivity and efficiency and reduce labour costs. Essential Energy’s projection is that it needs to achieve a reduction in its underlying operating expenditure of the order of 35% in order to be in a sustainable financial position under future anticipated AER determinations.

[60] Essential Energy intends in that connection to effect further significant reductions in its workforce. Its objective is to reduce its total workforce to around 1600 FTEs by financial year 2019. It has budgeted for redundancy payments to achieve the significant reductions in the workforce it perceives as necessary. It envisages that the reductions will be achieved in substantial degree through the outsourcing of the less-specialised aspects of its work.

The personal and social cost of redundancies in Essential Energy

[61] Redundancies always have significant direct effects on those who lose their jobs, and sometimes have indirect effects upon fellow employees who retain employment and upon local communities. In the case of Essential Energy, the effects are magnified because of the specialist skills of many of the employees involved, the location of Essential Energy’s depots in country towns scattered throughout NSW, and the scale of redundancies that have already occurred and will likely occur in the future. The effects include the following:

Enterprise bargaining 2015-16

[62] As earlier stated, Essential Energy and the unions began bargaining for an enterprise agreement to replace the 2013 Agreement in June 2015. Fifteen bargaining meetings occurred from 23 June 2015 to 3 May 2016 inclusive, and additionally there were a number of conferences facilitated by the Commission (which were conducted by Hamberger SDP). There was a high level of representation on both sides, and in particular Mr Gary Humphreys, the acting Chief Executive Officer of Essential Energy, and Mr Steve Butler, the NSW Branch Secretary of the CEPU, attended a number of the meetings. There were significant concessions made by both sides during the course of the negotiations; for example, Essential Energy eventually did not press a number of claims for significant changes to conditions which it had advanced at the outset, and the unions agreed to accept only one wage increase of 2.5% over the life of the proposed agreement operative on 1 July 2017. No protected industrial action was taken until mid-April 2016, almost ten months after bargaining had commenced.

[63] Although there were a range of issues at play during the negotiations, it is apparent that redundancy and the related issue of outsourcing were the most intractable issues. Both sides had genuine and legitimate interests at stake in this connection. From Essential Energy’s perspective, the commercial imperatives earlier described meant that it was necessary for it to achieve substantial reductions in its operating expenditures, a major proportion of which was labour costs. From the perspective of the unions and their members, the protection of as many jobs as possible through the retention of the protection against involuntary redundancy and restrictions on outsourcing was clearly a fundamental matter. It is not overly surprising that the negotiating parties were unable to reach agreement about this issue.

[64] Notwithstanding this, there was some progress made on these issues. In a letter dated 4 April 2016, Mr Butler advanced a proposal on behalf of the CEPU which included the following elements in relation to the redundancy issue:

[65] In a further letter dated 3 May 2016 Mr Butler on behalf of the CEPU set out a further proposal about a number of matters for response. In relation to outsourcing, the letter stated:

“Regarding Contractors; there was a proposal by the Union to support the Essential Energy clause from the most recent DRAFT agreement, provided that direct reference to the DSP [dispute settlement procedure] is included in the clause and DSP retained the status quo.”

[66] We understand that the draft agreement referred to was one prepared by Essential Energy and dated 4 February 2016. The outsourcing provision in that draft (clause 6.1) was the same as that appearing in the First Draft.

[67] In a letter dated 10 May 2016, Mr Humphreys responded to Mr Butler’s proposal on behalf of Essential Energy. He rejected the main aspects of the proposal, but the letter referred to Essential Energy’s position on a “modern redundancy clause” as including “The application of a cap on redundancies during the nominal term of the Agreement of 800 positions including the right for Essential Energy to utilise involuntary redundancies”. In relation to outsourcing the letter said:

“…I note that we do appear to be close to agreement on this clause however this is contingent on status quo remaining in the dispute resolution procedure. As we do not accept status quo remaining in the dispute resolution procedure we are not agreed on this clause.”

[68] On 18 May 2016 Essential Energy informed employees that it would seek a vote upon its latest proposal for an enterprise agreement. The proposal put a vote contained a redundancy clause and an outsourcing clause which were, in all relevant respects, the same as the respective equivalent provisions in the First Draft which we have earlier set out. 9 The vote occurred over the period 2-9 June 2016. About 87% of employees who voted rejected the proposed agreement.

[69] Essential Energy had, prior to the termination of protected industrial action, made an application pursuant to s.225 of the FW Act to terminate the 2013 Agreement after it had reached its nominal expiry date (on 7 March 2016). However that application did not proceed in light of the termination of protected industrial action and the requirement for the Commission to make a workplace determination.

[70] We consider that Essential Energy and the unions conducted themselves reasonably during the bargaining process and complied with the good faith bargaining requirements contained in s.228(1) of the FW Act.

Redundancy entitlements in other electricity distribution businesses in Australia

[71] The unions sought to demonstrate, by way of an analysis of enterprise agreements applying to other electricity distributors in Australia, the existence of “industry standards” pertaining to redundancy that were consistent with the redundancy provisions they claimed and were inconsistent with Essential Energy’s position.

[72] In NSW itself there are two other distributors, Ausgrid and Endeavour Energy. Unlike Essential Energy, these two businesses are in the process of being partially privatised through the long term lease of assets pursuant to the Electricity Network Assets (Authorised Transactions) Act 2015 (NSW) (ENA Act). Clause 5 of Schedule 4 to the ENA Act contains a prohibition on “forced redundancies” during an “employment guarantee period” of five years, subject to two identified restrictions the meaning of which has been the subject of controversy. The enterprise agreement currently applicable to Ausgrid 10 prohibits involuntary redundancies11, and it appears the current agreement at Endeavour Energy12 does the same. The Ausgrid severance payment scale is based on three weeks’ pay per year of service. The Endeavour Energy scale is (like Essential Energy) based on two weeks’ pay per year of service, but for employees engaged before 27 July 1996 there is an additional week’s pay per year of service for employees with 1-19 years’ service and an additional two weeks’ pay per year of service for employees with 20 or more years’ service.

[73] In respect of distributors in the other States, the enterprise agreement for all the distributors in Queensland and the majority in Victoria do not permit involuntary redundancy. In respect of the other distributors, the agreements may generally be characterised as permitting involuntary redundancy only where redeployment is not possible. In respect of redundancy payments, the large majority have a severance payments scale based on three weeks’ pay per year of service to a maximum of 75 weeks. A number of the agreements also have salary maintenance arrangements applicable to redundant employees who are redeployed.

Redundancy - conclusions

[74] The primary issue in relation to the redundancy provision to be placed in the workplace determination is whether there should be any prohibition or numerical restriction upon the capacity of Essential Energy to make employees involuntarily redundant. The starting-point submission of the unions is that the prohibition currently contained in the 2013 Agreement and its predecessors should be retained, while Essential Energy’s claim is for it to have an entirely free hand in making employees redundant.

