Application by Mihan
[2018] FWCA 41
•3 JANUARY 2018
| [2018] FWCA 41 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 16 - Application to terminate collective agreement-based transitional instrument
Application by Mihan
(AG2017/4244)
BELNIC COLLECTIVE AGREEMENT (2009)
Fast food industry | |
DEPUTY PRESIDENT BINET | PERTH, 3 JANUARY 2018 |
Application for termination of the Belnic Collective Agreement.
[1] Ms Jessica Mihan (Ms Mihan) has made an application (Application) to the Fair Work Commission (FWC) pursuant to Schedule 3 Item 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act) to terminate the Belnic Collective Agreement (2009) (Agreement).
[2] The parties to the Agreement are Belnic Pty Ltd T/A Subway (Belnic) and all employees of Belnic employed in the job classifications set out in the Agreement (Employees).
[3] Ms Mihan has made the Application in her capacity as an Employee of Belnic.
[4] There are no employee organisations covered by the Agreement.
[5] The Agreement has a nominal expiry date of 24 September 2014.
[6] The relevant reference award is the Fast Food Industry Award 2010 (Fast Food Award)
[7] Accompanying the Application, Ms Mihan filed a Statutory Declaration (Mihan Statutory Declaration), setting out the grounds on which she says the Agreement should be terminated.
[8] Directions were issued on 28 September 2017 inviting parties to file submissions in relation to the Application. On 29 September 2017 and 2 October 2017, Ms Mihan filed submissions in support of the Application. On 12 October 2017, Belnic filed submissions opposing the termination of the Agreement and forwarded a number of emails purportedly from Employees objecting to the termination of the Agreement.
[9] The Directions also required Belnic to provide a copy of the Application, the Mihan Statutory Declaration, Ms Mihan’s submissions, Belnic’s submissions and the Directions to all Employees.
[10] On 28 October 2017, the FWC became aware that Belnic issued the Employees with materials which may have caused some Employees some confusion in relation to enforceable entitlements under the Agreement.
[11] On 20 November 2017, a conference was held in relation to this matter. Further Directions were subsequently issued to the parties. The Further Directions required Belnic to provide to all Employees, inter alia, an analysis of the Agreement as compared to the Fast Food Award prepared by the staff of the FWC to ensure Employees had appropriate information to form a view in relation to the proposed termination of the Agreement.
[12] To ensure the authenticity of the evidence of the views of Employees, the Further Directions also required Ms Mihan and Belnic to file in the FWC and serve on each other evidence in relation to the views of Employees with respect to the termination of the Agreement. The Further Directions instructed that this evidence must be in the form of signed and dated witness statements or statutory declarations and that the deponents should be advised that they may be required to give oral evidence and/or be available for cross examination.
[13] The Directions and Further Directions invited any Employee who wished to be heard in relation to the Application to contact Chambers by 26 October 2017 and 21 December 2017, respectively. No written correspondence has been received directly from any Employee other than Ms Mihan as at the date of this decision.
[14] The Further Directions invited Ms Mihan and Belnic to inform Chambers by 21 December 2017 if they wished to make any oral submissions or examine any witness. Neither party elected to do so.
Legislative Framework
[15] For the purposes of Schedule 3, Item 16 of the Transitional Act, the Agreement is a Collective Agreement-Based Transitional Instrument. By virtue of Item 16 of the Transitional Act, the Agreement may be terminated pursuant to sections 225 and 226 of the Fair Work Act 2009 (FW Act).
[16] Section 225 of the FW Act states:
“225 Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.”
[17] Section 226 of the FW Act states:
“226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”
Consideration
[18] The leading authority with respect to applications made pursuant to section 225 is a decision of a Full Bench of the FWC in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd (Aurizon) [2015] FWCFB 540. The Full Bench remarked at [126]:
“The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.”
[19] As the Agreement has passed its nominal expiry date and the Applicant is an Employee covered by the Agreement, I find that the Applicant has standing to make the Application pursuant to section 225(b) of the FW Act.
Is it contrary to the public interest to termination the Agreement?
[20] Section 226(a) requires the FWC to be satisfied that it is not contrary to the public interest to terminate the Agreement.
