It is common for universities to support and facilitate unpaid work and work placements for their undergraduate and post graduate students. These placements can either be with an external placement provider or, in some cases, within the university itself.

The arrangements give rise to an important issue as to whether the student is working as an employee or volunteer. If a student is undertaking an unpaid work placement, or volunteer work required by their course authorised by a Commonwealth, State or Territory law or administrative arrangement, then generally they will not be an employee (for the purposes of the Fair Work Act 2009 (Cth) at least). If however the work placement does not fall within this category, can the student still be a volunteer?

This is an important issue because if a volunteer is an employee but is not treated as such, this can have serious consequences for the employer (whether a placement provider or the university). The consequences can include penalties for failing to comply with employer related obligations – such as payment of wages and benefits – and occupational health and safety obligations (although both the university and the placement provider may have occupational health and safety obligations even if the student is a volunteer).

The common difference between an employee and a volunteer is the mutuality of obligation – an employee generally receives a benefit in return for performing the work, whereas a volunteer is 'rewarded' only by the achievement of social or community objectives, or by personal development purposes. It is not possible to come up with a definitive checklist which, if followed, will guarantee that a student will not be considered an employee. However if you answer 'yes' to some or all of the following questions, this may suggest the student is in fact an employee. Further inquiries may be needed to determine the status of the student once regard is given to all the facts and circumstances of the particular arrangement:

If students who are participating in unpaid placements are in fact employees, this can have unintended consequences both for the placement providers and the university. Universities (and placement providers) should therefore ensure that the nature of the relationship between the student, university and placement provider is clear before agreeing to support or facilitate students to undertake the placement.

Media reports are awash with stories of information technology systems and infrastructure projects gone wrong and cost overruns. This creates an impression that significant IT projects are 'risky', particularly in tough economic times where the emphasis is for IT departments to make the most of their information technology budgets.

Whilst the success of an IT project can never be 'guaranteed', particularly if it is a complex project, the risks of failure can be greatly reduced, and acquirer's ability to mitigate the consequences of failure greatly enhanced, if that acquirer has satisfied each of the following steps:

1. Scoping the project before approaching the market

If an organisation does not have a clear sense of the outcomes it requires (functionally and otherwise), then inevitably it places greater reliance on the supplier to provide or deliver those outcomes. In such a case, it should never be assumed that the supplier's interests and objectives will be aligned with those of your organisation. A supplier will seek to supply a solution that meets its understanding of the requirements but also maximises the returns to it.

Further, if the customer is relying on the supplier's expertise not only to supply the solution/system, but also to determine what the solution or system should be, it becomes harder for the customer to manage project scope and costs.

The customer should therefore take time to determine what it requires, what is available, and whether the available solution(s) and systems are compatible with its requirements. If your organisation does not have that expertise internally, it could engage a consultant to assist with this process, or undertake a 'request for information' process – a precursor to a request for tender or proposal in which the customer seeks information about possible solutions or systems from the market.

2. Due diligence of suppliers – will the supplier see it through?

Whilst price and technical compliance are clearly important elements in evaluating a proposal or offer from a supplier, the history of IT projects is littered with examples of suppliers offering outstanding solutions or pricing that are too good to be true. The result is that such suppliers are not able to deliver on the solution, either because their proposals are not matched by their capabilities, or they lack financial substance.

Customers need to insist that prospective suppliers demonstrate both technical capability – regarding expertise and depth of resources – and solvency. To the extent that there is doubt on either front, customers should either steer clear of the suppliers, or require that those suppliers produce financial and/or performance guarantees. However customers must then ensure that the guarantor(s) has the capability and solvency that the supplier may lack.

3. Avoiding standard supplier contracts

Increasingly, many suppliers – particularly the large suppliers – are insisting that they will supply goods and/or services only subject to their standard supplier contracts. This may occur even where the supplier is responding to a request for tender.

Not surprisingly, standard supply contracts contain terms that are geared to maximise the supplier's position, usually at the cost of legitimate protections and rights for the customer. However, more fundamentally, if a customer accepts a standard supplier contract, it also accepts that its project will proceed in a manner that is largely mandated by the supplier, and is subject to the supplier's processes.

That may not be what the customer requires. For example, it may wish to ensure that the project is subject to its own project management and governance processes, and it may want to tie payment of fees to receipt of actual outcomes and benefits.

Therefore, at best, customers should challenge the notion that it must engage the supplier under the supplier's own terms. Naturally, if customers want to avoid supplier terms, they will need to develop their own template agreements.

4. Incorporating appropriate governance, reporting and oversight processes

A common feature in projects that 'come off the rails' is that problems or delays identified by one of the parties are not raised with the other party, then discussed and actioned in a forum that enables quick and effective decisions to be made about how to address that problem or delay(s). In many projects – particularly more complex projects – the prospect of unforseen matters and delays is relatively high.