[75] As a matter of general principle, we do not consider it is appropriate (except perhaps in particularly exceptional circumstances) to impose upon an employer by way of an arbitrated determination a prohibition of the nature sought by the unions. It is difficult to identify a proper justification for, in effect, requiring an employer to employ more persons than it needs to conduct its normal business functions. That would amount to compelling a business to subsidise employment, which would be in the nature of a social welfare decision appropriate for government and not for an industrial tribunal performing arbitral functions.

[76] There are cases where the Commission may be required to arbitrate a dispute about the staffing levels required to permit a particular work function to be performed safely, efficiently and without imposing an unconscionable work burden upon employees. Such cases are in a different category. The unions here did not advance their case on the basis that a particular aggregate level of staff was required in order to ensure the safe and fair performance of work, although some of its individual witnesses did describe the difficulties which redundancies (which, to date, have been voluntary redundancies) have caused in the performance of work. Rather, its case was that Essential Energy had not demonstrated any case for change from the current position as reflected in the 2013 Agreement, and in particular that voluntary redundancies had achieved significant reductions in the workforce to this point and would continue to do so in the future.

[77] We doubt that, in an arbitration for an industrial action-related workplace determination, either party bears an onus of proof in respect of any change from the position pertaining in the most recent enterprise agreement. Insofar as the Commission has a discretion in setting the terms of a workplace determination, the critical factors bearing upon the exercise of that discretion are the matters required to be taken into account by s.275. The conditions of the existing enterprise agreement are not one of the matters specified in s.275, although it may be accepted that they may be relevant to the “interests of the employers and employees who will be covered by the determination” under s.275(c). To require a party positively to demonstrate “a case for change” from the provisions of the current enterprise agreement would be to assign presumptive primacy to the status quo – a position which does not appear to us to be consistent with the terms of s.275.

[78] In any event, we are satisfied that the prohibition on involuntary redundancy contained in the 2013 Agreement should not appear in the workplace determination to be made by us. We cannot identify any exceptional circumstances which would cause us to depart from the general principle which we have earlier enunciated. Additionally we consider that the regulatory framework which we have earlier described, and Essential Energy’s financial and commercial position, provides powerful reasons why it should have the capacity to adjust the size of its workforce unhindered by the willingness of existing employees to depart. In summary, although the precise outcome to be determined by the AER remains in doubt, it is clear that Essential Energy faces an ongoing requirement to reduce substantially its operating expenditure in order to be able to operate within the revenue cap imposed by the regulatory regime, in circumstances where it is not currently profitable but is nonetheless expected to generate commercial returns for the NSW Government. Essential Energy’s labour costs are the major component of its total operating expenditure and therefore it is unavoidable that the size of the workforce must be diminished in order for reductions in labour costs of the required magnitude to be achieved. In that context, while we have taken into account the legitimate interests of the employees and their unions in preserving employment, that consideration cannot be given decisive weight.

[79] It is correct, as the unions have submitted, that to date voluntary redundancy has been successfully used to achieve substantial reductions in the size of the workforce to the point where Essential Energy is well ahead of its planned reduction trajectory. However we consider for a number of reasons that it is unlikely that voluntary redundancy will continue to supply the job reductions necessary to be achieved. First, it seems to us that the supply of persons who are willing to take a redundancy package and leave voluntarily cannot be inexhaustible, and there was no evidence before us to suggest that there was any substantial number of employees (or indeed any employees) remaining who wished to leave Essential Energy’s employment on acceptable terms. Second, the existence of the current redeployees who are excess to Essential Energy’s workforce requirements but who do not wish to leave their employment and cannot currently be made involuntarily redundant strongly indicates the limitations of a voluntary redundancy-only approach. Third, the fact that a major proportion of future redundancies will occur as a result of outsourcing exercises under which particular sections of the workforce may wholly be rendered redundant makes it unlikely that voluntary redundancies will supply the necessary numbers.

[80] We also consider that a prohibition on involuntary redundancy would act as a perverse disincentive upon Essential Energy to engage any new employees directly and on a permanent basis in the future. If Essential Energy is prohibited from making any new employee once so engaged involuntarily redundant at any time in the future, then it is more likely to engage new personnel on a casual basis or through the agency of a contractor.

[81] There is no avoiding the proposition that the removal of the prohibition on involuntary redundancies will almost certainly lead to greater job losses than there otherwise would have been, and that this will have significant detrimental consequences for individual Essential Energy employees, their families, and the communities in which they live. However we consider this to be an unavoidable consequence of the economic paradigm in which Essential Energy operates. In circumstances where Essential Energy, although government-owned, is required to operate as a business producing commercial rates of return rather than as a social service, and is subject to a regulatory regime which forces reductions in its revenue in order to minimise electricity costs to the consumer, it seems to us that a significant reduction in the size and cost of Essential Energy’s workforce has become inescapable. To maintain a prohibition on involuntary redundancies in those circumstances would simply be a denial of reality.

[82] Therefore the workplace determination which we will make will not prohibit involuntary redundancies. However we consider that there should be a numerical limit upon the number of redundancies during the period until the nominal expiry term of the determination. Our conclusion in that respect does not involve the expression of any view about what the size of Essential Energy’s workforce should ultimately be; rather, it is designed to act as a constraint upon the speed at which redundancies are effected. If Essential Energy is unrestricted as to the pace at which it can reduce its workforce, we are concerned that adequate consultation about redundancies will not be able to occur, opportunities for voluntary redundancy, redeployment and “mix and match” arrangements will not properly be explored, and the capacity of unions to appropriately advise and represent their members in the process may be overwhelmed by the numbers involved. Further, we are concerned about the effect on regional and rural communities and labour markets if too many persons lose their employment with Essential Energy in too short a space of time.

[83] Initially, as reflected in the First Draft, we were attracted to the position advanced by Essential Energy in the enterprise agreement it put to a vote of employees in May 2016. Under that proposal there would have been a limit of 250 employees per year (that is, 500 in total) on the number of employees who could actually be terminated from employment on the basis of redundancy until the nominal expiry date. Essential Energy understandably did not want to be held to this compromise position, but we consider that, in circumstances where (as we have found) the parties conducted themselves reasonably during the bargaining process by, among other things, advancing compromise positions which protected the fundamental elements of their own legitimate interests but also attempted to accommodate the interests of the other side, we are entitled to take account of and assign weight to such compromise proposals. In that context, Essential Energy’s proposal appeared to us to strike a reasonable balance of the respective interests of the parties.

