Alfred Health
[2024] FWC 713
•3 APRIL 2024
| [2024] FWC 713 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
Alfred Health
(AG2024/576)
| COMMISSIONER MIRABELLA | MELBOURNE, 3 APRIL 2024 |
Application for an order relating to instrument covering new employer and transferring employees.
Alfred Health has applied to the Fair Work Commission (the Commission) for an order under s.318 of the Fair Work Act 2009 (the Act) in relation to the Spotless Public Hospitals (Victoria) Enterprise Agreement 2023[1] (the Spotless Agreement) and the Health and Allied Services, Managers and Administrative Workers (Victorian Public Sector) (Single Interest Employers) Enterprise Agreement 2021-2025[2] (the VPS Agreement).
Clause 4.1 of the Spotless Agreement states that it applies to Spotless Facility Services Pty Ltd (Spotless) and its employees engaged to perform catering, cleaning, security, orderly and care attendant duties at public hospitals in Victoria.
Spotless’s business had been previously purchased by Downer EDI Limited (the Downer Group). As a result, the Downer Group’s employees outsourced to Alfred Health to perform the abovementioned duties, which is the business being transferred to Alfred Health, are still covered by the Spotless Agreement.
The Spotless Agreement is a “transferrable instrument” as defined in s.312 of the Act.
Alfred Health is seeking an order that employees whose employment is transferring to Alfred Health from the Downer Group on 1 May 2024 and who are covered by the Spotless Agreement (the transferring employees) will instead be covered by the VPS Agreement when they become employees of Alfred Health.
Background
The transferring employees are currently employed by the Downer Group to perform roles at Alfred Health under an outsourcing arrangement between the Downer Group and Alfred Health.
This arrangement will cease on 30 May 2024 and will not be renewed by Alfred Health.
In February 2024, Alfred Health provided offers of employment to Downer Group employees performing work under the outsourcing arrangement. As of 12 March 2024, 481 employees have accepted the offer.
This transfer of employment on 1 May 2024 provides for full recognition of service and a transfer of all accrued entitlements.
Statutory provisions
“318 Orders relating to instruments covering new employer and transferring employee
Orders that the FWC may make
(1) The FWC may make the following orders:
(a) an order that a transferable instrument that would, or would be likely to, cover the new employer and a transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee;
(b) an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.
Who may apply for an order
(2) The FWC may make the order only on application by any of the following:
(a) the new employer or a person who is likely to be the new employer;
(b) a transferring employee, or an employee who is likely to be a transferring employee;
(c) if the application relates to an enterprise agreement—an employee organisation that is, or is likely to be, covered by the agreement;
(d) if the application relates to a named employer award—an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (b).
Matters that the FWC must take into account
(3) In deciding whether to make the order, the FWC must take into account the following:
(a) the views of:
(i) the new employer or a person who is likely to be the new employer; and
(ii) the employees who would be affected by the order;
(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;
(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement;
(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;
(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;
(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;
(g) the public interest.
Restriction on when order may come into operation
(4) The order must not come into operation in relation to a particular transferring employee before the later of the following:
(a) the time when the transferring employee becomes employed by the new employer;
(b) the day on which the order is made.”
The power to make orders under s.318 is premised on the Commission being satisfied that there has been, or that there is likely to be, a transfer of business for the purposes of s.311 of the Act. I am satisfied that there will likely be a transfer of business from the Downer Group to Alfred Health for the following reasons.
First, as per sections 311(1)(a) and (b), the employment relationship between the Downer Group and the transferring employees will terminate upon the transfer of business and, immediately following the termination of their employment, the transferring employees will be employed by Alfred Health. Secondly, having regard to the information in the application, I consider that the work performed by the transferring employees for the Downer Group is the same as the work they will perform for Alfred Health (s.311(1)(c)). Finally, there is a “connection” between the Downer Group and Alfred Health as described in s.311(4) because the Downer Group has been outsourcing the work performed by the transferring employees to Alfred Health.
Next it will be necessary for me to consider s.318(3) which states that in deciding whether to make an order under s.318(1), the Commission must take certain matters into account.
The views of the new employer and affected employees – s.318(3)(a)
The view of Alfred Health, as the new employer, is that the application should be granted. They contend there will be the following benefits in standardising the employment conditions of transferring employees to match those of Alfred Health’s current workforce:
The standardisation will promote fairness and equity as employees performing identical roles will have access to the same benefits and conditions;
· Transferring employees will be better off under the terms of the VPS Agreement and applying it universally may enhance employee satisfaction and morale, and may foster a unified organisational culture by encouraging a sense of belonging and collective identity;
· Standardisation will reduce the complexity and cost associated with administering an additional enterprise agreement and will reduce the risk of compliance issues;
· Standardisation sends a clear message to employees about Alfred Health’s strategic goals and values, particularly in terms of employee welfare, operational efficiency, and ethical standards;
· Ensuring that employees are well-supported and receive fair and equitable employment conditions will mean service delivery is more likely to be of a higher quality; and
· Alfred Health in pursuing this application is demonstrating that they value their employees’ views as the decision to lodge the application is influenced by feedback from current and transferring employees.