[21] This requires the FWC to consider how the termination of the Agreement might foreseeably affect the public as a whole, such as the impact on the achievement or otherwise of the various objects of the Act, employment levels, inflation and the maintenance of proper industrial standards.1
[22] The public interest is distinct in nature from the interests of those covered by the Agreement. The views of those covered by an agreement may be relevant to the exercise of the discretion if they shed light on the effect of the termination on public interest, but those views should not be given any independent weight.2
[23] The object of the FW Act is set out in section 3 of the FW Act as follows:
“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:
…
(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;
…
(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;
…”
[24] The Agreement was approved by the Workplace Authority on 17 September 2009. At that time, the Agreement was required to pass the ‘No Disadvantage Test’. It was approved with variations, having previously failed the No Disadvantage Test. Since that time, a modern award reflecting the currently prevailing safety net of terms and conditions of employment has been created, and the approval test has been replaced with the Better Off Overall Test (BOOT).
[25] The minimum terms and conditions of employment in the fast food industry are now determined by the Fast Food Award and the National Employment Standards (NES). In the more than seven years since the Agreement was approved, the minimum terms and conditions in the fast food industry have changed significantly.
[26] The rates of pay provided for by the Agreement have fallen below the prevailing minimum rates as set out in the Fast Food Award for some categories of employees.3 In principle, this is addressed by Schedule 9, Item 13 of the Transitional Act, which requires that employees covered by the Agreement be paid the minimum base rates of pay as set out in the Fast Food Award. However, the entitlement to a higher base rate of pay would not be readily apparent to an Employee who is provided with a copy of the Agreement. Without further enquiry, an Employee might not be aware of the higher base rate of pay to which they are statutorily entitled.
[27] The Agreement now provides for terms and conditions inferior to those contained in the NES. For example, it provides that annual leave loading is not payable on accrued but untaken annual leave at termination and Employees can be required to work on public holidays. 4 As with award-based rates of pay, Employees are entitled to the benefits of the NES notwithstanding the terms of the Agreement. However, this entitlement is not apparent on the face of the Agreement and, without further enquiry, an Employee might not be aware of their statutory entitlements.
[28] Importantly, the lack of holiday pay and the different loadings payable under the Agreement as compared to the Fast Food Award means that there is potential for even those Employees who are entitled to a higher rate of pay under the Agreement to be disadvantage as compared to the Award, depending on their roster pattern. 5
[29] Furthermore, the Agreement lacks the allowances prescribed by the Fast Food Award.
[30] In addition, there are other terms and conditions contained in the Agreement which are less favourable than those contained in the Fast Food Award. For example:
a. Employees can be required to attend training and team meetings in their own time. 6
b. Part-time Employees are only entitled to overtime rates after they perform 76 hours per fortnight, not any hours in excess of their agreed hours of work. 7
c. The Agreement provides no minimum engagement period for casual Employees. 8
d. Voluntary overtime under the Agreement is paid at ordinary rates of pay rather than overtime rates of pay. 9
[31] The Agreement also lacks consultation and flexibility arrangements contained in the Fast Food Award which are mandatory terms in new enterprise agreements, as well as failing to provide for a dispute resolution procedure for disputes in relation to the NES. 10
[32] The objects in sections 3(f) and 171(a) of the FW Act are the facilitation of good faith bargaining and the making of enterprise agreements that deliver productivity benefits. The termination of an agreement can provide significant impetus for parties to negotiate replacement enterprise agreements.
[33] In some circumstances, it may be inappropriate for the FWC to interfere in the bargaining process by terminating an agreement so as to substantially alter the status quo in relation to the balance of bargaining between the parties. This is, however, not one of those situations. The fast food industry is one characterised by employees who, because of their skill sets, economic circumstances, age and the casualisation of their employment, have little or no bargaining strength. There is no evidence before me that the termination of the Agreement would so substantially alter the status quo as to unfairly force Belnic to concede to unreasonable claims by its workforce.
[34] The Fast Food Award sets the minimum standards that Belnic’s competitors must meet, and the parameters in which they must operate. Compliance with the Award should not commercially disadvantage Belnic so significantly that it is forced to concede to unreasonable claims. In fact, it is in the public interest, and consistent with the objects of the FW Act, to ensure that compliance by Belnic’s competitors with the minimum terms and conditions in the Fast Food Award does not commercially disadvantage those competitors as against Belnic because Belnic are operating under an agreement containing terms well below the minimum set by the Fast Food Award.
[35] The commercial advantage Belnic currently obtains from not being obliged to meet the minimum entitlements contained in the Fast Food Award, unlike its competitors, is a positive disincentive to Belnic negotiating a new enterprise agreement.