However in the absence of an effective reporting, oversight and governance process, there is a real possibility that one party – usually the customer – will be kept in the dark about the existence of problems and delays, and may only find out about them at a point where the project is delayed, or where the costs have gone well beyond budget.

Appropriate governance will not of itself ensure that projects proceed smoothly, but transparency and effective communication will enable both parties to be more proactive as to how they address problems and delays. IT project contracts should therefore incorporate measures such as mandatory periodic meetings of project principals, and periodic reporting of progress and issues (which also tracks action taken on past issues raised). In projects of strategic importance to the customer, measures such as a governance committee, comprised not just of project principals but also other stakeholders of the party, would be worthwhile.

5. Tying payment to achievement of required outcomes and timeframes

For an organisation that has embarked on a business-critical or expensive IT project, there may be two nightmare scenarios.

It could be that the organisation is either contractually bound to continue paying the supplier for the work it is undertaking (even though the supplier is not delivering the contracted outcomes), or that the organisation has paid the supplier all of the fees and charges due only to discover that the supplier has not yet completed the project. Aside from the fact that the project is not delivered, an organisation in that position has largely ceded all of its commercial leverage: it either has to persevere with its supplier (at additional cost), or cut its losses and potentially have to start again.

From the customer's perspective, the preferable arrangement for payment of fees is that payment of particular amounts is tied to the supplier's achievement of milestones and/or delivery of required outcomes. This is not to say that the supplier should not receive any payment until the project is completed, but that the project should be divided into milestones, with instalments of the overall amount payable then tied to the supplier's achievement of those milestones. The amount received should depend on the relative importance of each milestone.

Nevertheless, the best form of arrangement is one where the bulk of the overall amount payable (at least 50% to 60%) is paid when the project is completed. Instalment payment arrangements do not provide the supplier with much incentive to complete if it has already received 90% of its payment.

6. Proactive contract enforcement

A well-drafted contract will give the customer a range of rights and remedies to address the supplier's failure to comply with that contract. If a customer feels that its proposed contract does not offer it the kind or range of rights or remedies that it would expect, then it should not sign it.

Assuming that the customer has all the contractual 'tools' at its disposal, the question will be which one of those rights it should use in particular cases. Regrettably, many customers feel that exercising any rights given to them to enforce their contract will in some way be a precursor to ending that contract, and so they do nothing. Once again, such an approach cedes commercial leverage to the supplier.

Issuing a notice of default, disputing an invoice and invoking requirements for a party to provide a guarantee are appropriate and usual actions for a customer to take (assuming that it has a right to do so). Customers should not feel that taking such action is a sign of failure. Rather, it should be seen as a proactive attempt by the customer to rectify problems, and a reminder to the supplier that legal obligations must be satisfied, or it will face consequences in the form of financial compensation or other remedies.

If your organisation is contemplating an IT project, it will be the one that has to live with the outcome of that project. It should therefore not be shy about requiring a contract and contracting process that ensures that the outcome aligns with its objectives.

For further information please contact:

James Flowers, Special Counsel
T: +61 3 8608 2879
james.flowers@minterellison.com

On 9 March 2010, former Liberal MP Bruce Baird issued a report titled ‘Stronger, Simpler, Smarter ESOS: Supporting International Students’ (Report). It follows a review of the Education Services for Overseas Students (ESOS) Act 2000 (Cth) (ESOS Act), and associated regulatory and legislative frameworks.

The Report considers various issues impacting Australia's international education sector and makes recommendations, including amendments to the ESOS Act, for stronger regulation on education providers and their agents. The Report aims to ensure greater protection for international students and uphold Australia's reputation as a world class education provider. The key recommendations from the Report are discussed below.

Registration requirements

Aside from the compulsory re-registration of all providers on the Commonwealth Register of Institutions and Courses for Overseas Students, recent amendments to the ESOS Act (in effect from 3 March 2010) have introduced two additional requirements to the existing registration system. Potential providers must now show that their principal purpose is to provide education and that they are capable of providing education of a satisfactory standard.

In addition to these amendments, the Report calls for new amendments to the ESOS Act that would enable national registration of providers and the introduction of further registration criteria, as follows:

(a) demonstration of access to sufficient financial resources
(b) development of a sustainable business model, and
(c) implementation of a solid governance structure.

The Report also recommends a risk management approach involving the profiling and auditing of providers, so that appropriate conditions can be placed on an individual provider’s registration where they are assessed as high-risk. One suggested condition is the prohibition of high-risk providers collecting any non-course monies (eg, for accommodation, excursion fees or textbooks) to protect students from losing their money in the event of a provider being unable to meet its course delivery obligations.

The overall tightening of the registration system seeks to address provider quality and viability concerns, thereby reducing the prospect of substandard providers entering the market.