[84] However, in response to the First Draft, the unions persuasively submitted that the limitation proposed was largely illusory. The structure of the redundancy scheme proposed allowed employees to accept an “Early Redundancy Election” once notified that their position was redundant. This would allow them to leave within four weeks and be paid, in addition to a severance payment calculated in accordance with the usual scale, an additional severance payment (proposed to be 20 weeks’ pay). Alternatively, the employee had the option of declining the Early Redundancy Election and commencing a 25 week “Retention Period” in which redeployment was to be sought. If, after the completion of that Retention Period, no alternative position was obtained, then at that point the employee would be made involuntarily redundant and paid severance pay calculated in accordance with the standard scale. It was only in relation to employees terminated at that point that the numerical limitation was proposed to apply. The unions submitted that it was overwhelmingly likely that the large majority of employees notified of redundancy would take the Early Redundancy Election rather than enter into the Retention Period and risk involuntary redundancy six months later. The attraction of the additional severance payment, and the lack of any significant prospect of redeployment because of the size of the workforce reductions being contemplated by Essential Energy, would make the Early Redundancy Election far more attractive than entering into the Retention Period, it was submitted, in which case most persons selected for redundancy would not count towards the numerical limitation.

[85] We accept the unions’ submission in this respect. Accordingly the redundancy clause we propose to include in the workplace determination will contain a numerical limitation upon the number of positions which can be declared redundant, rather than simply upon the number of persons whose employment may be terminated involuntarily for redundancy. Given this is a more restrictive approach, we will increase the limitation to a total of 600 over the period until the nominal expiry date of 30 June 2018 is reached, without any yearly sub-total. This is a number which will allow Essential Energy to make significant progress towards its workforce reduction targets while allowing proper consultation and efforts to maximise any redeployment opportunities to occur. The current redeployees will not be included in that number since their positions have already been declared redundant.

[86] The unions also submitted, in the alternative, that there should at least be a prohibition or some other restriction on involuntary redundancies after the workplace determination reached its nominal term so that there was no “cliff” in terms of job losses. We cannot accept that submission. The parties have agreed that the nominal expiry date of the workplace determination is to be 30 June 2018, and because that is an “agreed term” for the purpose of s.267(2), it must be included in the determination. We do not consider it would be consistent with that agreed term for the Commission to impose discrete new obligations, not applicable prior to the nominal expiry date, to take effect only after the nominal expiry date. That would be antithetical to there being a proper incentive for the parties to bargain for a new enterprise agreement after 30 June 2018 and deprive the nominal expiry date of any real significance. As earlier stated, the numerical limitation we have decided to impose on the number of redundant positions prior to the nominal expiry date is intended to control the pace at which redundancies occur, not to determine what the ultimate size of Essential Energy’s workforce should be. After the nominal expiry date is reached, the in-principle position earlier identified should apply, and parties may enter into bargaining concerning any limitation on redundancies which should be contained in respect of a new enterprise agreement.

[87] The unions’ claim for an enhanced severance payment package, consisting of an uncapped three weeks’ pay per year of service and an early acceptance payment of 34 weeks’ pay, is likewise rejected. The former element of the claim was based on what was said to be the “industry standard” for the electricity distribution industry. We do not consider that this, by itself, could serve as a sufficient justification for such a significant increase to the existing severance pay scale, for in substance it is no more than a claim for comparative wage justice. There was no analysis of the origin or rationale of the redundancy arrangement at the different electricity distributors, including how it came to be that the different distributors in NSW, all of which had their origin in government ownership and control, have ended up with distinctly different arrangements. Nor was there any evidence adduced in relation to Essential Energy that the current and longstanding severance pay scale, which is well in excess of the NES standard provided in s.119(2) of the FW Act, is inadequate in meeting the standard redundancy pay objectives of compensating for the inconvenience and hardship imposed by redundancy in relation to loss of seniority, loss of security of employment and other kinds of losses, the trauma associated with loss of employment due to redundancy, and the loss of non-transferable credits. 13 In those circumstances we consider that current severance pay scale should remain as it is, except that it will be modified (in terms consistent with the Essential Energy amended workplace determination redundancy clause filed on 16 August 2016 earlier set out) to ensure that employees with less than five years’ service receive not less than the NES redundancy pay scale in s.119(2) of the FW Act.

[88] A payment of 20 weeks’ pay to encourage early acceptance of redundancy is, we consider, sufficient for that purpose. A payment of that quantum was contained in Essential Energy’s May 2016 proposed enterprise agreement, and presumably therefore it was an expense which Essential Energy considered it was able to fit within its budget. It reflects an amount which has successfully been used to encourage voluntary redundancies in recent years. It is a significant enhancement to the package, and is payable in addition to the 52 weeks’ cap applicable to the standard redundancy scale. We see no necessity to increase it to 26 weeks, as claimed by the unions. Nor do we consider that it should be reduced to 13 weeks’ pay, as claimed by Essential Energy in its proposed workplace determination, since that would be insufficiently attractive to avoid employees entering the Retention Period for the purpose merely of obtaining a further 26 weeks’ paid employment.

[89] There were four other specific issues concerning the redundancy provision to be included in the workplace determination to be made which require resolution:

(1) whether the existing redeployees should have access to the Early Redundancy Election with its additional severance payment;

(2) whether severance payments should be calculated on the basic rate of pay or should include all-purpose allowances, particularly the Electrical Safety Rules Allowance;

(3) whether salary maintenance for employees who are able to be redeployed to other positions should be maintained; and

(4) whether employees in the Retention Period may be required to take accrued annual and long service leave.

[90] We consider that the existing redeployees (that is, those redeployees as at the date that the workplace determination comes into effect) should have access to the Early Redundancy Election. We reject Essential Energy’s submission that, because these redeployees previously rejected taking voluntary redundancy, they had disqualified themselves from taking the Early Redundancy Election. That choice by the redeployees was made in the context of the current regime under which they could not be made involuntarily redundant, and constituted a rational and legitimate choice by them in that context. Now that Essential Energy will be permitted to make employees involuntarily redundant, we consider that it is fair that the redeployees be permitted to exercise the Early Redundancy Election, and receive the additional severance payment, in that altered context. If they do not exercise that election, we intend that, like other redundant employees, they would enter into the six-month Retention Period and could only be involuntarily retrenched at the end of that period.

[91] We also accept the unions’ submission that all-purpose allowances, including the Electrical Safety Rules Allowance, should be included in a week’s pay for the purpose of the calculation of severance payments. Those allowances form a significant proportion of employees’ normal weekly pay, so that it would be artificial to exclude them from the calculation of severance payments. Their inclusion is also consistent with past practice in respect of voluntary redundancy payments.

[92] We do not accept that, in the context of an arbitrated workplace determination, we should require Essential Energy to continue the previous consensual salary maintenance policy, except that the policy should continue to apply in accordance with its terms to those employees who, as at the date of the commencement of the workplace determination, are already subject to salary maintenance. Due to the size of the anticipated reduction in Essential Energy’s workforce, it will be difficult to find redeployment opportunities for redundant employees. The requirement to maintain salary to a redeployed employee would operate as a disincentive to redeployment in that context, and we consider that the usual principle whereby an employee receives the proper rate of pay for the position which he or she occupies should apply to redeployed employees in the future.