Alfred Health says they have made employment offers to 529 transferring employees and as of 12 March 2024, 481 employees have accepted the offer. They asked the 529 employees to vote on whether they supported transferring to the VPS Agreement and of the 476 employees who voted, 98% of employees voted “yes” in support and 2% of employees returned an incomplete voting form.
The Health Services Union is covered by the Spotless Agreement and informed me at a conference regarding the matter on 12 March 2024 that they do not object to the application.
The views of the new proposed employer and the views of the transferring employees, which are in support of the application, weigh in favour of granting the order sought.
Whether any employee will be disadvantaged – s.318(3)(b)
The Commission must consider whether any of the transferring employees will be disadvantaged by the order sought in relation to their terms and conditions of employment.
Alfred Health submits that the transferring employees will be better off under the VPS Agreement. They submit that the VPS Agreement provides a number of more beneficial entitlements when compared to the Spotless Agreement, including entitlements to more beneficial salary packaging, meal breaks, annual leave and family violence leave, as well as entitlements that the Spotless Agreement does not provide for, including childcare reimbursement and a right to transition to retirement. Alfred Health concedes that transferring employees will receive a lower night shift allowance; however, they submit that the night shift allowance in the Spotless Agreement is equivalent to the allowance for permanent night shift in the VPS Agreement.
Alfred Health further submits transferring employees would benefit from the change sought because it would ensure standardisation of the terms and conditions provided to employees performing identical roles.
Alfred Health submits the relevant pay rates in the VPS Agreement and the Spotless Agreement are identical.
The absence of any demonstrable disadvantage weighs in favour of granting the order sought.
The nominal expiry date of the agreements – s.318(3)(c)
If the application under s.318 relates to an enterprise agreement, the Commission must consider the nominal expiry date of the agreement. The nominal expiry date for the Spotless Agreement is 21 April 2026 and the expiry date for the VPS Agreement is 30 June 2025. I consider the nominal expiry dates to be a neutral factor.
Negative impact on productivity – s.318(3)(d)
The Act requires the Commission to consider whether the transferrable instrument would have a negative impact on the productivity of the new employer’s workplace.
Alfred Health submits that administering an additional enterprise agreement would introduce complexities in managing and dealing with workforce related matters, including matters relating to payroll, staff rostering, human resources processes and employee relations.
They further submit that providing different terms and conditions for employees in the same role may lead to decreases in morale, motivation and overall job satisfaction, which in turn could negatively impact performance.
I consider this factor to weigh in favour of granting the order sought.
Whether the new employer will incur significant economic disadvantage – s.318(3)(e)
The Act requires the Commission to consider whether the new employer will incur significant economic disadvantage if the transferable instrument continues to cover the transferring employees.
Alfred Health submits that they would incur economic disadvantage if required to apply the Spotless Agreement to transferring employees. They submit that this is because they would have to engage the expertise of a third party to incorporate the changing entitlements into their payroll and human resources system, which is cloud-based and complex. They estimate the cost of doing so would exceed $50,000.
Alfred Health further submits that the introduction of an additional enterprise agreement would require the running of a separate payroll process every week, which would require the employment of an additional payroll staff member, incurring an annual cost of between $85,000 and $100,000. Alfred Health also submits they may incur increased operational costs in setting up the transferring employees under the Spotless Agreement. In comparison, they say that setting up the transferring employees under the VPS Agreement will allow for a more streamlined approach.
I consider this factor to weigh in favour of granting the order sought.
The degree of business synergy – s.318(3)(f)
The Commission is required to consider the degree of business synergy between the transferrable instrument and any workplace instrument that already covers the new employer.
Alfred Health submits that there is some business synergy between the Spotless Agreement and the VPS Agreement. They say that the Spotless Agreement appears to have used the VPS Agreement as its foundation, with a significant number of identical clauses and classifications, with some differences which are mainly more beneficial entitlements provided for in the VPS Agreement. They further submit that the pay rates in the VPS Agreement and the Spotless Agreement that would apply to transferring employees are identical.
I consider this to be a factor which weighs in favour of granting the order sought.
Public interest – s.318(3)(g)
Section 318(3)(g) requires the Commission to consider “the public interest”.
Alfred Health submits that it is not in the public interest that they administer two separate enterprise agreements with different terms and conditions provided to employees working identical roles, noting their distinctive role as a public hospital, for the following reasons:
· It could cause a sense of inequality which could lead to conflict and decreased morale, motivation, and collaboration. Alfred Health submits this perception of inequality could also diminish public trust in the hospital’s administration as the public expects fairness and equity in public institutions. They further submit this could expose the hospital to legal challenges and reputational damage;
· It will lead to unnecessary administrative complexity and cost;
· It may create challenges retaining staff under the Spotless Agreement as the VPS Agreement is more favourable; and
· The VPS Agreement being more favourable is likely to lead to higher job satisfaction and job security and in turn increases in productivity and effectiveness. Alfred Health says this is because transferring employees will likely be more motivated and committed if the VPS Agreement applies to them.
I am satisfied that it is not contrary to the public interest to grant the order sought. This weighs in favour of granting the order sought.
Conclusion
Having considered the application and supporting material and taking into account each of the requirements in s.318(3), I am satisfied that the order sought should be granted.
An order will be separately issued with this decision.
COMMISSIONER
[1] AE519747.
[2] AE515689.
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