[36] Belnic submits that it is contrary to the public interest to terminate the Agreement because:
“Belnic would have to complete a full review of operating hours including weekends and public holidays to determine if it is viable to remain open during these times. [The franchisee, Mr Nicholas Beard] would expect that significant reductions to both weekend and public holiday trading hours would need to be made”.
[37] It might be argued that there is some public interest in the availability of fast food on weekend and public holidays as a matter of convenience to the general public. However, there is no evidence before me that, as a matter of fact, it will be unprofitable for Belnic to trade at these times if the Agreement is terminated. At the highest, Belnic only submit that it is a possibility that it will become unprofitable to trade. There is also no evidence before me to indicate that the public would not be able to source fast food from alternative providers.
[38] The inconvenience of Belnic undertaking these calculations does not outweigh the public interest in ensuring Employees do not suffer terms and conditions of employment below those set as national minimums. It also does outweigh the public interest in ensuring that that compliance by Belnic’s competitors with the minimum terms and conditions in the Fast Food Award does not commercially disadvantage those competitors as against Belnic.
[39] Based on the materials filed by Ms Mihan and Belnic, in consideration of section 226(a), and having regard to the decision in Aurizon, there is nothing before me which raises public interest considerations which might weigh against the termination of the Agreement. I am therefore satisfied that it is not contrary to the public interest to terminate the agreement.
What are the views of the Employees and employee organisations covered by the Agreement?
[40] There are no employee organisations covered by the Agreement whose views can be taken into account.
[41] On 12 October 2017, Belnic forwarded a number of emails and letters opposing the termination of the Agreement purported to be from 13 of the 40 Employees employed by Belnic. Only three were signed, and only six were dated.
[42] It appeared from this correspondence that some Employees may not have been fully aware of the terms and conditions of the Fast Food Award, and that they had been told that they would have shifts attracting penalty rates removed from them if the Agreement is terminated. It also appeared that Employees believed that the Fast Food Award was the only alternative in the event that the Agreement is terminated and were unaware that the parties could agree terms for a new enterprise agreement, which would be highly unlikely to reduce their take home pay and may, in fact, increase it.
[43] To ensure Employees were fully informed when reaching their decision, a comparison of the Agreement and the Fast Food Award was provided to Belnic on 27 October 2017 for distribution to Employees.
[44] To ensure the evidence of Employee views could be properly tested, the Further Directions required Ms Mihan and Belnic to file in the FWC, and serve on each other, all evidence in relation to the views of Employees with respect to the termination of the Agreement upon which they intended to rely before 14 December 2017. The Further Directions instructed that this evidence must be in the form of signed and dated witness statements or statutory declarations and that the deponents should be advised that they may be required to give oral evidence and/or be available for cross examination. No witness statements were filed by either Ms Mihan or Belnic.
[45] The Further Directions extended the opportunity for any Employee who wished to be heard in relation to the Application to contact Chambers until 21 December 2017. No written correspondence has been received directly from any Employee other than Ms Mihan as at the date of this decision.
[46] Any concerns about loss of income expressed in the unsworn and untested materials filed by Belnic are hypothetical and predicated upon Belnic implementing its threat to cease offering the Employees shifts attracting penalty rates. Whether Belnic will, or even operationally can, make good on this threat is not clear.
[47] I have no sworn or tested evidence of the views of Employees before me. None of the Employees took advantage of the two opportunities to provide their views directly to Chambers.
[48] I have modified the weight I have attached to the views of Employees accordingly.
What are the views of the Employer covered by the Agreement?
Belnic submits that the FWC should not terminate the Agreement on the grounds that to do so would have a negative effect on Employees working Monday to Friday who have families and/or mortgages because they “… are currently paid above award which would no longer be viable if not under this agreement”.
What are the circumstances of the Employees and employee organisations covered by the Agreement?
[49] There are no employee organisations covered by the Agreement whose circumstances can be taken into account.
[50] Belnic submit that:
“The overall effect to Belnic Pty Ltd is not fully known at this point, however an estimate based on a current roster would result in several staff members who rely on their income for mortgages, rent and to support family’s having their wages reduced whilst the majority of staff who would benefit live at home with parents and do not have dependents.”
[51] Belnic acknowledges that some Employees will benefit from the termination of the Agreement. This is consistent with the analysis conducted by the staff of the FWC. There is no evidence before me that, as a matter of fact, the income of any Employees will be reduced if the Agreement is terminated. At the highest, Belnic only submit that it is a possibility that income reductions will be necessary. In fact, given that Belnic submits that Employees are currently being voluntarily paid over the Fast Food Award, it is unclear precisely how an obligation to pay the Award rate will result in adverse outcomes for the Employees. Belnic are proposing to withdraw the staff meal and staff discount they currently offer the Employees if the Agreement is terminated. If they do so, this will presumably provide cost savings to assist funding any necessary changes in wage rates which might arise if the Agreement is terminated.
