30 The ratio of the Commissioner's decision to vary the Award to incorporate the variation proposed by ASMOF was that an agreement (albeit unenforceable) regarding salary sacrificing had been struck between the parties in 2002, that ASMOF was entitled to continue to rely on the faith of that agreement, that it was "entirely inappropriate" for the appellant to "walk away" from the agreement, and so it was appropriate to vary the Award to put beyond doubt "what should operate between the parties on the basis of the agreed arrangements that have existed and should have continued to exist until negotiations had taken place on any replacement agreement or arrangements."
31 We need to consider firstly the nature of the asserted 2002 agreement. In 1998/1999 a Memorandum of Understanding was entered into between ASMOF and the appellant about salary sacrificing based upon the appellant's then salary packaging policy. Eleven benefits could be salary sacrificed up to the FBT exemption cap without incurring any FBT liability that would otherwise have been passed on in full and incurred by staff specialists. The agreement reached was that the FBT deduction benefit was to be shared on a 50/50 basis as between the employer and employee. There was no agreement concerning the treatment of any income tax savings that might become available to staff specialists who took advantage of the salary sacrificing arrangements. Indeed, it does not appear that income tax savings was even a subject of discussion between the parties at that early stage.
32 We note also that the Salary Packaging Agreement made between the employer and individual employee, based on the appellant's Salary Packaging Policy and which addressed the question of sharing the FBT saving, defined the Salary Packaging Policy as meaning "the policies and procedures relating to salary packaging as announced by the Employer from time to time."
33 The Award was varied in July 1999 to reflect the salary sacrifice arrangements agreed between the parties and the Award provisions then inserted only dealt with the question of FBT savings and did not deal at all with the question of whether the income tax savings arising from the salary sacrificing of FBT exempt items should be shared between the parties.
34 In 2002, ASMOF sought to withdraw from the FBT sharing agreement and at the same time sought to align the scheme applicable to staff specialists with some of the features of the general salary-sacrificing scheme available to other Health Services employees but which were not then available to staff specialists under their own salary-sacrificing scheme. The respondent was not successful in its first endeavour but it was successful in gaining access to the greater range of salary sacrificing benefits that were then available under the general scheme. ASMOF also successfully resisted the appellant's attempt to fully "align" the two schemes so that staff specialists would have been required to share with the employer all income tax savings associated with participation in the scheme (irrespective of whether the benefits sought to be packaged were subject to FBT or were "FBT exempt") on a 50/50 basis. Instead, it was agreed that the status quo would apply, namely, that staff specialists (approximately 3,000) would be able to salary sacrifice on a more beneficial basis, that being they only had to share the FBT savings associated with salary sacrificing under the staff specialists' scheme on a 50/50 basis.
35 The acceptance of the status quo by the appellant took the form of a letter to ASMOF dated 5 April 2002, in which the Acting Director-General of the Department, in responding to ASMOF's letter of 26 March 2002 where ASMOF declined to agree to the formula used to calculate the employer share in the general scheme, relevantly stated as follows:
I refer your letter of 26 March 2002 where following the cancellation of the McMillan Shakespeare salary packaging contract and transfer of the scheme's administration to the Health Services scheme administrations, you expressed a preference to continue using the formula for the calculation of the 50/50 share arrangement for employers' and employees' savings under the Senior Medical Practitioners (SMPs), Salary Packaging Scheme, rather than the formula from the 'general' salary packaging scheme.
Your preference is noted, and it is agreed that the SMPs salary packaging continue to be administered in terms of the notional FBT formula per the Senior Medical Practitioners Award.
36 It was this exchange of letters that the Commissioner found constituted an agreement between the appellant and ASMOF, "albeit one that was not formalised in any award/agreement/MOU documentation, that provided for SMPs to gain access to the additional 22 benefit items available to be salary sacrificed but without the 50/50 income tax sharing arrangement applicable to all other Health Services employees."
37 As at March 2002, there was clearly an arrangement between ASMOF and the appellant that the agreement reached in 1998/99, to the effect that there would be a sharing of the FBT savings associated with salary sacrificing on a 50/50 basis, would continue. We do not consider that arrangement could be regarded as an enforceable agreement or, for that matter, any form of agreement that the appellant would henceforth maintain the 1998/99 agreement in perpetuity; but it was nonetheless what may be described as an agreement of an industrial nature having some significance, as we will discuss below, in proceedings before this Commission.
38 Despite the 2002 arrangement being an agreement of an industrial nature there are two things we need to say about it. First, the Salary Packaging Agreements made between the appellant and individual employees following the making of the MOU in December 1998 provided that all salary-packaging arrangements were to be made in accordance with "the Employer's Salary Packaging Policy" … "as announced by the Employer from time to time". In so far as individual employees were concerned who entered into a Salary Packaging Agreement, it would appear that such employees acknowledged that their salary packaging might change from time to time depending upon changes to the employer's policy. The 2002 arrangement did not displace those formal contracts. Secondly, the terms of the Award only dealt with the question of FBT savings and did not deal with the question of whether the income tax savings arising from the salary sacrificing of FBT exempt items should be shared between the parties. So there was no Award provision that precluded the employer from making changes to its policy in respect of these exempt items.
39 The 2002 arrangement was maintained until 2007 when the appellant sought to unilaterally change it by deciding that, in respect of all employees, the meal entertainment benefit and any future approved benefits would only be made available "strictly on the basis of a 50/50 sharing of the income tax saving between employer and employee". Whilst it may be the case that the employer was entitled, in a strict sense, to announce that it intended to change its policy, the 2002 arrangement had been operating for five years on the basis that staff specialists only had to share the FBT savings associated with salary sacrificing and not all income tax savings, as was the case with all other employees. ASMOF was entitled to believe this arrangement had become part of a settled entitlement of staff specialists in accordance with the terms of the agreement subject to its terms being re-negotiated, nothing having been done or said in the five years that would have put ASMOF on notice that the appellant could or would, at any time, unilaterally change the arrangement without consultation or negotiation. It should be borne in mind that the original arrangement in 1998 was not unilaterally introduced by the employer but was the subject of negotiation. The same applied in relation to the introduction of the general salary-packaging scheme; it was introduced in 2002 on the basis of an agreement between the employer and the Health Unions.
40 We consider the appellant should have realised that if there was to be any change to the 2002 arrangement it would have been appropriate to either seek to re-negotiate the arrangement or, at the very least, give reasonable notice of the intention to effect a change. It has been said that it is extremely important in industrial and employment relations that parties adhere to considered agreements entered into by them: Re Broken Hill Commerce and Industry Consent Award [2002] NSWIRComm 252 at [8]. Such agreements, notwithstanding that they might be attended by a significant degree of informality, should not be departed from lightly.
41 Notwithstanding the view we have expressed regarding the care which industrial parties should take in seeking to depart from longstanding arrangements, we find that the Commissioner erred in determining that it was appropriate to vary the Award to put beyond doubt "what should operate between the parties on the basis of the agreed arrangements that have existed and should have continued to exist until negotiations had taken place on any replacement agreement or arrangements."