Application by Mitchell
[2020] FWCA 1876
•12 MAY 2020
| [2020] FWCA 1876 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Application by Mitchell
(AG2019/4333)
IPCA (SA) ENTERPRISE AGREEMENT 2011
Fast food industry | |
DEPUTY PRESIDENT MILLHOUSE | MELBOURNE, 12 MAY 2020 |
Application for termination of the IPCA (SA) Enterprise Agreement 2011.
[1] Ms Stephanie Mitchell has applied under s.225 of the Fair Work Act 2009 (Act) to terminate the IPCA (SA) Enterprise Agreement 2011 (AG2011/7133)(Agreement). The Agreement nominally expired on 21 July 2015. 1
[2] For the reasons that follow, I have decided that it is appropriate to terminate the Agreement.
Context
[3] A single interest employer authorisation was made by the Commission in respect of the Agreement on 5 January 2011. The authorisation lists at Attachment A the names of 20 employer parties to the Agreement. 2
[4] The Agreement applies to each of the employers and their employees engaged in the job classifications of sandwich artist, senior sandwich artist, and restaurant supervisor/manager. 3 By order of the Commission dated 28 February 2014, the Agreement also covers all non-transferring employees of Knevitt Family Enterprises Pty Ltd engaged in the classifications covered by the Agreement.4
[5] Ms Mitchell is employed by D&L Schwartz Pty Ltd atf Dalzax Trust, being one of the employer parties, at the Subway Salisbury Plain site. Ms Mitchell has appointed the Shop, Distributive and Allied Employees’ Association (SDA) to act on her behalf. 5
[6] The Agreement reached its nominal expiry date on 21 July 2015. Ms Mitchell has standing to make the application because, pursuant to s.225(b) of the Act, she is an employee covered by the Agreement. Accordingly, the jurisdictional prerequisites for the making of an application under s.225 of the Act are satisfied.
Service of the application
[7] To provide an opportunity for interested parties to respond to the application, a dedicated page on the Commission’s public website was created making accessible the Form F24B application, Form F24C statutory declaration made by Mr Gerard Dwyer, National Secretary of the SDA, a comparison between the Agreement and the Fast Food Industry Award 2010 (FFIA), and the directions of the Commission. All relevant material filed in this application was published to the website. 6
[8] Mr Angelo Pardo, National Industrial Officer of the SDA, undertook an Australian Securities and Investments Commission (ASIC) search of each employer party listed in the single interest employer authorisation to ascertain details of service. The result of each ASIC search was provided to the Commission. 7 The Commission sent correspondence by post to each registered employer (and also by email where such contact details were known) advising them of the application with a link to the dedicated page on the Commission’s public website.
[9] In the circumstances, and at the SDA’s request on behalf of Ms Mitchell, 8 I have decided to deal with the application on the papers without conducting a hearing.
Consideration
[10] Section 226 of the Act provides:
“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.”
Public interest – s.226(a)
[11] The notion of public interest refers to matters that might affect the public as a whole, as distinct from the interests of the parties. 9 In the context of s.226 of the Act, public interest considerations are directed to the consequences of terminating the Agreement and particularly those consequences which are likely foreseeable.10 The question is whether the Commission is satisfied that termination of the Agreement is not contrary to the public interest.
[12] The SDA contends that the terms and conditions of employment under the Agreement have fallen below the minimum terms and conditions of the FFIA. It is submitted that increases in the rates of pay under the Agreement have not kept up with the rate of increases in the FFIA, so that over time the buy-out of penalty rates has been absorbed. As a consequence, the base rate of pay under the Agreement no longer compensates for lower penalty rates in the Agreement for work performed in the evening, Saturdays, Sundays and public holidays when compared to the FFIA. 11 As a consequence, employees under the Agreement are said to suffer a disadvantage in respect of their rates of pay and terms and conditions of employment.12
[13] Further, Ms Mitchell contends that the maintenance of proper industrial standards bears upon the notion of public interest. Relevant to this consideration is the fact that the Agreement nominally expired close to five years ago. 13
[14] Two employer parties filed submissions. None of the matters raised in these submissions address the question of public interest.
[15] There is nothing before me which raises public interest considerations that might militate against termination of the Agreement, such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. 14
[16] Based on the material filed with the Commission, I am satisfied that termination of the Agreement is not contrary to the public interest.