What are the circumstances of the Employer covered by the Agreement?
[52] Belnic submits that while “[t]he overall effect to Belnic Pty Ltd is not fully known at this point …” it may be necessary in the event that the Agreement is terminated for Mr Beard, the franchisee, to cover the weekend and public holiday shifts personally. Mr Beard says that this will impact on the time he spends with his family and will cause a loss of income for those Employees currently performing those shifts.
[53] There is no evidence before me that, as a matter of fact, it will be financially necessary for Mr Beard to personally work the weekend or public holiday shifts. At the highest, Belnic only submits that it is a possibility that it will be necessary. It is also unclear how Mr Beard could perform shifts at the two business locations simultaneously.
Is it appropriate to terminate the Agreement taking into all the circumstances?
As noted by Vice President Watson in Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union[2010] FWA 2434 at [16], “[t]aking into account the views and circumstances of the parties involves far more than an expression of their views in support or opposition to termination. It should involve a reason for their views and the validity of their concerns.”
[54] The Agreement was approved on 17 September 2009 and it reached its nominal expiry date on 24 September 2014. In the more than seven years since the Agreement was approved, the minimum terms and conditions in the fast food industry have changed significantly. It is not unusual for minimum terms and conditions of employment to improve over time, which is why the case for termination typically strengthens the longer an agreement has expired.11
[55] I have doubts about the validity of the concerns which Belnic submits it has, and its Employees have, in relation to the impact of the termination of the Agreement. Belnic has not filed any evidence of the potential economic impact of the termination of the Agreement on the viability of the business or the income of the Employees. The submissions made by Belnic at the highest are that there is a concern that the impact might be negative.
[56] Despite being directed to provide evidence of the views of the Employees in the form of formal witness statements or statutory declarations, neither party chose to do so. Nor did any Employees choose to take advantage of two opportunities to provide their views directly to Chambers. I therefore have concerns about the accuracy of the information provided by the parties in relation to Employee views.
[57] To the extent that some Employees may have concerns, I believe that these views may be based on a lack of familiarity with the Fast Food Award, misconceptions about the enforceability of the entitlements the Employees currently receive, fear of the threatened loss of shifts attracting penalty rates, and ignorance of the opportunity to undertake enterprise bargaining to produce an agreement suited to the specific needs of Belnic and the Employees.
[58] Termination of the Agreement does not condemn Belnic and its Employees to be permanently bound by the Fast Food Award, but it does guarantee that the Employees receive the entitlements which have been recognised as national minimums in this country in 2018. Belnic can avail itself of the various mechanisms available within the FW Act to agree with its Employees terms of a new enterprise agreement which recognises the needs of Belnic and its Employees.
[59] If Belnic is correct about the views of its Employees about their satisfaction with the existing conditions of employment, and Belnic is prepared to make the necessary adjustments to those conditions to satisfy the BOOT, there should be no reason why a new enterprise agreement which is consistent with the particular needs of Belnic and the Employees cannot be concluded in a timely manner.
Conclusion
[60] For the reasons enunciated above, I am satisfied that it is not contrary to the public interest to terminate the Agreement.
[61] Taking into account all the circumstances, including the views and circumstances of Belnic and its Employees, I am satisfied that it is appropriate to terminate the Agreement.
[62] Accordingly, the Agreementis terminated. The termination is to take effect on and from the date of 5 February 2018 to enable Belnic to make any necessary payroll and rostering changes.
DEPUTY PRESIDENT
1 Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 at 40-41.
2 Ibid.
3 Belnic Collective Agreement (2009) (Agreement) at Schedule 2 and Fast Food Industry Award 2010 (Fast Food Award) at Part 4.
4 Workplace Relations Act 1996 (Cth) at s.s 114-116; Agreement at cl 34.
5 Agreement at cl 5, 13 and 17; Fast Food Award at Part 5.
6 Agreement at cl 19 and 36.
7 Agreement at cl 5.2; Fast Food Award at cl 12.
8 Fast Food Award at cl 13.
9 Agreement at cl 17.
10 Fast Food Award at cl 7, 8 and 9.
11 Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union[2010] FWA 2434 at [31].
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