Application by Tasha Jones
[2018] FWCA 2571
•28 MAY 2018
| [2018] FWCA 2571 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date
Application by Tasha Jones
(AG2018/1416)
SAMSUB PTY LTD ENTERPRISE BARGAINING AGREEMENT 2010
Fast food industry | |
COMMISSIONER HAMPTON | ADELAIDE, 28 MAY 2018 |
Application for termination of the Samsub Pty Ltd Enterprise Bargaining Agreement 2010.
1. The application and the parties
[1] This decision concerns an application by Ms Tasha Jones pursuant to s.225 of the Fair Work Act 2009 (the FW Act). Ms Jones is represented by the Shop, Distributive and Allied Employees Association (SDA). The application seeks to terminate the Samsub Pty Ltd Enterprise Bargaining Agreement 2010 (the Enterprise Agreement).
[2] The Enterprise Agreement was approved 1 by the Commission on 5 August 2010 under the terms of the FW Act with a nominal expiry date of 11 August 2014.
[3] Ms Jones commenced work as a Sandwich Artist at Subway Hope Valley in October 2014. At that time the store was owned by Samsub Pty Ltd (Samsub), which is the employer party expressly covered by the Enterprise Agreement.
[4] On 18 October 2015, Subway Hope Valley was, in effect, sold to Sleeth Family Trust (Sleeth). Ms Jones continued to work at the Hope Valley site after its sale and remains in that employment with Sleeth. Under the transfer of business provisions of the FW Act, 2 the Enterprise Agreement also transferred to Sleeth for relevant employees, including Ms Jones.
[5] As a result, although Ms Jones is no longer employed by Samsub her employment is still covered by the Enterprise Agreement, along with one other employee of Sleeth who transferred and also remains in that employment. In addition, Samsub, which now operates a Subway store at St Agnes, and its employees, remain covered by the Enterprise Agreement.
[6] The application was initially subject to a telephone directions conference on 23 April 2018. Ms Blythe McLachlan-Kambuts from the SDA appeared on behalf of the applicant, Mr Michael King appeared on behalf of Samsub and Ms Sharon Sleeth on behalf of Sleeth.
[7] The Commission subsequently issued directions on 24 April 2018 and the matter was listed for hearing.
[8] The directions 3 included the requirement for both employers to provide a copy of the notice of listing and directions to all employees covered by the Enterprise Agreement. The directions also explained the nature of the application and invited employees to express a view about the matter including by raising any concerns directly with the Commission.
[9] In response to the directions, Samsub confirmed that it did not oppose the termination of the Enterprise Agreement but that a 6 month delay in the operation of any decision would be sought. Sleeth advised that it did not oppose the application, did not seek a delay, and did not have a preference on the length of any delay in giving effect to the termination should the Commission consider any such delay.
[10] A hearing was subsequently conducted on 14 May 2018 to deal with the matter.
2. The relevant legislation
[11] Without overlooking the objects of the FW Act in s.3 and s.171, and other provisions that set the context for this application, the immediately relevantly provisions are as follows:
“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.
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.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”
[12] Ms Jones is covered by the Enterprise Agreement and has made a valid application under s.225 of the FW Act. The Enterprise Agreement has passed its nominal expiry date, some three and a half years ago.
3. The positions and circumstances of the parties
[13] The SDA, on behalf of Ms Jones, contends that:
• Employees would be covered by the Fast Food Industry Award 2010 (the Award) in the event the Enterprise Agreement is terminated;
• There would be a net increase in the conditions of employment for employees as they would be entitled to receive penalty rates and allowances under the Award (which they are not entitled to under the Enterprise Agreement);
• No employee has raised an objection to the termination; and
• The Enterprise Agreement should be terminated effective immediately. In this regard, the SDA contend that:
• The Commission should take into account that the Enterprise Agreement passed its nominal expiry date in 2014;
• Transitioning employees to the Award would improve employment conditions for Ms Jones and the other employee affected at Sleeth, as well as all staff employed at Samsub on weekends and public holidays; and
• Any negotiations for a new agreement with Samsub at the St Agnes store and its staff should not delay the operation of the termination of this Enterprise Agreement as the two employees currently working at Sleeth’s Hope Valley store would not benefit from that arrangement and accordingly this should not be a relevant consideration.