[93] We consider it reasonable that Essential Energy may be able to direct employees to take accrued annual and long service leave during the Retention Period to the point where their leave balances are reduced to four weeks in each case. Employees who have entered the Retention Period are persons whose positions have been abolished and who may not have any useful work to perform. The purpose of the Retention Period is to allow employees to pursue redeployment within Essential Energy, and we do think that the taking of leave would prevent employees from undertaking that task. The requirement is not inconsistent with the FW Act provisions concerning the taking of annual leave 14 or the provisions of the Long Service Leave Act 1955 (NSW) concerning the taking of long service leave.15

[94] The draft redundancy clause contained in the Second Draft generally reflects the conclusion we have reached. As earlier noted, Essential Energy does not press its Re AEU objection in relation to this provision, so that issue does not require further consideration. We will therefore include in the workplace determination a redundancy clause in the form of the Second Draft, except that the scale of retrenchment payments in clause 3.6(2)(ii)(A) will be amended to reflect the terms of clause 3.6(e) of the amended proposed redundancy clause filed by Essential Energy on 16 August 2016 in order to ensure there is no inconsistency with the NES minimum redundancy payments prescribed in s.119(2) of the FW Act.

Outsourcing - conclusions

[95] In circumstances where Essential Energy has indicated its intention to significantly reshape its workforce through the use of outsourcing, its claim for a provision which would effectively give it an entirely free hand in that respect is rejected. We consider that employees have a proper interest in ensuring that any outsourcing of work is carried out for a legitimate business purpose, that employees be given the opportunity in a co-ordinated way to develop and offer competitive internal alternatives to any proposed outsourcing exercise, and that any contractors engaged to perform work conform to industrial relations norms and thus cannot unfairly render direct employment by Essential Energy uncompetitive.

[96] Whilst the outsourcing clause proposed by the unions contains a number of protections along these lines, it contains provisions which go beyond this and effectively would prevent outsourcing from proceeding to any significant degree. In particular, the provision which prevents any employee being made redundant through the use of contractors would likely mean that no function currently performed by Essential Energy’s direct employees could ever be outsourced. Additionally, the requirement for contractors to pay wages and conditions that are no less favourable than those applicable to Essential Energy’s direct employees - a requirement that had not been contained in any previous outsourcing clause agreed to by the unions - has not been justified on the evidence. In particular, the evidence did not support the proposition that Essential Energy has in the past outsourced work functions solely for the purpose of avoiding the wages and conditions provided for in the enterprise agreements it has entered into, which would be the only proper justification for a requirement of this nature proposed by the unions. The unions’ claim is therefore also rejected.

[97] The proposed outsourcing clause contained in the First Draft was, as earlier stated, the same as that contained in the proposed enterprise agreement put to a vote in May 2016 and also the same as that contained in Essential Energy’s proposed enterprise agreement of 4 February 2016. It was therefore a provision which, although not ideal from Essential Energy’s perspective, was one which it was prepared to agree to (and therefore, presumably, did not regard as being unduly constrictive of its future plans for outsourcing). We also note that at least the CEPU was, as at 3 May 2016, prepared to agree to a provision in these terms provided that it cross-referred to the dispute settlement procedure and that procedure retained a capacity for the status quo to be maintained pending resolution of the dispute. The outsourcing clause in the First Draft does (in clause 6.1.7) cross-reference the dispute settlement procedure in clause 1.14 and its effect is to require compliance with that provision in respect of any dispute that arises in relation to outsourcing. As discussed above, the terms of the dispute settlement procedure we will include in the workplace determination were ultimately agreed between the parties, and the procedure retains the status quo albeit in a time-limited fashion. Accordingly the outsourcing clause in the First Draft was one which, at the ultimate stage of the bargaining process, at least the CEPU was prepared to accept.

[98] We consider that the provision in the First Draft appropriately balances the respective interests of the parties. It contains provisions which ensure that:

(1) outsourcing occurs for legitimate business reasons (clause 6.1(2));

(2) employees and the unions are given a structured opportunity to advance alternatives to any outsourcing proposal in a timely way and with the assistance of resources to be provided by Essential Energy (clause 6.1(3)); and

(3) any contractors engaged comply with industrial relations norms, and that Essential Energy has an obligation to monitor such compliance and take appropriate action where necessary (clause 6.1(4)).

[99] Accordingly the outsourcing clause in the First Draft will be included in the workplace determination we will make.

Section 275 factors

[100] In reaching the above conclusions, we have taken into account all the relevant factors specified in s.275. In relation to each factor, we have (in summary) taken it into account in the following way (using the paragraph numbering in s.275 to refer to each factor):

(a) We have earlier set out the respective cases advanced by the parties in relation to the disputed issues and our analysis and conclusions concerning the merits of their cases. It is not necessary to repeat what we have already stated.

(b) This factor is not relevant to an industrial action related workplace determination.

(c) The primary interest of Essential Energy which we have taken into account is its need to reduce the size and cost of its workforce as part of an overall reduction in its operating expenditure so that it may operate within the AER revenue caps (present and future) and at the same time meet its objective of rendering a commercial rate of return to its shareholder, the NSW Government. We have taken into account the primary interest of employees, namely the prevention of loss of employment through redundancy, but we have been unable to give this decisive weight because as a matter of principle we do not consider that, other than in exceptional circumstances, an employer should be required by the Commission to retain persons in employment for whom it has no business requirement, and because the unalterable facts concerning the regulatory framework in which Essential Energy operates means that it must have the capacity to effect reductions in its workforce through redundancy and outsourcing. We have however given significant weight to the interests of employees in three respects. First, we consider that it is necessary to ensure that interests of employees facing redundancy in having proper consultation and a real opportunity to seek redeployment must be protected by there being a cap on the number of redundancies until the nominal expiry date of the workplace determination is reached. Second, we have taken into account the interests of redundant employees in ameliorating the financial consequences of redundancy through a fair redundancy package and process. Third, we have ensured in the outsourcing clause that the interests of employees in outsourcing should not being used to avoid the wages and conditions of direct employment, and in having a proper opportunity to advance alternatives to outsourcing proposals is protected.

(d) In removing the prohibition on involuntary redundancy and in determining a provision which does not obstruct the outsourcing of work for legitimate business reasons, we have taken account of the public interest in Essential Energy being able to contribute through the successful operation of the NEM towards lower electricity prices for consumers and to return profits to the NSW Government. However we have likewise taken account the economic and social effect of redundancies upon rural and regional communities in setting the cap on the number of redundancies until the nominal expiry date of the workplace determination is reached.

(e) The reduction in the size of the workforce planned by Essential Energy is likely to improve productivity, and we have taken that into account in the removal of the prohibition upon voluntary redundancy.

(f) We have concluded that the conduct of Essential Energy and the unions during bargaining was reasonable, and we have taken this into account in giving weight to proposals advanced by either side during the critical stages of the bargaining process.

(g) We consider that Essential Energy and the unions complied with the good faith bargaining requirements, and this has likewise caused us to give weight to the proposals advanced by the parties during the bargaining process.

