ABnote Australasia Pty Ltd

[2015] FWC 1032

[2015] FWC 1032

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

ABnote Australasia Pty Ltd
(AG2015/1732 & AG2015/1733)

COMMISSIONER ROE MELBOURNE, 11 FEBRUARY 2015

Applications for orders relating to instruments covering a new employer and transferring employees in agreements.

[1] Australia Post has sold its PostConnect Fulfillment business to ABnote. ABnote is a specialist printing provider and mail house. PostConnect is involved in marketing, print production and fulfilment. Pursuant to the sale agreement it is expected that the sale will be implemented in the second week of February 2015. There are a number of assets which will change hands as a result of this sale. Those existing employees of Australia Post who work in the PostConnect business who cannot be redeployed within Australia Post will be made redundant.

[2] ABnote is seeking that the Australia Post Enterprise Agreement 2013 (Australia Post Agreement) not apply to any Australia Post employees who are employed by ABnote. Employees who would otherwise fall within the coverage of the ABnote Australasia Dandenong Enterprise Agreement 2014 (ABnote Agreement) should, if employed by ABnote, fall within the coverage of that agreement instead of the Australia Post Agreement and those who do not fall within the coverage of the ABnote Agreement should be covered by an award if that applies or otherwise by the National Employment Standards (NES) and individual contracts.

[3] ABnote offered employment to 13 Australia Post employees from the PostConnect business on 23 December 2014. The offers of employment include a commitment to maintain salary levels and also to recognise unused long service leave and personal leave accumulated during employment with Australia Post. The offers of employment are conditional upon the Fair Work Commission (the Commission) granting the orders sought by these applications. It is proposed that the ABnote Agreement apply to three of the 13 employees if the orders are granted (AG2015/1732). In respect of the other 10 employees two would be covered by the Clerks Private Sector Award 2010, two would be covered by the Graphic Arts Printing and Publishing Award 2010 and seven would be covered by the NES and would be Award free if the orders are granted (AG2015/1733).

[4] It is not in contest and I am satisfied that ABnote can make the application for orders under Section 318(a) of the Fair Work Act 2009 (the Act) if there is, or is likely to be, a transfer of business from Australia Post to ABnote (as defined in Sections 311(1) and 317 of the Act). I am also satisfied that the Australia Post Enterprise Agreement is a transferable instrument which, absent the orders, covers the transferring employees and ABnote.

[5] The precondition for orders is stated in Section 317 of the Act as follows: “This Division provides for the FWC to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.” Transfer of business and transferring employee are relevantly defined as follows in Section 311 of the Act:

“Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;
(b) within 3 months after the termination, the employee becomes employed by the new employer;
(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;
(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and

(c) are satisfied is a transferring employee in relation to the transfer of business.”

[6] There is no contest and I am satisfied that there is a connection between the old employer and the new employer in that assets are being transferred (Section 311(d) of the Act is satisfied).

[7] If I am satisfied that there is, or is likely to be, a transfer of business then the making of the order sought is discretionary and in exercising discretion I need to consider each of the matters set out in Section 318(3) of the Act.

[8] I accept as submitted by ABnote that there have been a number of cases where the Fair Work Commission has found that there has been or there is likely to be a transfer of business in circumstances where the offers of employment made to transferring employees have been conditional upon the Fair Work Commission making an order that the transferring collective agreement or award not apply. However, I am only aware of one case where this was a contested issue. In that case Vice President Hatcher found that it is necessary for the applicant to demonstrate that there are transferring employees in relation to a transfer of business which has occurred or is likely to occur. 1 In the circumstances considered by Vice President Hatcher, as in the present case, there had been no transfer of business and no transferring employees as at the date of the application. He then considered whether or not there was likely to be a transfer of business. He concluded that a transfer which satisfied Section 311(1)(b) and (c) could only occur if the orders sought were made by the Commission given that the transfer of their employment was conditional upon that occurring. He decided that the Commission is not empowered to exercise jurisdiction in relation to a transfer of business which will only occur if the Commission exercises jurisdiction.

[9] The relevant parts of Vice President Hatcher’s reasoning are as follows:

“[11] Section 317 establishes a pre-condition for the making of orders under Division 3 of Part 2-8, namely that such orders may only be made “if there is, or is likely to be, a transfer of business from an old employer to a new employer” (it being apparent that the expression “transfer of business” bears the meaning prescribed in s.311(1)). The applicants and the AWU and the CFMEU accepted that s.317 imposed a pre-condition of this nature. This pre-condition appears to be in the nature of a jurisdictional fact which must “truly exist” in order for any orders to be able to be made, since there is nothing in the language of the provision which suggests that the pre-condition depends merely upon the opinion or satisfaction of the member of the Commission hearing the particular application as to that matter. 1 This interpretation is consistent with s.308, which identifies the object of Part 2-8 as operating by reference to a similar condition, namely “if there is a transfer of business from one employer to another employer”. Section 310 likewise makes provision for the transfer of rights and obligations under particular instruments “if there is a transfer of business from one employer to another employer”. These provisions indicate that the purpose of the Part is to deal with the legal effect upon employee entitlements of any actual occurrence of a transfer of business.

