Awx Pty Ltd & Awx Staff Pty Ltd and Others
[2023] FWCFB 262
•21 DECEMBER 2023
| [2023] FWCFB 262 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch 3, Item 20A(4)—Application to extend default period agreement‑based transitional instrument
Awx Pty Ltd & Awx Staff Pty Ltd and Others
(AG2023/3817)
| EMPLOYEES AWX PTY LTD CERTIFIED AGREEMENT | |
| DEPUTY PRESIDENT WRIGHT | SYDNEY, 21 DECEMBER 2023 |
Application to extend the default period for the Employees AWX Pty Ltd Certified Agreement
AWX Pty Ltd, AWX Staff Pty Ltd, Retail Staff Pty Ltd and Tribe Workforce Pty Ltd (Applicants) have applied, pursuant to item 20A(4) of Sch 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (Cth) (TransitionalAct), to extend the default period for the Employees AWX Pty Ltd Certified Agreement (Agreement).
The Agreement was certified by the Australian Industrial Relations Commission (AIRC) pursuant to s170LK of the Workplace Relations Act 1996 on 22 September 2004. It is an agreement-based transitional instrument as defined in the Transitional Act.
The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBPAct) to provide for the automatic termination of all remaining transitional instruments. Pursuant to items 20A(1) and (2) of Schedule 3 to the Transitional Act, the Agreement was to terminate on 6 December 2023 (the end of the default period) unless it is extended by the Commission. The main features of item 20A of Schedule 3 to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd (‘Suncoast’).[1]
When an application is made under subitem 20A(4) the Commission is required under subitem (6)(a) to extend the default period if satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so. Put briefly, subitem (7) applies if, at the time of the application, the applicant is bargaining for a replacement agreement. Subitem (8) applies to individual agreement-based transitional instruments. And Subitem (9) applies if it is likely the employees covered by the Agreement would be better off overall if the Agreement continued to apply. This is the better off overall test (BOOT). The Commission must also extend the default period under subitem (6)(b) if satisfied that it is reasonable in the circumstances to do so.
The application is made pursuant to subitem (6)(b).
Background
The Agreement covers full time, part time, casual, junior, apprentice and trainee employees across multiple States and Territories of Australia. It has been varied a number of times since its commencement and has been expanded to cover additional employees by transfer of business orders made between June 2012 and December 2014.
The Applicants rely upon a witness statement of Carla Stieper, Head of People. Ms Stieper annexes a number of documents relevant to the history of the Agreement. The following background is taken from that material.
The Agreement covers four entities:
·AWX Pty Ltd (AWX), which currently employs approximately 323 casual and 95 permanent employees.
·AWX Staff Pty Ltd (AWX Staff), which currently employs approximately 118 casual employees and no permanent employees.
·Retail Staff Pty Ltd (Retail Staff), which currently employs approximately 540 casual employees and no permanent employees.
·Tribe Workforce Pty (Tribe), which currently employs approximately 882 casual and 165 permanent employees.
The total number of employees covered by the Agreement is 2,123. Of those 1,863 are engaged as casual employees.
The Applicants operate their respective businesses on a primarily labour hire basis with employees engaged in work otherwise covered by the following Modern Awards:
·Clerks – Private Sector Award 2020
·Concrete Products Award 2020
·Food, Beverage and Tobacco Manufacturing Award 2020
·Gardening and Landscaping Services Award 2020
·Manufacturing and Associated Industries and Occupations Award 2020
·Storage Services and Wholesale Award 2020
·Road Transport and Distribution Award 2020
·Hospitality Industry (General) Award 2020
·Restaurant Industry Award 2020
The Agreement contains 150 classification levels with loaded weekly rates attributed to each classification level. For permanent employees, the loaded rate compensates employees for weekend and shift penalties as well as all allowances otherwise payable under the Awards. For casual employees, the weekly loaded rate is divided by 38, and a 25% loading is payable on top of the hourly rate which compensates employees for all work performed. Casual employees are not entitled to weekend, shift, overtime, public holiday penalties or allowances otherwise payable under the Awards. There are a number of rates of pay in the Agreement that fall below the Award rates, and while these base rates would be increased in line with the relevant award in accordance with item 13 of Sch 9 of the Transitional Act, given the rates are loaded and intended to compensate for a number of penalties and allowances, employees paid equal to the Award would be worse off having regard to the reductions of these entitlements. This is especially the case for casual employees, who make up the bulk of the employees covered by the Agreement, given their rate of pay is paid for all hours worked, and no overtime, shift or weekend penalties are payable. This has been a feature of the Agreement since inception and has underpinned the Applicants’ business model as labour hire businesses.