[14] Samsub confirmed that it did not oppose the termination of the Enterprise Agreement but contends that its effect should be delayed for a period of 6 months on the following grounds:
• Samsub requires time to canvass the views of its employees about any new arrangements, and if they support a new agreement, to then bargain and apply for the approval of a new enterprise agreement;
• Samsub is a small business and the effect of the termination will require them to make administrative changes to rosters, payroll and potentially to restructure hours of work; and
• Samsub has increased the loaded rate of pay under the Enterprise Agreement each year by 3 per cent and therefore the current rates when compared to the base rate of pay (including penalty rates) under the Award are not that disparate.
[15] Sleeth confirmed the position outlined earlier in this decision.
[16] All employees covered by the Enterprise Agreement were notified of the application 4 and given an opportunity to make any written submissions or to attend the hearing. No employees have raised any concerns about the application and none, other than Ms Jones, provided any submissions or attended the hearing of this matter. Noting this process, the fact that the application is brought by an employee who is represented by the SDA and that the application is not opposed by any party, I do not consider that an additional process to further canvass the views of the employees was necessary.5
[17] It is common ground that the Award covers the employment of all relevant employees and would apply in the absence of the Enterprise Agreement.
[18] In general terms, the Enterprise Agreement contains “loaded” rates of pay which were apparently designed to compensate for the non-incidence of most of the penalty rates and loadings that would have otherwise applied. The Enterprise Agreement also provides that the loaded rates were to be adjusted by 3 per cent on three specific dates set out in the agreement. Based upon the material now before the Commission, it is evident that the two employers involved with this matter have adopted different approaches to the adjustment of the rates beyond those nominated dates.
[19] Samsub has continued to (voluntarily) 6 adjust the wage rates each year. Sleeth has apparently not done so and as a result of the operation of the FW Act, it now pays its employees who are covered by the Enterprise Agreement the relevant base rate specified in the Award. That is, s.206 of the FW Act provides, in effect, that the base rate payable to an employee under an enterprise agreement cannot be less than the base rate of pay applicable to that employee under a relevant modern award. In the cases of both employers, under s.52 of the Act, the conditions of the Award (including the more beneficial penalties and loadings) do not apply whilst the Enterprise Agreement applies to the employees.
[20] As to the relationship between the terms of the Enterprise Agreement and the Award the following is clear:
• There are no penalty rates under the Enterprise Agreement (apart from an apparent 10% loading on hours worked in excess of 9.00 pm) and employees are instead paid a loaded flat rate for all hours worked. Under the Award, an employee is entitled to (additional) penalty rates for weekday evening work (beyond 10.00pm), weekends (Saturday 25% and Sunday 45%) and Public Holiday work (125%);
• There is a 25% casual loading which applies to casual employees under both instruments, although Samsub does not currently employ any casual staff members; and
• Under the Award, a loading of 17.5% applies to annual leave taken by part-time and full-time employees, although no such loading applies under the Enterprise Agreement.
[21] In relation to the rates of pay, the different circumstances of the parties lead to the following:
• The rates of pay under the Award differ depending on which level an employee is classified and range between a Level 1 to a Level 3 in charge of 2 or more persons. The current rates provided by Samsub apply a loaded rate which increases according to age, as follows:
• The current Adult rate paid by Samsub is $21.77. Under the Award, the Adult base rate ranges from between $20.08 per hour (Level 1) to $21.88 per hour (Level 3 – in charge of 2 or more persons).
• The current rate of pay for a 20 year old paid by Samsub is $19.59 per hour. Under the Award, the 20 year old base rate ranges from between $18.08 per hour (Level 1) to $19.70 per hour (Level 3 – in charge of 2 or more persons).
• The current rate of pay for a 19 year old paid by Samsub is $17.41 per hour. Under the Award, the 19 year old base rate ranges from between $16.07 per hour (Level 1) to $17.51 per hour (Level 3 – in charge of 2 or more persons).
• The current rate of pay for an 18 year old paid by Samsub is $15.24 per hour. Under the Award, the 18 year old base rate ranges from between $14.06 per hour (Level 1) to $15.32 per hour (Level 3 – in charge of 2 or more persons).
[22] I understand that from the limited material that is before the Commission that Samsub engages only Level 1 part-time employees under the Enterprise Agreement.
[23] In the case of Sleeth, the base award (casual) rates are paid to those covered by the Enterprise Agreement.
[24] I note that in relation to the other employees of Sleeth (those not covered by the Enterprise Agreement) the full terms of the Award are already applicable.