[12] Section 318(1) empowers the Commission to make an order that a transferable instrument “that would, or would be likely” to cover the new employer and a transferring employee because of the operation of s.313(1)(a) will not cover them. For there to be a “transferring employee” upon which s.313(1)(a) can operate, there must (as s.311(2) makes clear) be an employee in relation to whom the requirements in paragraphs (a), (b) and (c) of the definition of “transfer of business” in s.311(a) are satisfied in relation to a “transfer of business” (for which all the requirements of s.311(1) must be satisfied). The effect of this, in summary, is that in order for s.318(1)(a) orders to be made, there must be, or be likely to be, a transfer of business affecting a transferring employee upon which s.313(1)(a) operates or will operate. This is effectively the same jurisdictional fact requirement as prescribed in s.317.

[13] Section 318(2), which identifies who has the capacity under the Act to make application for orders under s.318(1)(a), operates consistently with the identified jurisdictional fact requirement in s.317 and s.318(1)(a). Under s.318(2)(a), only an employer which is a “new employer or a person likely to be a new employer” - that is, by reference to s.311(1), an employer who has employed or is likely to employ a transferring employee in relation to a transfer of business - can make application for orders. Under s.318(2)(b), only an employee who is a “transferring employee, or an employee likely to be a transferring employee” can apply. Paragraphs (c) and (d) of s.318(2) allow employee organisations to apply in specified circumstances; where the application relates to a particular award, the organisation must be entitled to represent the industrial interests of an employee referred to in paragraph (b) - that is, an employee who is or likely to be a transferring employee. In the absence of an actual or likely transfer of business, an employer cannot make an application for orders under s.318(1).

[14] I will therefore proceed on the basis that, with respect to each application, it is necessary for the applicant to demonstrate that there are transferring employees (as defined in s.311(2)) in relation to a transfer of business (as defined in s.311(1)) which has occurred or is likely to occur. Unless that is demonstrated, there is no power to make the orders sought in the application.

…..

[21] To grant LLE’s application would require a form of circular reasoning. On its case, there will be no transfer of business and no transferring employees unless the Commission exercises its jurisdiction to make the orders it seeks under s.318(1). The Commission cannot exercise that jurisdiction unless it first finds that there is likely to be a transfer of business and transferring employees. Therefore, LLE effectively asks the Commission to conclude that the jurisdictional fact finding which is the necessary prerequisite to the exercise of jurisdiction is established by the likelihood that the jurisdiction will be exercised and the transfer of business will therefore occur.

[22] There is clearly a logical fallacy in this. To interpret and apply ss.317 and 318 in the manner contended for by LLE would put the Commission in the position of determining whether a transfer of business actually occurs or not. I do not consider such an approach to be consistent with the intended purpose and effect of the provisions of Part 2-8. Section 318(1) orders are for the purpose of altering, where appropriate, the default position established by s.313 as to the transferring instrument which will apply to transferring employees in relation to a transfer of business which has occurred or is likely to occur. That is, the role of the Commission is to consider whether to act in relation to a set of events which, it is independently established, has actually occurred or is actually likely to occur. The Commission is not empowered to exercise jurisdiction in relation to a transfer of business which will only occur if it exercises jurisdiction. I accept the AWU’s submissions in this respect.

[23] The conditional nature of the offers of employment made to Messrs Jones, Perrot and Pomeroy and any future offers that would be made to any other current employees of LLBC means that there is no proper basis to find that there is likely to be any transferring employees in relation to a transfer of business. It may be added that, apart from Messrs Jones, Perrot and Pomeroy, no offers have yet been made to anybody, so that in any event it could not be said that it was anything more than possible that there would be future transferring employees in relation to a transfer of business.

[24] There is no power to make the orders sought in the first application, and it must therefore be dismissed.” 2

[10] ABnote submitted that the reasoning of Vice President Hatcher is wrong. They argued that his reasoning would significantly and unreasonably limit access to orders in transfer of employment situations. They argue that employees may be disadvantaged in that they may not be offered employment if conditional offers cannot give access to orders. They argue that despite the conditionality of the offer the Commission can find that there are transferring employees in respect to a transfer of business which is likely to occur. I accept that the sale of the business is likely to occur but I do not accept that the employees are likely to be transferring employees unless the orders are made. I can see no error in the reasoning of Vice President Hatcher and it is directly applicable to the situation before me. I adopt the reasoning of Vice President Hatcher and find that there is no power to make the orders sought in this case.