Section 226(b) – appropriateness of terminating the Agreement
[17] Ms Mitchell, as an employee covered by the Agreement, supports its termination. The SDA filed with the Commission a document which compares entitlements between the Agreement and the FFIA. It contends that the analysis contained in the comparison document supports termination of the Agreement. The SDA submits that reverting to the FFIA will restore the safety net of protections and will deliver material advantages to the employees covered by the Agreement. 15
[18] It is observed that the Agreement enables an employer to engage an employee under one of six minimum rate schedules, options A to F. Each option contains different minimum ordinary wage rates. The ordinary time rates under each option (which are subject to increases in accordance with clause 26 of the Agreement) vary markedly. The rates payable for work performed on weekends and public holidays also vary according to the selected option, and in the case of option A the ordinary time rates continue to apply for such work.
[19] A review of the matters in the comparison document, which have not been disputed by the employers, identifies various deficiencies in the terms and conditions of employment under the Agreement as against the FFIA. In the main, the weekend and public holiday penalties under the Agreement are less than the FFIA for the same work. 16 This issue is compounded by the fact that employees may be rostered to work on any day of the week.17 There is also no entitlement to an evening shift loading in all but one of the options.18 Further, the qualifying circumstances giving rise to an overtime payment are more confined under the Agreement.19 In the case of salaried employees there is no entitlement to overtime or any of the penalty rates prescribed within each of the options (excluding option A, which pays all hours at the ordinary time rate in any event). Rather, salaried employees are paid a weekly salary in satisfaction of all hours worked including reasonable additional hours.20 The Agreement does not provide any method for calculating the salary.
[20] Furthermore, there is no provision for annual leave loading under the Agreement. The Agreement is also silent on allowances including the meal allowance, special clothing allowance and the laundry allowance. While the Agreement contains a reimbursement of expenses clause, it is limited to travel, accommodation and “like” expenses. 21 It does not operate to capture circumstances unrelated to transport and travel.
[21] It is also submitted by way of the comparison document, and I accept, that the FFIA offers more favourable non-monetary entitlements to part-time engagement and casual conversion.
[22] These matters weigh in favour of a finding that it is appropriate to terminate the Agreement.
[23] No other employee views were provided to the Commission and there are no employee bargaining representatives covered by the Agreement from whom views were sought.
[24] Two employers made submissions in the application. These submissions address their views, circumstances and the likely effects any termination would have on them. The first submission relevantly states:
“I am writing to let you know of the impact that terminating our current employment agreement, IPCA (SA) Enterprise Agreement 2011 (hereafter referred to as Enterprise Agreement), is likely to have on our business. After approximately 3 years of operation in a shrinking market with increasing costs, we have had a significant increase in debt. Cashflow has become a significant issue.
The brand has endeavoured in the last 12 to 15 months to reinvigorate the business with an updated menu, 3rd party delivery and a loyalty program. At this point, this has resulted in an increase in sales but unfortunately has seen a decrease in our bottom line which has further exacerbated our cashflow issues. Now that a large portion of the changes have been rolled out, I believe the next 12 months will hopefully see a period of consolidation. A chance to revisit what is working and what isn’t, to alter some of the carton sizes for new products to avoid wastage and re-engineer some processes to deliver an increase in productivity and a decrease in wages etc. It is going to take some time to get profit back to an acceptable level and even longer to clear the debts that have accumulated. It is really not a good time for an increase in wages.
Many stores have been closed and many more are on the brink of closure according to data issued by IPCA. Whilst I respect the applicant and her right to bring this matter of terminating our Enterprise Agreement to the table, the timing is extremely dangerous. I know that when delivering the documents sent to me by the SDA on this issue to my staff, they were very concerned about the possibility of losing their jobs and this is a distinct possibility. Of course, they would like to see an increase in their income but did not want that to come at the expense of their job.
I have a very good relationship with my staff, I keep them informed of how the business is travelling, there is open communication, so they are aware of how tight things have become over the last few years. A number of them have worked for me for over 7 years and I have a vested interest in their future, I don’t want to stand in the way of what they rightfully deserve but I don’t want to support this if it will risk their job. At this point, I would say that their job is very much on the line and that it would be prudent to not go ahead with the termination of our Enterprise Agreement.
Many Franchisees are currently preparing their own payroll, with the cost of hiring professionals out of the question. Moving from the simple system of our current Enterprise Agreement to the Modern Award will add a lot of complication and a greater risk of errors and wrongly calculated payroll. It will also add to the administration cost/time for Franchisees who aren’t even taking a wage at the current time and haven’t been for some time.