[25] As a result, for Samsub employees, the base rate for all Level 1 employees is marginally higher than the base rate in the Award. Accordingly, for those part-time employees who only work Monday to Friday the termination of the Enterprise Agreement would mean the loss of the marginally higher rates. However, any employee working on weekends and Public Holidays would be significantly better off in terms of rates of pay under the Award. This would include any employees who work both weekdays, weekends and/or Public Holidays. In all cases, the additional annual leave loading would be applied; albeit to the marginally lower award base rates.
[26] In relation to Sleeth employees, including Ms Jones, the termination of the Enterprise Agreement would mean that the full range of penalty payments and additional loadings (where applicable) would become payable.
[27] In addition to matters set out above, there are also other differences between the two instruments. These include that, in relation to part-time employees, the Award provides that the employee and employer will agree on a regular pattern of work specifying (at least) the hours of work each day, start and finish times and the duration of any meal breaks amongst other things. Overtime is payable outside of those arrangements unless a written variation is agreed. There is no such requirement under the Enterprise Agreement and whilst it may be the current practice adopted by the employers, it is not currently required by the agreement.
[28] The ordinary hours of work under both instruments for a full-time employee is 38 hours per week averaged over a four week period. The maximum hours of work under the Award is 11 ordinary hours on any day. This is more than the maximum number of hours of work under the Enterprise Agreement (being 9 hours in any shift). A loading applies for weekday work after 9.00pm under the Enterprise Agreement whereas a loading is payable after 10.00pm under the Award. It is difficult to assess the practical impact of these differences given the absence of information about rosters and any such changes also need to be considered alongside the likely application of relatively significant penalty rates for those hours worked on weekends.
[29] There are other differences between the instruments however it is a reasonable inference that the package of provisions under the Award will provide more benefits to the employees than the Enterprise Agreement and increase the employment costs for the businesses, at least to some degree. For those employees working on weekends and Public Holidays or taking annual leave, the additional benefits of the Award are significant.
4. Consideration
[30] The fact that the Enterprise Agreement should be terminated is not disputed by the parties appearing in this matter. The Commission must however consider and apply the considerations set out in s.226(b) of the FW Act.
[31] Both of the employers support, or are not opposed to, the termination, Ms Jones has made the application and clearly supports the termination and the other employees may support, or at the very least are not opposed, to the application. I have had regard to those views and the reasoning underpinning them.
[32] The termination of the Enterprise Agreement will mean that the more contemporary conditions and provisions of the Award will apply to the parties. Further, the problematic interaction between the present instrument and the operation of the FW Act will be removed. The termination may also lead to some staffing and other business changes as a result of the different provisions and costs, and this must be taken into account as part of the overall assessment. All of these matters are relevant to the considerations provided by s.226(b)(ii) of the FW Act.
[33] There is presently no bargaining for a new enterprise agreement taking place; although Mr King has foreshadowed that he will be seeking the views of his employees to determine whether they would support a new instrument being made.
[34] In all of the circumstances I am satisfied that the termination of the Enterprise Agreement would not be contrary to the public interest.7 I am also satisfied that the termination is appropriate having regard to the likely effect of that action and the views and circumstances of the parties.
[35] As a result of these findings, the Commission is obliged by the operation of s.226 of the FW Act to terminate the Enterprise Agreement.
5. The date of effect
[36] The SDA on behalf of Ms Jones contends that the effect of s.227 of the FW Act is that the termination is to operate from the date of the termination decision. However, s.227 provides that the termination “operates from the day specified in the decision to terminate the agreement” and this means that the Commission is given a discretion to decide the date that the termination takes effect. I also observe that given this provision, it is not open to the Commission to determine different termination dates for the two employers involved with this matter.
[37] As set out earlier, Ms Jones also seeks that the termination operate immediately given the more beneficial operation of the Award and the fact that the negotiation of any new agreement at Samsub will not involve or benefit her.
[38] Samsub seeks a six months delay in order to make the necessary changes and to negotiate a new enterprise agreement with employees, should they so choose. The basis for that proposition is that the current agreement pays a higher rate to those employees who are working Monday to Friday. Samsub contends that its employees in those categories tend to be those who rely upon that income to support their households whereas those working on the weekends tend to be students.
[39] In exercising the discretion provided by s.227 of the Act I consider that the Commission should have regard to all of the relevant circumstances including those assessed in determining whether the agreement should be terminated. That is, the determination of the date of effect must be an overall assessment having regard to all of the relevant circumstances taking into account the needs and particular circumstances of the parties. Further, public interest considerations may also have a role to play and each matter must be determined in its own circumstances.