The Applicants do not pay strictly in accordance with the Agreement. Ms Stieper described the current pay arrangements as involving employees falling into four categories. Those categories are: those who receive the Agreement flat base rates with no penalties or overtime; those who receive a flat loaded rate which is a rate above the Agreement but still does not attract penalties or overtime; those who are paid a ‘CA additional rate’ which is above the flat loaded rate but still would not meet the BOOT because not all penalties, overtime or allowances are paid; and, those who are paid full award rates which involves payment in accordance with the relevant modern award. AWX and AWX Staff only pay 1% of their staff at the Agreement flat base rates. Retail Staff and Tribe pay 45% of their staff at the Agreement flat base rates. AWX and AWX staff pay 2.6 % of their employees at the flat loaded rates. Retail Staff and Tribe pay 27% of employees at the flat loaded rates. AWX and AWX staff pay 47% of their employees at the CA additional rates. Retail Staff and Tribe pay 1% of their employees on the CA additional rates. Retail Staff and Tribe pay 27% of employees at the flat loaded rates. AWX and AWX Staff pay 41% of employees at full award rates. Retail Staff and Tribe pay 4.5% of employees the full award rates. On these figures AWX and AWX Staff who together employ 536 staff are paying 265 employees less than the modern award rates. Retail Staff and Tribe who together employ 1,587 employees are paying 1,490 less than the relevant award. In total, 1,755 employees are being paid less than the relevant awards.
The Applicants’ first argument in support of extending the Agreement is that they have a large workforce with many casuals that operates in different industries across a number of Modern Awards and across a number of geographical locations. This is said to create a challenge for bargaining. It is proposed by the Applicants that the employees will no longer be covered by one agreement. Each of the Applicants have issued Notices of Employee Representational Rights (NERRs) to their employees.
Two of the Applicants, AWX and AWX Staff, issued NERRs in June 2023. The proposed agreement for AWX will cover employees performing work in the clerical and administrative sector, concrete products, food beverage and tobacco manufacturing, gardening, and landscaping, manufacturing, and storage and wholesale services. The proposed agreement for AWX Staff will cover work in similar industries. The letters to employees accompanying the NERRs stated that it was proposed to distribute a draft agreement ‘in the coming weeks’. It foreshadowed that employees would have the opportunity to attend meetings online and in person to discuss the proposed agreement and indicated that a vote would occur following those meetings. It appears from Ms Stieper’s statement that at the time the applications were made the discussions with employees had not commenced. Ms Stieper said that those discussions were expected to commence around November 2023, and it is expected to take 12 months for replacement agreements to come into force.
The other two applicants, Retail Staff and Tribe, issued NERRs on 2 October 2023. The Retail Staff proposed agreement will cover work in the hospitality and restaurant industries. The Tribe proposed agreement will cover work in the same industries. These employees were also told that there would be an opportunity to attend meetings online and in person to discuss the proposed agreement and indicated that a vote would occur following those discussions. According to Ms Stieper’s statement, those discussions were expected to commence around November 2023, and it is expected to take 12 months for replacement agreements to come into force.