(h) We have taken account and given significant weight to the incentive for Essential Energy and the unions to bargain for new redundancy provisions after the nominal expiry date of the workplace determination has passed in deciding not to impose a prohibition or cap on redundancies operative after the nominal expiry date.

Operative date of workplace determination

[101] The unions sought that the redundancy clause in the workplace determination to be made, to the extent that it removed the prohibition on involuntary redundancies, not come into effect until “the new year” because otherwise the likely effect would be that significant numbers of employees would be “forced to exit in or around the Christmas and new year period” and that it was “extremely unlikely that employees will be able to source alternative work during this period of time”. It is not clear that this submission can be reconciled with the requirement in s.276(1) of the FW Act that a workplace determination operates from the day in which it is made, and the further obligation upon the Commission in s.266(1) to make a workplace determination as quickly as possible after the end of the post-industrial action negotiating period. In any event, we do not consider that the redundancy clause which we will include in the workplace determination could result in any redundant employee involuntarily leaving Essential Energy before the beginning of 2017. Essential Energy will presumably seek to have the current redeployees leave the organisation once the prohibition of involuntary redundancy is removed, but those redeployees will have the right to stay with the organisation for the six month Retention Period if they wish. They could only leave Essential Energy prior to 2017 if they chose to exercise the Early Redundancy Election. Accordingly we do not accept the unions’ submission.

[102] The provisions concerning the issues of consultation, the disputes settlement procedure, redundancy and outsourcing which will be included in the workplace determination are contained in the schedule to this decision. The parties are jointly directed to file, within three working days of this decision, a draft workplace determination in terms consistent with this decision. Once an agreed draft is received, we will proceed to make the workplace determination as soon as practicable thereafter, and the workplace determination will take effect when it is made in accordance with s.276(1). If any dispute arises between Essential Energy and the unions concerning the terms of the workplace determination, the matter will be relisted before Vice President Hatcher for finalisation.

VICE PRESIDENT

Appearances:

H. Dixon SC and S. Meehan of counsel for Essential Energy

I. Taylor SC and L. Doust of counsel for the unions.

Hearing details:

2016.

Sydney:

22-26 August, 16 September.

SCHEDULE

1.13 CONSULTATION AND WORKPLACE CHANGE

(1) This term applies if Essential Energy:

(a) has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise that is likely to have a significant effect on the employees; or
(b) proposes to introduce a change to the regular roster or ordinary hours of work of employees.

Major change

(2) For a major change referred to in paragraph (1)(a):

(a) Essential Energy must notify the relevant employees of the decision to introduce the major change; and
(b) subclauses (3) to (9) apply.

(3) The relevant employees may appoint a representative for the purposes of the procedures in this term.
(4) If:

(a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and

(b) the employee or employees advise Essential Energy of the identity of the representative;

Essential Energy must recognise the representative.

(5) As soon as practicable after making its decision, Essential Energy must:

(a) discuss with the relevant employees:

(i) the introduction of the change; and
(ii) the effect the change is likely to have on the employees; and
(iii) measures Essential Energy is taking to avert or mitigate the adverse effect of the change on the employees; and

(b) for the purposes of the discussion--provide, in writing, to the relevant employees:

(i) all relevant information about the change including the nature of the change proposed; and
(ii) information about the expected effects of the change on the employees; and
(iii) any other matters likely to affect the employees.

(6) However, Essential Energy is not required to disclose confidential or commercially sensitive information to the relevant employees.
(7) Essential Energy must give prompt and genuine consideration to matters raised about the major change by the relevant employees.
(8) If a term in this Workplace Determination provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of Essential Energy, the requirements set out in paragraph (2)(a) and subclauses (3) and (5) are taken not to apply.
(9) In this term, a major change is likely to have a significant effect on employees if it results in:

(a) the termination of the employment of employees; or
(b) major change to the composition, operation or size of Essential Energy's workforce or to the skills required of employees; or
(c) the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or
(d) the alteration of hours of work; or
(e) the need to retrain employees; or
(f) the need to relocate employees to another workplace; or
(g) the restructuring of jobs.

Change to regular roster or ordinary hours of work

(10) For a change referred to in paragraph (1)(b):

(a) Essential Energy must notify the relevant employees of the proposed change; and
(b) subclauses (11) to (15) apply.

(11) The relevant employees may appoint a representative for the purposes of the procedures in this term.
(12) If:

(a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and
(b) the employee or employees advise Essential Energy of the identity of the representative;

Essential Energy must recognise the representative.

(13) As soon as practicable after proposing to introduce the change, Essential Energy must:

(a) discuss with the relevant employees the introduction of the change; and
(b) for the purposes of the discussion--provide to the relevant employees:

(i) all relevant information about the change, including the nature of the change; and
(ii) information about what Essential Energy reasonably believes will be the effects of the change on the employees; and
(iii) information about any other matters that Essential Energy reasonably believes are likely to affect the employees; and

(c) invite the relevant employees to give their views about the impact of the change (including any impact in relation to their family or caring responsibilities).

(14) However, Essential Energy is not required to disclose confidential or commercially sensitive information to the relevant employees.
(15) Essential Energy must give prompt and genuine consideration to matters raised about the change by the relevant employees.
(16) In this term:

relevant employees means the employees who may be affected by a change referred to in subclause (1).

1.14 DISPUTE & GRIEVANCE RESOLUTION PROCEDURE

(1) Dispute Resolution Procedure

(a) The dispute resolution procedure will be used to deal with all disputes arising out of the employer-employee relationship.
(b) While a dispute is being dealt with under the dispute resolution procedure work is to continue as normal. The process will not be accompanied by industrial action.
(c) Disputes should, as far as possible, be resolved at their source and at the lowest possible level.
(d) Disputes should remain in the part of the organisation concerned without interference from employees not involved.
(e) While a dispute is being dealt with under the dispute resolution procedure a union may apply to the Fair Work Commission for an interim order imposing the status quo (that is the situation that existed immediately prior to the issue that gave rise to the dispute) for a period of up to 8 weeks after the application for the order or such longer period as the Fair Work Commission may determine. Such an order will only be made in the Fair Work Commission is satisfied that:

(i) there is an arguable case that the change is not either safe, or legal, or fair;
(ii) the balance of convenience favours the grant of the interim order.

(f) All relevant parties must participate in the dispute resolution procedure to try to resolve the matter quickly and efficiently, and arrange and attend meetings without unnecessary delay. If any party fails to comply with these obligations and an interim order has been made pursuant to paragraph 1(e), another party may apply to the Fair Work Commission for the status quo to be suspended or revoked. The Fair Work Commission is authorised to determine any such application.
(g) If a dispute concerns a workplace change which is urgent in nature, a party may apply to the Fair Work Commission to have the dispute proceed immediately to conciliation and/or arbitration without the need to follow the prior steps in this procedure. The Fair Work Commission is authorised to determine any such application.
(h) All those involved in dealing with a dispute shall adopt an interest-based approach. They shall appreciate the interests and points of view of the other parties, approach discussions in good faith, work co-operatively to try and resolve the matter, and arrange and attend meetings without unnecessary delay.
(i) Essential Energy will, where possible, take the needs of employees into account when making decisions.