If it has to go ahead, I would suggest that the termination be delayed until after winter. The winter period is our slowest as a brand and has the most impact on our cashflow. To avoid this period will be safer for all concerned, it will also give Subway the opportunity to consolidate the changes they have made. This time will also assist the Franchisees with becoming familiar with the Modern Award if that has to happen.
In conclusion, I don’t support the termination of our enterprise agreement due to the delicate position of our business and the brand and the more onerous requirements of the Modern Award. If it does become necessary to proceed, I would suggest delaying the termination until 31 August 2020 to give the business time to consolidate changes, sure up cashflow and avoid the risky winter period.”
[25] The second submission relevantly states that:
“We don’t wish to object the termination but wish to request more time to establish the new payroll systems and settings so that we can ensure we pay our staff correctly under the Fast Food Industry Award 2010.
We wish to request an extension date of 31 March 2020 – meaning we will pay our staff under the Fast Food Industry Award 2010 from 1st of April 2020.”
[26] The first employer submits that the timing of this application is “extremely dangerous” because cashflow is a significant issue for its business. It says that reverting to the FFIA will compound payroll complexities and increase administration and cost, albeit there is no material before the Commission in support of these contentions. Further, it is submitted that by terminating the Agreement employees may become entitled to an increase in take home pay. It says that this is not sought by its employees at the expense of their job, which “is very much on the line” if the Agreement is terminated.
[27] These submissions indicate that terminating the Agreement would lead to increases in employees’ take-home pay. This outcome is consistent with the earlier analysis, which demonstrates that the FFIA contains more favourable penalties for weekend, public holiday and evening work, as well as additional triggers for overtime payments. There are no apparent benefits under the Agreement capable of reconciling these deficiencies. While it is said that terminating the Agreement may impact job security, the Agreement does not offer an adequate safety net for employees covered by it. This weighs in favour of a finding that it is appropriate to terminate the Agreement.
[28] The second employer does not object to terminating the Agreement. There is no other material before the Commission as to the circumstances of the remaining employer parties.
[29] Having regard to the submissions advanced and all the circumstances as required by ss.226(b)(i) and (ii) of the Act, I consider it is appropriate to terminate the Agreement.
Conclusion
[30] As I have concluded that it is not contrary to the public interest to terminate the Agreement, and that it is appropriate to do so taking into account all the circumstances under ss.226(b)(i) and (ii), I must terminate the Agreement.
[31] The SDA contends that the termination should come into operation as soon as possible. However, the first employer seeks that any termination take effect from 31 August 2020. It contends that that this transitional period will enable it to consolidate necessary changes during the “slow” winter period. The second employer sought, at the time of making its submission, a shorter transitional period of approximately two and a half months for any termination to take effect.
[32] The Commission may exercise its discretion to allow a period of time between the decision and the specified date pursuant to s.227 of the Act. I am satisfied that changes will be required to the administration and payroll processes of each employer to ensure compliance with the FFIA. However, the transitional period sought is extensive. Having regard to the deficiencies in the Agreement, I consider that a period of two weeks is sufficient for this purpose.
[33] Accordingly, termination of the Agreement will operate from 26 May 2020.
DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
<AE886940 PR718168>
1 [2011] FWAA 4707 at [5]; Agreement cl.4.1
2 PR505639
3 Agreement cl.2.2, cl.3.6 and cl.10.1
4 PR548234
5 Statutory declaration of Ms Stephanie Mitchell declared on 11 November 2019 at [1]-[5]
6 Email from Mr Angelo Pardo dated 14 April 2020; Statutory Declaration of Mr Angelo Pardo declared on 22 January 2020
8 Submission from the SDA dated 3 March 2020
9 Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 (Kellogg Brown) at p.40; see also Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd [2015] FWCFB 540 (Aurizon)at [153]
10 Kellogg Brown at p.41
11 Form F24C Statutory declaration of Mr Gerard Dwyer declared on 12 November 2019 (Form F24C), 2.1 at [1]-[2]
12 Form F24C, 2.1 at [3]
13 Submission filed by SDA on behalf of Ms Mitchell dated 22 January 2020 (22 January submissions) at [10]-[12]
14 Kellogg Brown at p.41
15 22 January 2020 submissions at [16]
16 see FFIA cl.25.5(b)-(d) and cl.30.4
17 Agreement cl.15.1
18 contra FFIA cl.25.5(a)
19 Agreement cl.18.2; see FFIA cl.26.2 and cl.26.3
20 Agreement cl.3.14
21 Agreement cl.28
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