Ethical recruitment practices

In order to curb unethical practices by recruitment agencies, the Report makes a number of recommendations, including:

(a) the introduction of financial penalties for providers whose overseas agents act unethically

(b) disclosure of recruitment agencies and their commission structure to students and regulators as a pre-condition to payment by providers of agency commissions or service fees

(c) greater prescription regarding details to be included in written agreements between providers and students covering matters such as course description, applicable costs, refund provisions and transfer restrictions, and

(d) prohibiting commissions or other inducements for procuring transfers of currently enrolled students from one provider to another.

The Report recognises the regulatory challenge for Australia in monitoring the activities of unethical recruitment agencies located offshore. It recommends that the Australian Government work with industry stakeholders and overseas governments to implement and foster compliance with consumer protection laws in the home countries of Australian international students. Furthermore, the Report calls for the Australian Government to continue to promote professional development initiatives for education agents.

Provision of accurate information to potential students

The Report recommends that the ESOS Act be amended so that from the outset potential international students are provided with sufficient information for them to accurately compare courses, study choices and providers. This would require disclosure of provider and course details, academic and student support services, local employment opportunities, safety issues and accommodation information. The Report suggests that this information be available at a centralised location, such as on the 'Study in Australia' website.

Regulation and enforcement

The Report makes several recommendations for stronger compliance and enforcement reforms, including:

(a) increasing resources to enable proactive regulatory compliance monitoring through greater funding contributions by the international education sector

(b) introducing financial penalties for a broader range of non-compliant conduct (eg, issuing fines for failing to provide students with prescribed information)

(c) imposing clear, objective and enforceable minimum standards on providers within the ESOS Act (given the lack of clarity surrounding the legal status of, and what constitutes compliance with, the National Code of Practice for Registration Authorities and Providers of Education and Training to Overseas Students (National Code)), and

(d) publication of targets, compliance monitoring and regulatory reporting for greater transparency, accountability and assurance for students and other stakeholders within the sector.

In order to achieve a consistent and effective approach to regulation, the Report also recommends that the Australian Government Minister for Education be given the discretion and authority to issue directions as to the consistent application of the ESOS Act.

Complaints handling

In accordance with the National Code, the Report recommends that the ESOS Act be amended to require all international education providers to use a statutorily independent body for the processing of complaints and appeals. The Report further recommends that amendments be made to the Ombudsman Act 1976 (Cth) to extend the Commonwealth Ombudsman's jurisdiction to cover those non-government providers which do not fall within the ambit of currently existing statutorily independent complaints bodies.

Stronger tuition protection

The Report calls for amendment of the ESOS Act to establish a compulsory tuition protection service that provides a single mechanism for students to be placed at another institution when a provider cannot meet its refund obligation and which, on a last resort basis, gives tuition refunds. It is intended that a provider's membership fee for the tuition protection service be based on financial viability and other risk factors associated with the provider, in order to avoid unduly burdening high quality and financially stable providers. The Report also recommends that the ESOS Act be amended to only refund the portion of the course not assessed or delivered.

Furthermore, the Report suggests that a provider's failure to meet its refund obligations be taken into account in the recommended financial viability test detailed above for any future registration application.

Student support

The Report recommends that the ESOS Act be amended to require that providers deliver a comprehensive induction program, and provide ongoing access to accurate information on safety, student rights, complaints handling and support services specifically tailored to the needs of its students.

The Report supports the International Student Roundtable recommendation for the creation of 'international student hubs' in all capital cities. These international student hubs would act as a centralised place where students can seek information, access referral and support services, engage with the broader Australian community and provide a mechanism for building a representative student voice.

Implementation of recommendations

The Australian Government has stated its support in principle for the recommendations contained in the Report, and is seeking to implement recommendations relating to restricting unethical recruitment practices and amendments to the ESOS Act as soon as possible. However, certain changes will require further consultation with the states and various stakeholders within the international education sector.

Once the changes are implemented, international education providers will need to:

(a) ensure that they comply with any new registration requirements imposed on them

(b) review their arrangements with overseas agents to ensure that those arrangements comply with the amended ESOS Act and adequately protect the education providers from liability for breach of the ESOS Act by their agents, and

(c) review their procedures for engaging with international students to ensure that those procedures comply with the amended ESOS Act.

At this stage the Government has not provided any indication of the timing for implementation of these changes. We will continue to monitor the progress of these proposed amendments and provide updates as developments occur.

For further information please contact:

Darshini Nanthakumar, Lawyer
T: +61 3 8608 2574
darshini.nanthakumar@minterellison.com

Introduction

The tertiary education sector has undergone a sustained period of regulatory reform over the last decade. One area however that has not been specifically addressed through these reforms is the regulation of dual sector institutions (ie universities with a TAFE division). Four of Australia's five dual sector institutions are located in Victoria – the Royal Melbourne Institute of Technology, the Swinburne Institute of Technology, the University of Ballarat and Victoria University of Technology (the only other being the Charles Darwin University located in the Northern Territory).