(1) Local Matters

(a) Tier 1: Resolution of local matters will be sought at their source with the involvement of the following:

• the employee(s) concerned and the union delegate (if requested by the employee(s));



• the supervisor and manager (if required);



• the relevant union(s).

(b) Tier 2: If the issue or dispute is not resolved at the local level, it may be referred to the corporate level with involvement of the following:

• the union organiser(s), relevant local delegate and employee(s) concerned if necessary;



• Executive Manager(s) affected local manager(s), General Manager People & Services and Manager Employee Relations.

An independent third party facilitator may be engaged to assist in resolving the issue or dispute, if agreed by all affected parties.

(c) Tier 3: If the issue or dispute remains unresolved, it may be referred to the Fair Work Commission for conciliation and/or arbitration, by either Essential Energy and/or the relevant union(s) with the rights of the parties to appeal being reserved. If both parties agree, a person other than the Fair Work Commission can be asked to deal with the issue or dispute, as provided for under s.740 of the Fair Work Act 2009.

(2) Corporate-wide Issues

(a) Tier 2: Claims or issues may be raised by either:

• Employee(s);



• Relevant Union(s); or



• Essential Energy.

Resolution of the issues raised should involve:

• Relevant member(s) of Executive Management and any other necessary resources, and



• Union Organisers and relevant Delegates to ensure input reflects the organisation or the issues raised.

(b) Tier 3: If the issues remain unresolved the matter may be referred to the Fair Work Commission for conciliation and/or arbitration with the rights of the parties to appeal being reserved. If both parties agree, a person other than the Fair Work Commission can be asked to deal with the issue or dispute, as provided for under s.740 of the Fair Work Act 2009.

(3) Other Initiatives

There will be joint training of union delegates and line managers in dispute resolution.

3.6 REDUNDANCY

(1) Introduction

(a) Essential Energy is committed to achieving continuous improvement in the performance of its business. From time to time this may include restructuring Essential Energy or changing how work is performed. Through this process, it may be determined that a role is no longer required.
(b) Essential Energy understands that restructures and redundancies can be a difficult time for our employees. This clause has been developed to ensure that our employees are supported through this challenging period by providing clarity on the options available to impacted employees and ensuring there is a clear and consistent process which is followed.
(c) Essential Energy at its discretion, after thoroughly analysing all the circumstances, will decide if a role becomes redundant. If this occurs, the impacted employee will become an Excess Employee.
(d) For the abundance of clarity, all existing employees who are current redeployees (Redeployees) as at the commencement date of this Workplace Determination are Excess Employees.
(e) From the commencement date of this Workplace Determination until its nominal expiry date of 30 June 2018, Essential Energy will not declare redundant in excess of 600 roles. This number shall not include Redeployees, voluntary redundancies effected in accordance with subclause (3) below, and the roles of Excess Employees whose employment is retained as a result of a “mix and match” arrangement effected in accordance with subclause (8) below.
(f) These redundancy provisions do not apply to employees on a contract, temporary or casual employees, apprentices, trainees or employees with less than 12 months continuous service.

(2) Redundancy Payments

(a) Essential Energy will seek to find a suitable alternative position for an Excess Employee, however if one is not immediately available at the date the employee is formally advised that their role has been made redundant (the Notification Date), the employee will receive 26 weeks' notice of the final date of employment (the Termination Date). The Notification Date for Redeployees under this Workplace Determination will be the commencement date of this Workplace Determination. Immediately following the Notification Date, the Excess Employee will have four weeks to choose between two courses of action:

(i) Accept an early redundancy offer (Early Redundancy Election) and leave Essential Energy within four weeks (unless otherwise agreed by Essential Energy) of making the Early Redundancy Election. If this offer is accepted, the Excess Employee will be paid:
i. 20 weeks additional severance payment, plus
ii. payments as follows (the total of which is capped at 52 weeks' pay):

• 8 weeks early acceptance payment, plus



• applicable notice payment in lieu, plus



• 2 weeks per completed year of service;



• plus

(C) accrued leave entitlements.
(the Early Redundancy Payment)

(ii) Decline to accept the Early Redundancy Election and enter a 26 week retention period (Retention Period) to seek redeployment if possible. If an Excess Employee declines the offer of Early Redundancy and is not redeployed at the conclusion of the Retention Period, their employment will end on the Termination Date and they will receive a severance payment as follows:

(A) The amount of the redundancy pay will be the following at the employee's Relevant Weekly Rate of Pay:
(i) employees with at least 1 year of service but less than 2 years will receive 4 weeks' pay;

(ii) employees with at least 2 years of service but less than 3 years will receive 7 weeks’ pay;

(iii) employees with at least 3 years of service but less than 4 years will receive 8 weeks’ pay;

(iv) employees with at least 4 years of service but less than 5 years will receive 9 weeks’ pay;

(v) employees with five or more years’ service will receive two weeks’ pay for every completed year of service (up to capped amount).
Such payment will be capped at 39 weeks' pay.
(B) Plus accrued leave entitlements.

(the Involuntary Redundancy Payment)
If an Excess Employee fails to notify Essential Energy of a course of action within the nominated four week timeframe, this will be taken as the employee having decided to decline Early Redundancy Election and pursue redeployment.

(b) The 8 weeks early acceptance payment in (2)(a)(i)(A) is only available once to Excess Employees. That is, if the Excess Employee (or current Redeployees at the commencement date of this Workplace Determination) fails to accept the Early Redundancy Election immediately following the Notification Date then the Early Redundancy Payment will not be included in any future redundancy payments should the Excess Employee later apply for a Voluntary Redundancy.
(c) If approved by Essential Energy, after rejecting the offer of Early Redundancy Election, an Excess Employee can exit Essential Energy at any time during the Retention Period prior to the Termination Date. If this occurs, the Excess Employee will receive:

(i) Relevant Weekly Rate of Pay for the remainder of the Retention Period (being the period from the last day of employment to the Termination Date) paid in lieu;
(ii) 2 weeks per completed year of service capped at an overall total of 44 weeks' pay (which represents 52 weeks less the 8 weeks early acceptance payment which has been foregone), plus
(iii) accrued leave entitlements.