[11] Given this finding it is not necessary to consider the matters in Section 318(3) of the Act. I will however make some observations about these matters.

The views of ABnote and the transferring employees (Section 318(3)(a))

[12] ABnote is obviously in support of the making of the Orders. Primarily the Orders are sought in order to have consistent terms of employment in the enterprise, to reduce administrative complexity, to reduce payroll administration costs, to avoid dissatisfaction which may arise from more than one set of conditions and to avoid the additional employee cost associated with meeting the Australia Post Agreement conditions. There are already some employees of ABnote who are covered by collective agreements and others who are not. The desire to have consistent terms of employment in the enterprise is therefore illusive. However, I accept that ABnote have genuine concerns that there would be additional costs if the Australia Post Agreement continued to apply and this is a factor which stands in favour of making the orders.

[13] In some circumstances employees other than those who are transferring may be affected by the making of an order but in this case I am satisfied that it is the views of the transferring employees which are of particular relevance. The employees have all signed forms indicating their support for the making of the orders. These employees have decided that they wish to accept a job with ABnote. They have no choice but to support the making of the order if they want a job. A number of other employees have decided not to accept a job offer from ABnote. I do not know what the attitude of the employees who accepted a job offer and those who declined a job offer might be to a job offer which was not conditional upon the making of the orders. In these circumstances I do not consider that weight should be given to the forms signed by the employees. The absence of clear support from employees or their representatives does not stand in favour of making the orders. However, this is not a strong factor given that there is no expressed opposition.

[14] In this case an industrial organisation with coverage of the employees at Australia Post, the CEPU, is aware of the application and have advised that they do not wish to make any submission. I understand that the CEPU may be constrained by the fact that the affected employees have indicated that they wish to be employed by ABnote notwithstanding the fact that their employment is conditional upon the making of the orders. If the CEPU were to make a submission it might affect the employment prospects of its members or potential members.

Will any employees be disadvantaged by the making of the order? (Section 318(3)(b))

[15] The three employees who would as a result of the orders be covered by the ABnote Agreement will enjoy some improvements in conditions under the ABnote Agreement and will also suffer some reductions in conditions and rights they enjoy under the Australia Post Agreement. On balance I am not satisfied that the disadvantages to these employees are significant. This is a neutral factor.

[16] In respect to the other employees an individual employment contract and the Award have different mechanisms for enforcement and disputes settlement than a collective agreement. The disputes settlement procedure under the Agreement provides for a party to be able to access Fair Work Commission arbitration in respect of matters arising under the Agreement or the NES. There is a significant disadvantage in moving from a collective agreement to an individual employment contract underpinned by the Award and/or the NES. Should the order be made the Act would limit access to private arbitration without the consent of ABnote. This disadvantage is greater for those who would be Award free.

[17] ABnote provided a table, which I accept, that compares the other significant wages and conditions of employment. Employees under the Australia Post Agreement are entitled to enhanced personal and parental leave and redundancy/redeployment entitlements when compared to those applicable under the Awards and individual contracts offered by ABnote. The weekly working hours are also shorter under the Australia Post Agreement. There are also some shift and overtime differences. The penalties in the Graphic Arts Award are in some cases superior to those in the Australia Post Agreement; however, they are generally inferior when compared to the Clerks Award. The span of ordinary working hours is more restrictive in the Australia Post Agreement. There are some differences in respect to allowances. These factors are of greater significance for the Award free employees. Current Australia Post salary levels are being maintained but there is no commitment to maintain many of the other Australia Post Agreement conditions.

[18] Overall this is a factor which stands against the making of the order in respect to those employees who are not transferring to the ABnote Agreement.

The nominal expiry date of the Agreement (Section 318(3)(c))

[19] The nominal expiry date of the Australia Post Agreement is 31 December 2016. The nominal expiry date of the ABnote Agreement is 31 March 2017. This is therefore a neutral factor in respect to the employees who would fall within the coverage of the ABnote Agreement should the order be granted.

[20] The employees who would be covered by an Award or by the NES should the order be made are free to bargain for a collective agreement if the order is made. Given the small number of employees involved and the nature of their positions I am not satisfied that they are likely to have any significant bargaining strength or capacity. These rights are probably more apparent than real. I consider this to be a neutral factor.

Will the Agreement have a negative impact on the productivity of ABnote’s workplace? (Section 318(3)(d)) Will ABnote suffer significant economic disadvantage if the order is not made? (Section 318(3)(e))

[21] ABnote submits that it would suffer significant economic disadvantage but made no submission about the impact on productivity.