The Applicants also say they would be exposed to significant cost and operational complexities associated with configuring payroll and administrative systems if required to transition from the Agreement to each of the Modern Awards and then to enterprise agreements within a short period of time. Ms Stieper indicated that the Applicants were in the process of implementing a new payroll system to cater for the expiry of the Agreement. Details were provided of the various software that the businesses use to calculate current rates of pay. The process of reconfiguring the systems to cater for the Awards was described as cumbersome. The project had already involved the allocation of significant resources. Ms Stieper expressed a preference to not have to go through a similar process to accommodate new agreements in 12 months’ time.
Ms Stieper also pointed to a further matter in support of the application being the complexity arising by virtue of the nature of the Applicants’ labour hire businesses. The businesses are subject to commercial agreements and contracts with customers where it is obliged to provide labour at agreed contractual rates. Those rates will need to be changed if the Applicants are required to pay penalty rates in accordance with the awards. This will require commercial negotiations with each of its customers. It says that there is a prejudice to the business if the Applicants have to renegotiate rates to take effect in December 2023, and then renegotiate those rates again within a period of 12 months upon the approval of new enterprise agreements.
In support of the application the Applicants submit that while it has taken some time for the bargaining to commence with their employees, given the sunsetting of zombie agreements was announced and legislated over 12 months ago that time delay is explained by the complexity of its workforce, the complexities that surround the changes to its payroll and administrative systems, and the complexities surrounding its strategy on engagement and renegotiation of new rates with customers. Those matters are said to require more time to deal with the issues that will arise out of the requisite changes. A further factor in the complexity associated with the sunsetting of the Agreement is said to be the payroll and administration challenges associated with the fact that certain cohorts of employees may work different jobs in different industries at different rates of pay.
Consideration
The Commission must extend the default period pursuant to subitem 6(b) if it is reasonable in the circumstances to do so. This involves the application of a broad evaluative judgement.
Full Bench decisions have considered when it will be reasonable in the circumstances to extend the default period. In Suncoast,[2] the Full Bench said:
[17] The ‘reasonable’ criterion in the subitem should, in our view, be applied in accordance with the ordinary meaning of the word – that is, “agreeable to reason or sound judgment”. Reasonableness must be assessed by reference to the circumstances of the case, that is, the relevant matters and conditions accompanying the case. Again, a broad evaluative judgment is required to be made.
While each application will turn on its own circumstances recent Full Bench decisions provide some guidance as to how the broad evaluative judgment required by subitem 6(b) should be applied. The following have resonance with the current matter:
· In Peter Frick,[3] the Full Bench considered that the default position of the statute to automatically terminate transitional instruments suggests a policy preference for employees covered by zombie agreements to be regulated by contemporary instruments made under the Fair Work Act 2009 (FWAct).[4]
· In Qualipac,[5] the Full Bench rejected an application for an extension of the default period in circumstances where an applicant wanted to continue to rely on inferior terms and conditions in a zombie agreement, noting the need to ensure that the integrity of the safety net provided for by the Act and modern awards is not undermined by very old agreements that may no longer meet contemporary standards.
· In Kalfresh Management Services Pty Ltd,[6] the Full Bench expressed a view that where an agreement contains inferior and outdated terms and conditions, this weighs strongly against a conclusion that it is reasonable in the circumstances to extend a default period.[7]
· In Karpay Pty Ltd[8] the Full Bench refused to extend an Agreement where it was contended that an extension was required as there was some complexity in introducing software to manage the new arrangements under the modern award. The Full Bench balanced the harshness associated with the employees enduring ongoing inferior penalty rates in the Agreement with the inconvenience claimed by the applicant. The failure of the employer to commence bargaining for a replacement agreement was also a factor.