(d) For the purposes of this subclause and others in clause 3.6:

(i) “Relevant Weekly Rate of Pay” means the Excess Employee’s rate of pay (see Section 6 Clause 6.12 Table 1: Essential Energy Rates of Pay) at the Notification Date, and in addition any applicable all-purpose work-related allowances including, but not limited to, the Electrical Safety Rules Allowance; and
(ii) “Weeks” or “Weeks’ pay” in relation to the calculation of any redundancy payment means the Relevant Weekly Rate of Pay

(3) Expression of Interest in Voluntary Redundancy

(a) Any employee can submit an expression of interest at any time in voluntary redundancy. The acceptance of this application is solely at the discretion of Essential Energy and is subject to relevant tax rulings. If Essential Energy determines the role is excess to requirements and accepts an employee's expression of interest in voluntary redundancy and a relevant tax ruling is in place:

(i) the employee's employment will terminate within 4 weeks of Essential Energy's acceptance of the expression of interest unless otherwise determined by Essential Energy at its sole discretion; and
(ii) the employee will be entitled to the following payment:
(A) 20 weeks additional severance payment, plus
(B) payments as follows (the total of which is capped at 52 weeks' pay):

• 8 weeks early acceptance payment, plus



• applicable notice payment in lieu, plus



• 2 weeks per completed year of service; plus



• plus

(C) accrued leave entitlements.

(b) If Essential Energy determines that the employee is not excess to requirements the application will be rejected however, at Essential Energy's sole discretion, the employee may be considered for a mix and match opportunity (see subclause (8) below).

(4) Retention Period

(a) During the Retention Period, Excess Employees will receive their Relevant Weekly Rate of Pay while pursuing redeployment opportunities within and outside of Essential Energy. The Retention Period will not be extended by Essential Energy for Excess Employees beyond 26 weeks, except in the circumstances of subclause (7) where a temporary work placement or secondment extends beyond the Retention Period.
(b) The purpose of the Retention Period is to allow excess employees the opportunity to pursue redeployment to a permanent position within Essential Energy.
(c) During the Retention Period, Excess Employees are provided with priority access to relevant redeployment opportunities. Where a potentially suitable job match is identified, Excess Employees are entitled to priority assessment for vacancies before any other applicants. Where two or more Excess Employees apply for the same vacant position, selection is based on merit between the Excess Employees.
(d) During the Retention Period, the Employee will be eligible for outplacement and career transition services as determined and paid for by Essential Energy.
(e) Nothing in this subclause requires Essential Energy to provide work to Excess Employees during the Retention Period. In its sole discretion, where Essential Energy has determined that no further training opportunities or work placements exist, it may direct the Excess Employee not to report for work for part or all of the Retention Period. The Excess Employee shall receive all of his/her normal entitlements during any such period.

(5) Leave

Notwithstanding any other provision of this Workplace Determination, during the Retention Period at its sole discretion, Essential Energy may require Excess Employees to take accrued annual leave and long service leave after the provision to the Excess Employee of 14 days' notice. Annual leave will be reduced in the first instance. Excess Employees will be directed to take leave as follows:

(a) Annual leave balances to be reduced to 4 weeks (pro-rata for part time);
(b) Long service leave balances to be reduced to 4 weeks for Excess Employees with more than ten years continuous service.

(6) Training Payment

Excess Employees who decline an Early Redundancy Election and remain employed to the completion of the Retention Period will be provided with payment of up to $3,000 for skills acquisition or training purposes to assist with achieving employment within or outside of Essential Energy during the Retention Period. Such payment will be made directly to the service provider on production by the employee of an invoice.

(7) Temporary secondment or work placement within the Retention Period

(a) During the Retention Period, an Excess Employee may be directed by Essential Energy to take a temporary secondment or work placement. If this occurs and the Excess Employee’s Retention Period ends during the secondment or work placement, the employee will continue to be employed for the remaining period of the secondment or work placement. When the secondment or work placement ends, if the Excess Employee has not been redeployed or secured an extension of the secondment or work placement, the Excess Employee is then made Involuntarily Redundant. Redundancy payments will be calculated on the Excess Employee’s Relevant Weekly Rate of Pay.
(b) During the Retention Period, while an Excess Employee is undertaking a temporary secondment or work placement he/she will continue to receive their Relevant Weekly Rate of Pay. However, if the temporary secondment or work placement is in a role on a lower base rate of pay and it extends beyond the Retention Period (that is 26 weeks after the Notification Date), the rate of pay received for the balance of the temporary secondment or work placement will be the lower base rate of pay. If at the conclusion of the temporary secondment or work placement the Excess Employee has not been redeployed then the Excess Employee will be made Involuntarily Redundant. Redundancy calculations will be made on the Relevant Weekly Rate of Pay the Excess Employee received during the Retention Period and not the lower base rate of pay.

(8) Mix and match

(a) Application

(i) Employees are not able to decide that their position has become redundant. However, where an employee (referred to in this subclause as the Matched Employee) in an existing position wishes to voluntarily give up their current position to an Excess Employee, then Essential Energy may agree to a “mix and match” process provided certain criteria are met as outlined below.

(ii) For the avoidance of doubt, Essential Energy has sole discretion over the mix and match process including the criteria.

(iii) The mix and match process outlined in this subclause (8) only applies to Excess Employees who have not elected Early Redundancy.

(iv) This subclause (8) will only operate subject to the requirements of a necessary tax ruling from the Australian Taxation Office subject to the paragraph directly below.

(v) If the necessary tax ruling expires or is refused by the Australian Taxation Office, Essential Energy may at its absolute discretion implement a mix and match process on the following basis:

(A) any expression of interest in mix and match received from Excess Employees and expressions of interest for voluntary redundancy from employees who are not Excess Employees will be considered on a case by case basis;

(B) where an expression of interest is accepted, the role held by the non-Excess Employee will not be declared redundant and the non-Excess Employee will not be entitled to any bona fide redundancy payment;

(C) Essential Energy may, at its absolute discretion, make an ex gratia payment to the non-Excess Employee at the date the non-Excess Employee's employment terminates. This payment will not be a redundancy payment and will not be subject to tax treatment as a bona fide redundancy.

(b) Criteria

(i) For the avoidance of doubt this subclause (8) only applies in circumstances where the Australian Taxation Office issues the necessary tax ruling and for the period that tax ruling continues to apply.

(ii) The mix and match process can only be instigated as follows:

(A) Essential Energy may, at its discretion, seek expressions of interest in mix and match from Excess Employees and expressions of interest for voluntary redundancy from employees who are not Excess Employees to facilitate mix and match.

(B) It is Essential Energy’s sole discretion to determine which Excess Employees may participate in mix and match and which employees may be asked to express interest in voluntary redundancy. Essential Energy retains the right to decline any expressions of interest from these employees.

(C) Essential Energy may then identify a match between an Excess Employee and another employee (who becomes the Matched Employee) from the expressions of interest. In identifying a match, Essential Energy will consider a number of factors including, but not limited to, the following:

• if the Excess Employee has, or can within a short time gain the skills and ability to fill the position of the Matched Employee. A match will not be made and accepted if it would require unreasonable training (in the view of the Chief Executive Officer) for the Excess Employee except at the sole discretion of the Chief Executive Officer;



• the costs associated with any required re-training for the Excess Employee;



• the costs associated with any required further qualifications for the Excess Employee;



• the costs associated with any required relocation of the Excess Employee; and



• the extent of the payment required to be made to the Matched Employee.