[40] In this case, I consider that given the impact of the termination upon the employers, and Samsub in particular, some delay is appropriate to enable the businesses to deal with those consequences including some additional employment costs. This may also lead to changes in staffing and other arrangements with the consequential need to consult those affected and to have regard to their individual interests.8
[41] The factors outlined above must be weighed against the fact that the Enterprise Agreement is well below the minimum safety net determined by the Commission for some employees and the continuing impact of any delay upon the employees covered by the agreement, and the community more generally, is also a relevant and important contrary consideration.
[42] I have also taken into account the fact that the employers have known since early May 2018 that the termination of the Enterprise Agreement may well occur. This would have permitted some planning and preparation to commence; albeit without the certainty of a decision of the Commission. I note also that in terms of Sleeth and the conditions to be applied to Ms Jones (and other employee still covered by the Enterprise Agreement) it is able to apply the more beneficial terms of the Award at any time. Indeed, given that the Award is already being applied to all other employees, and Sleeth did not seek any delay in the termination of the Enterprise Agreement, this has much to recommend it.
[43] In terms of the negotiation of an enterprise agreement, the objects of the Act 9 encourage that course of action. There are however some difficulties associated with the concept being considered by Samsub. Amongst the various approval requirements for an enterprise agreement, the Better Off Overall Test of s.193 requires the Commission, in effect, to be satisfied that each class of employee would be better off overall with the approval of the agreement.10 An approach that averaged the payments across the roster but left the weekend employees worse off than under the Award would not be able to be approved.
[44] This does not mean that Samsub should not consult its staff about the making of an enterprise agreement and I would encourage it to do so. However, it is unlikely that this process will be straightforward or allow for the current model and staffing arrangements to be maintained.
[45] In those circumstances, I do not consider that it is appropriate to provide for the length of delay sought by Samsub, particularly given the fact that this would also delay the significantly beneficial provisions of the Award to many of the employees.
[46] Both employers apparently run their own payroll system. However, given the size of the businesses and apparent nature of employment, the required changes to the payroll systems are unlikely to be complex but some time to adjust is warranted. Further, I note that the reversion to the Award would mean a slight reduction in wages for some employees. A delay to allow any increase in the relevant modern award rates, which would be expected to arise from the current annual wage review being conducted by the Expert Panel,11 to take effect, may reduce or eliminate the differential in rates for the employees concerned. Any such award increase would come into operation on 1 July 2018, absent exceptional circumstances.12
[47] On balance, I consider that a delay in the termination of the Enterprise Agreement until the end of June 2018 is appropriate and reasonable in all of the particular circumstances of this application.
[48] The termination of the Samsub Pty Ltd Enterprise Bargaining Agreement 2010 will take effect at 11.59 pm on 30 June 2018.
[49] I recommend that Sleeth immediately commence to pay Ms Jones and the other employee presently covered by the Enterprise Agreement the more beneficial provisions of the Award in line with the approach already being applied to all of its other employees.
COMMISSIONER
Hearing details:
2018
Adelaide
May 14.
Appearances:
B McLachlan-Kambuts of Shop, Distributive and Allied Employees Association on behalf of Ms Jones, the applicant employee.
M King on behalf of Samsub Pty Ltd.
Final written submissions:
Samsub Pty Ltd – 22 May 2018.
Shop, Distributive and Allied Employees Association – 22 May 2018.
1 Samsub Pty Ltd [2010] FWAA 5955.
2 Part 2-8 of the FW Act.
3 Due to an issue with an out-dated email address the directions were not received by Samsub. As a result, revised directions were subsequently issued and sent to the parties on 9 May 2018.
4 The revised directions issued on 9 May 2018 required both Samsub and Sleeth to make the notice of listing and the directions available to all employees covered by the agreement at the respective workplaces.
5 See Application by Johnston-Wyly [2018] FWCA 908 at [39].
6 See by contrast the approach required where the annual adjustments in an enterprise agreement are not linked to specific years as discussed in B-d Farm Paris Creek Pty Ltd v Ian Johnson [2017] FWC 3687.
7 The application of the public interest test was canvassed by the then AIRC in Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 and by the Full Federal Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126.
8 See for example Re Shop, Distributive and Allied Employees Association[2017] FWCA 5703 at [7] where the Commission has taken into account the desirability of allowing employers a transitional period to deal with the consequences of an agreement termination.
9 Section 3 of the FW Act.
10 See for example: Hart v Coles Supermarkets Australia Pty Ltd[2016] FWCFB 2887 at [6].
11 Under Part 2-6, Division 3 of the FW Act.
12 Section 286 of the FW Act.
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