This article focuses on the regulation of dual sector institutions in Victoria under the enabling legislation applying to each institute as a university (University Act) and the requirements applying to it by virtue of it operating a TAFE division under the Education and Training Reform Act 2006 (Vic) (ETR Act).

This regulatory framework places obligations on dual sector institutions, including in the areas of reporting, employment and accreditation, which are not placed on non-dual sector universities.

Hybrid regulation of dual sector institutions

TAFEs and non-dual sector universities in Victoria are regulated under distinct regimes primarily set out in the applicable enabling legislation. Dual sector universities, in contrast, must comply with the requirements of their own enabling University Act, plus the requirements of the enabling Act for the TAFE sector: the ETR Act. These obligations seek to achieve parity in regulation between the TAFE divisions of universities and stand alone TAFE institutes, but in doing so subject dual sector institutions to a regulatory regime which does not apply to other universities in Victoria.

University Acts

For each Victorian university (including dual sector institutions), there is a University Act which is the primary source of the university's powers and obligations. Broadly speaking, University Acts have applied consistently across dual sector and non-dual sector institutions in Victoria. The consistency across the enabling legislation for universities is even more pronounced under the new 'model' University Acts (Model Acts), which have been enacted but are yet to commence.

While the existing University Acts for dual sector institutions specifically provide for TAFE divisions, TAFE academic boards, and particular employment arrangements for TAFE division staff, the new Model Acts do not provide specifically for these matters. Indeed the only relevant difference between the Model Acts for dual sector institutions and non-dual sector institutions is the specific requirement to have on the Council a member with substantial knowledge or experience with vocational education and training.

Under each University Act, the Council is the peak governance body of the respective university. The University Acts recognise that each respective university is a body politic, as well as a body corporate, and vest in each university's Council the power to make university statutes and regulations which govern the university. The structure of courses and the awards of the university are matters for the Council, as are the terms and conditions of employment of staff (subject to workplace relations legislation).

The current University Acts do not require universities to report to the relevant Minister (currently the Minister for Skills and Workforce Participation (Minister)). New reporting requirements to be introduced under the Model Acts mean the commercial activities of the relevant university must be reported to the Minister on request. These reporting requirements are much less onerous than those applying to TAFEs, reflecting the greater autonomy of universities from the Commonwealth Government. As much of the funding for universities is derived from the Government, there are additional reporting and performance requirements which universities need to satisfy under these funding arrangements.

ETR Act

In contrast to the autonomy granted by University Acts, the ETR Act – and Ministerial directions and guidelines made under that Act – closely regulates the TAFE sector, including the TAFE divisions of universities. The system of regulation reflects an integrated TAFE sector with centrally allocated student numbers, external accreditation of courses and awards by a statutory authority, extensive reporting requirements, Ministerial oversight, and consistency in employment arrangements across the TAFE sector. Three of these aspects are used to illustrate the system of hybrid regulation currently applying to dual sector institutions.

Reporting obligations

Reporting obligations under the ETR Act require TAFE institutes and dual sector institutions to report extensively and on an on-going basis, to the Minister, the Secretary to the Department of Education and the Victorian Skills Commission. These reports include the compilation of statistical data in accordance with detailed requirements set out in Ministerial directions. The application of these reporting requirements to dual sector institutions place these universities under a very different accountability regime to that applying to other Victorian universities.

Accreditation

The Victorian Registration and Qualifications Authority (VRQA) registers education and training providers (including dual sector institutions) and accredits all TAFE courses provided by these providers. In comparison, the VRQA only accredits higher education courses provided by non-dual sector universities (along with other education and training providers) to overseas students.

Employment

The employment of staff at TAFE institutes is regulated by the ETR Act and the Ministerial directions under that Act. These requirements are currently imported into the University Acts of dual sector institutions by express reference. A submission to Victoria's higher education sector review in 2008 from a dual sector institution commented that this created a disparity between higher education and TAFE staff within the university, and hampered the movement of staff between divisions. The issue was also recognised in the Statement of Intent: Higher Education Review published by the Victorian Government in November 2008.

The Model Acts in respect of the dual sector institutions no longer include express references to the employment requirements of the ETR Act. These requirements, however, remain relevant by operation of provisions of the ETR Act which specifically apply these requirements to the TAFE divisions of dual sector institutions.

Lessons for universities

Universities that are considering offering TAFE courses, or that currently have a TAFE division, need to be aware of this hybrid regulation and (where applicable) have arrangements in place to ensure compliance with both the ETR Act and their University Act.

For further information please contact:

Carolyn Vigar, Special Counsel
T: +61 3 8608 2753
carolyn.vigar@minterellison.com