(D) Once a match is identified it is required to be approved by the Chief Executive Officer. The Chief Executive Officer has the discretion to accept or reject a match.

(E) Once a match is approved by the Chief Executive Officer, Essential Energy will provide an estimate of the proposed redundancy payment (calculated in accordance with subclause (8)(c) below) to the Matched Employee. The Matched Employee will then have one week from receiving the estimate to accept or reject the mix and match opportunity.

(F) Once a Matched Employee accepts the mix and match opportunity, Essential Energy will process and finalise the voluntary redundancy of the Matched Employee, the timing of which will be at the discretion of Essential Energy.

(c) Payment to Matched Employee

Essential Energy will pay the Matched Employee the following:

(i) payments as follows:

(A) 8 weeks early acceptance payment, plus

(B) applicable notice payment in lieu, plus

(C) 2 weeks per completed year of service;

(the total of which is capped at 52 weeks' pay), plus

(ii) accrued leave entitlements.

(9) Redeployment

Where an Excess Employee is successful in obtaining an alternate role in Essential Energy within the Retention Period, that role will be offered on the terms and conditions applicable to the new role under this Workplace Determination. However if the role previously held by the Excess Employee is paid above the applicable band for the new role, the appointment will be at the top pay grade within the band for the new role.

(10) Re-employment

(a) Employees who are made redundant cannot be re-employed on a permanent (full-time or part-time), temporary, casual, fixed term or contract basis for a period of two years from their exit date.
(b) In exceptional circumstances based on genuine business needs, ex-employees who left under redundancy circumstances may be re-employed less than two years after their exit date on a strictly short-term temporary/casual basis provided prior approval by the Chief Executive Officer has been given.

(11) Salary Maintenance

An employee who, as at the commencement date of this Workplace Determination, has their salary maintained as a consequence of the operation of the Salary Maintenance Policy (CEC1026) or the Redeployment Policy (CEC1083) (either due to illness, redundancy or restructure) will continue to be paid in accordance with those policies while ever they remain in their current role or are a Redeployee. However, for the abundance of clarity for all other employees, after the commencement date of this Workplace Determination, those policies no longer apply and have been abolished.

6.1 OUTSOURCING

(1) Basic Principles

Outsourcing or contracting out will not diminish the working conditions of this Workplace Determination.

(2) Work will only be outsourced or contracted out when it can be demonstrated that:

(a) peak workloads cannot be met by Essential Energy's workforce including reasonable overtime; or

(b) where specific expertise, not available in Essential Energy's workforce, is required. Where recurring work requires such expertise, Essential Energy will make efforts to obtain this expertise by training and/or reorganising its existing workforce. Essential Energy will keep the relevant union(s) informed about such training and reorganisation; or
(c) the use of outsourcing or contracting out the work is commercially the most advantageous option taking into account safety, quality, performance, and cost.

(3) The following circumstances apply when Essential Energy is examining outsourcing or contracting out of work activities:
Phase 1: Testing the Market

(a) When Essential Energy is considering an outsourcing proposal and proposes to test the market through RFI processes or otherwise a consultation committee shall be formed comprising appropriate representation from Essential Energy and the applicable unions. The purpose of the committee will be to serve as a forum for Essential Energy to inform and consult the Unions and their members on the proposal, the reasons for the proposal and the intended process.
(b) During this period and in the consultative committee Essential Energy and the Unions will investigate whether it is viable for an internal proposal to be developed.
(c) The Phase 1 consultation process shall be completed within 28 days of Essential Energy notifying the Unions of its intention to commence consultation.

Phase 2: Go to Market

(a) If after assessing all of the relevant data, Essential Energy makes a decision to proceed to a request for proposal or tender it will notify the Unions and provide them and any employee with the appropriate time (relevant to the nature of the proposal which will be 28 days unless Essential Energy decides otherwise), to respond with suitable proposals in respect of possible alternative arrangements to outsourcing or contracting out.
(b) Assistance will be provided to employees to prepare an EOI or tender, and where necessary external assistance will be engaged at the cost of Essential Energy.
(c) expressions of interest or tenders when advertised shall be timed so as to provide the employees with an opportunity to submit a conforming expression of interest or tender. If an employee generated conforming expression of interest or tender is submitted, it will be evaluated together with external submissions consistent with the tendering and probity procedures of Essential Energy.

(4) When a decision is made by Essential Energy to outsource/contract out work not already outsourced or contracted out, or in a review of existing contracts, Essential Energy will consider a contract to a contractor that demonstrates:

(a) Contractor(s) undertaking the outsourced /contracted out work will have wages and conditions that are no less favourable than that provided for in their relevant industrial instrument.
(b) It has established appropriate industrial relations policies and practices which promote harmonious employee relations and minimise the risk of industrial disputes and that it complies with appropriate safety standards, environmental standards and quality standards to a level commensurate with the standards Essential Energy expects.
(c) If after engagement of a contractor a party to this Workplace Determination provides sufficient evidence that a contractor is not providing its employees with correct statutory entitlements, Essential Energy will use an independent organisation to audit compliance with these entitlements. If the audit confirms that there is a breach of the statutory entitlements of the Contractor's employees, Essential Energy will take appropriate action.

(5) In the event that Essential Energy has determined to outsource or contract out work, affected employees will have access to the full range of options available under all relevant Essential Energy policies which apply at the time. These options will include training and/or retraining.
(6) Either party may refer this process to the Dispute and Grievance Resolution Procedure in this Workplace Determination.
(7) The parties will comply with their obligations under clauses 1.13 and 1.14 of this Workplace Determination prior to enacting the above. Nothing in this clause diminishes the parties' obligations under clauses 1.13 and 1.14.

 1   PR580630, PR580631

 2   [2016] FWC 3338

 3   [1947] HCA 26, (1947) 74 CLR 31

 4   [1995] HCA 71; (1995) 184 CLR 188

 5   [2011] FWAA 7449

 6   [2015] FWC 6931

 7   The statement of Luke Jenner dated 13 July 2016 at [51] stated that there were 75 redeployees as of 30 June 2016 but an Essential Energy Board Meeting Paper published 28 July 2016 stated that the number was 52.

 8   [2015] FWC 8971

 9   The clause numbering was modified and there were some technical drafting changes, including references in the 26 May 2016 proposal to an agreement being altered in the First Draft to refer to a workplace determination.

 10   Ausgrid Agreement 2012

 11   [2015] FWC 6931 at [10] and [68]

 12   Endeavour Energy Enterprise Agreement 2012

 13   See Redundancy Case 2004 PR032004, [2004] AIRC 287 at [133]-[142]

 14   See FW Act, ss.55, 93(3) and 272(5)(a)

 15   See Long Service Leave Act 1955 (NSW), s.4(3) and (10)

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