[22] I accept that there would be some administrative and payroll costs associated with administering two agreements. These administrative costs would include becoming familiar with the obligations under the Australia Post Agreement. However, it is apparent that a number of different arrangements already apply as only a proportion of the ABnote workforce are covered by their collective agreements. I consider that the additional burden imposed by the Australia Post Agreement will involve some additional costs but I do not consider this to be a significant economic disadvantage.

[23] Additional administrative and payroll costs do not necessarily affect productivity in the medium term. However, it may be that increased inputs are required for a given unit of output as a result of these administrative and payroll tasks. However, considered in the context of the business as a whole the impact on productivity would not be significant.

[24] ABnote argue that there could be disharmony or industrial disputation arising from differing conditions in the workplace. I consider this no more likely than the disharmony or industrial disputation which might arise if the order was granted and employees suffer a loss of conditions. Employees understand that acquisitions can lead to differing cultures and conditions. There is no evidence as to why this would be a factor of significance in the circumstances of this case.

[25] The Australia Post Agreement is the transferring instrument and is the normal cost of doing business associated with the acquisition. These costs may affect profitability but do not affect productivity. I accept that the additional costs associated with the better pay and conditions under the Australia Post Agreement may produce some economic disadvantage when compared to the alternative.

[26] I consider Section 318(3)(d) to be a neutral factor and Section 318(3)(e) to stand slightly in favour of making the orders sought.

The degree of business synergy between the Agreement and any workplace instrument that already covers ABnote (Section 318(3)(f))

[27] I accept the submission of ABnote that there is little business synergy between the Australia Post Agreement and the ABnote Agreement. The businesses are very different. The ABnote business is much less diverse and complex and the instruments reflect this.

[28] This is a factor which stands in favour of making the orders sought.

Is it in the public interest to make the order sought? (Section 318(3)(g))

[29] ABnote argues that it is not contrary to the public interest to grant the orders in circumstances where the order is supported by the employer and the transferring employees. As discussed earlier, I do not consider that when considering the public interest weight can be given to the consent of employees in the circumstances of this case.

[30] ABnote argue that it is in the public interest to make the orders as it will enable the employees to be employed and if the orders are not made they will need to search for alternative employment.

[31] The Act suggests that it is not generally in the public interest to decrease the coverage of enterprise agreements. I particularly refer to the object of the Act:

“3 Object of this Act

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g) acknowledging the special circumstances of small and medium-sized businesses.”

[32] I particularly refer to Object 3(f). I also consider, having regard to the particular objects in other parts of the legislation and the overall scheme of the legislation, that pursuit of Object (f) generally enhances and is enhanced by pursuit of Objects (a), (b), (c), (d) and (e). It would not be consistent with the Object of the Act to find that it is in the public interest to decrease the coverage of employees by enterprise agreements. In this case the order sought in AG2015/1733 would have this effect whilst the order sought in AG2015/1732 would not have this effect. ABnote submitted that the employees can bargain for a new agreement. However, I do not consider that this is a practical reality given that this minority group of employees are in a category which are not currently covered by agreements and where it is reasonable to infer ABnote does not support agreement coverage.

[33] I do not consider that it is in the public interest, in the circumstances of this case, to remove employees from collective agreement coverage.

[34] The general scheme for enterprise bargaining under the Act is that if there is an agreement in place then the parties have the advantage of bargaining for a new agreement whilst that agreement remains in place even if the nominal expiry date has been passed. A consequence of the making of the order to remove workers from agreement coverage would be that employees would in the future bargain from the safety net of the modern award or the NES rather than the safety net of the Agreement. However, the fact that individual employment contracts have been signed which preserve the salary levels of the Agreement reduces this disadvantage.

[35] I accept that the maintenance of employment is in the public interest.

[36] I am satisfied that the public interest is a neutral consideration in respect to the employees who would transfer to the ABnote agreement but I am not satisfied that the public interest favours the granting of the order in respect to the other employees.

Approach to the factors in Section 318(3)

[37] In weighing the factors considered above I would have regard to the Object of Part 2-8 - Transfer of Business of the Act as set out in Section 309. That requires me to balance the protection of employees and the efficient running of business.

Conclusion in respect to the applications for Orders.

[38] The jurisdiction to make the orders sought does not exist because ABnote has not established that there are likely to be any transferring employees in relation to a transfer of business. The applications are dismissed.

COMMISSIONER

Appearances:

Mr A Pollock and Ms H Christo appeared for the Applicant.

Hearing details:

2015

Melbourne

February 3

 1   Lend Lease Engineering Pty Ltd and others [2014] FWC 5499.

 2   [2014] FWC 5499.

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