In this matter, the Agreement was made in 2004. It has not kept up with modern standards. It provides for terms and conditions which are inferior to those found in the relevant modern awards. The Agreement covers a large number of employees. Most of the employees are engaged as casual employees. The Agreement has been varied and its scope expanded to increase its coverage a number of times. It appears from decisions of the Commission referred to by the Applicants that as the business grew, the corporate structure of AWX Pty Ltd changed and the Agreement became the subject of orders made under s.318 of the FW Act to allow the Agreement to cover new employees of the new entities. The last of those orders was made in 2014.[9] As the business grew, the Applicants have been diligent in ensuring that the Agreement and its inferior conditions continued to apply. This avenue was available under the FW Act, but it has been to the detriment of employees over a long period. We note that in AWX and AWX Staff businesses the terms and conditions of the Agreement do not set the actual rates of pay as most employees are paid in accordance with arrangements that are in excess of the Agreement. This suggests that those businesses have accepted that the lower rates in the Agreement are not suitable to a modern business.
As to the negotiations for a replacement agreement, they had not commenced at the time the application was made. The Applicants contend that negotiations will be complex as they will involve negotiations with employees who work across a number of workplaces in a number of industries. The letters sent to employees with the NERR outline a process of using online and in person meetings to conduct discussions. This approach would alleviate the concerns raised. No explanation is given as to why these discussions were not commenced earlier. It appears that for the AWX and AWX Staff employees those discussions were intended to start in around July 2023.
We also observe that the Agreement could have been replaced by an enterprise agreement negotiated under the FW Act at any time since 2009. The Applicants chose instead to keep the Agreement current through a number of applications to extend its scope as the business grew. While this was open to the Applicants under the legislation, it does not change the fact that the issues associated with bargaining with a workforce working across a number of workplaces in a number of industries could have been addressed at any time since the FW Act was introduced. A corollary of the Applicants choosing to maintain the Agreement is that its employees have for a long time been deprived of the minimum standards in the relevant awards.
As to the complexities associated with payroll systems, we note two things. First, that substantial work to implement new systems has already commenced and the preference was to not have to perform that work again in 12 months’ time. Second it appears that a number of employees, especially in the businesses conduct by AWX and AWX staff, are already paid in accordance with the relevant modern awards and so the Applicants have systems in place to meet the requirements of the awards.
Further, in Karpay it was pointed out that the provisions of the SJBP Act providing for the automatic sunsetting of zombie agreements commenced operation in December 2022. The Act did not terminate the agreements immediately. Rather it provided a 12-month grace period up to 6 December 2023. Like other employers, the Applicants have had 12 months to make arrangements to address the sunsetting of the substandard zombie agreement. The Applicants’ case is that they want more time to implement those arrangements. The matters relied upon by the Applicants, being insufficient time to negotiate replacement agreements, introduce changed administrative arrangements, and renegotiate with clients arise because the Applicants have failed to take advantage of the 12-month grace period already provided by the Transitional Act.
We balance these matters against the harshness to employees of extending a substandard agreement, the purpose of the changes introduced by the SJBP Act to replace zombie agreements with modern industrial instruments and the need to ensure that the integrity of the safety net provided for by the FW Act and modern awards is not undermined by very old agreements that no longer meet contemporary standards.
Taking all of these matters into account we are not satisfied that it is reasonable in all of the circumstances to extend the default period for the Agreement.
The application is dismissed.
As our decision is to refuse to extend the default period under subitem 20A(6) of Sch 3 and our decision is made after the sunset date in the Transitional Act, subitem (11)(e) provides that we must extend the default period to the day of this decision or specify a day that is not more than 14 days after the day of this decision. We have decided that, to enable the Applicants to make the necessary administrative arrangements to give effect to the sunsetting of the Agreement, the default period is extended to 4 January 2024.
DEPUTY PRESIDENT
[1] [2023] FWCFB 105 at [3] to [18]
[2] [2023] FWCFB 105.
[3] [2023] FWCFB 137
[4] Ibid, [32].
[5] [2023] FWCFB 212
[6]Kalfresh Pty Ltd [2023] FWCFB 217
[7] Ibid, [14]
[8] [2023] FWCFB 240
[9] [2014] FWC 9454
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