BlueFit Pty Ltd

Case •

[2022] FWC 3253

•

21 DECEMBER 2022
[2022] FWC 3253

FAIR WORK COMMISSION
DECISION

Fair Work Act 2009

s.318 - Application for an order relating to instruments covering new employer and transferring employees

BlueFit Pty Ltd

(AG2022/4697)

Amusement, events and recreation industry

DEPUTY PRESIDENT CLANCY

MELBOURNE, 21 DECEMBER 2022

Application for an order relating to instruments covering new employer and transferring employees.

  1. BlueFit Pty Ltd (BlueFit) has made an application to the Fair Work Commission (the Commission) pursuant to s.318 of the Fair Work Act 2009 (the Act) for an order that a transferable instrument, the Swim Fit Group Pty Ltd ATF The Swim Fit Group Unit Trust Agreement 2013[1] (Agreement) does not and will not cover BlueFit and the employees of Swim Fit S.E.Q Pty Ltd or Swim Fit Sunshine Coast Pty Ltd ATF the Swim Fit Sunshine Coast Unit Trust who become employed by BlueFit.

  1. In addition to the Form F40 – Application for orders in relation to a transfer of business, BlueFit has filed an affidavit affirmed on 10 November 2022 from its Chief Financial Officer, Mr Oscar Reed, dated 10 November 2022.

Background

  1. BlueFit is a leisure facility management company and manages approximately 40 sport and recreation facilities across Western Australia, South Australia, Victoria, New South Wales and Queensland.

  1. BlueFit has approximately 1,500 employees, of which approximately 1,367 are covered by the Fitness Industry Award 2020 (Fitness Award). The remaining employees are award-free.

  1. BlueFit proposes to acquire the assets of the following three businesses:

·   Sport in Action (Sunshine Coast) Pty Ltd (Sport in Action);

·   Swim Fit S.E.Q Pty Ltd (Swim Fit S.E.Q); and

·   Swim Fit Sunshine Coast Pty Ltd ATF the Swim Fit Sunshine Coast Unit Trust (Swim Fit Sunshine Coast)

(collectively, Swim Fit)

  1. Swim Fit employs 289 employees, 118 of whom are employed BY Swim Fit S.E.Q and 171 by Swim Fit Sunshine Coast. Sport in Action does not have any employees.

  1. The Agreement continues to apply to a total of 57 employees of Swim Fit: 13 employees of Swim Fit S.E.Q and 44 employees of Swim Fit Sunshine Coast (Transferring Employees). BlueFit submits that if an order pursuant to s.318(1) of the Act is issued, the Transferring Employees will be covered by the Fitness Award.

  1. I issued Directions on 17 November 2022 which required BlueFit to provide a copy of my Directions, the Form F40 Application, the affidavit of Mr Reed and a copy of the Agreement to the Transferring Employees by email. I also directed any transferring employee to file material, if they wished to do so, in respect of the considerations affecting them. BlueFit had an opportunity to file any material in reply. No submissions were received from any transferring employee by the required date of 6 December 2022. In an email to my Chambers on 9 December 2022, BlueFit confirmed it did not intend to file any further material in support of its application.

The relevant legislation

  1. Part 2-8 of Chapter 2 of the Act describes when a transfer of business occurs and s.312(1) of the Act provides for the transfer of enterprise agreements, certain modern awards and certain other instruments if there is a transfer of business from one employer to another employer.

  1. Section 311 of the Act relevantly provides:

“311      When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

(1)       There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a)       the employment of an employee of the old employer has terminated;

(b)       within 3 months after the termination, the employee becomes employed by the new employer;

(c)       the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d)       there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2)       An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3)       There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a)       the old employer or an associated entity of the old employer; and

(b)       the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c)       that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d)       that relate to, or are used in connection with, the transferring work.

  1. Sections 317 and 318 of the Act relevantly provide:

“317      FWC may make orders in relation to a transfer of business

This Division provides for the FWC to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.

318     Orders relating to instruments covering new employer and transferring employees

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.

Transferable instrument

  1. As it is an enterprise agreement that was approved by the Commission on 1 July 2013, the Agreement is a transferable instrument pursuant to s.312(1)(a) of the Act.

  1. Section 313 of the Act provides that the Agreement would be likely to cover BlueFit and the Transferring Employees, subject to any order of the Commission under s.318(1) of the Act.

Transfer of business

  1. As part of the proposed asset sale transaction, BlueFit intends to make offers of employment to all current employees of Swim Fit. Assuming these employees accept the offers of employment that BlueFit intends to make, they will become employees of BlueFit.

  1. As such, I am satisfied that there is likely to be a transfer of business from Swim Fit to BlueFit and that BlueFit is likely to be a “new employer” pursuant to s.311(1) of the Act.

Who may apply for an order?

  1. BlueFit has made the application in its capacity as “a person who is likely to be the new employer”. This meets the requirement of s.318(2) of the Act.

  1. BlueFit seeks an order pursuant to s.318(1)(a) of the Act, that the Agreement will not cover it and the employees of Swim Fit S.E.Q Pty Ltd or Swim Fit Sunshine Coast Pty Ltd ATF the Swim Fit Sunshine Coast Unit Trust in respect of their employment with BlueFit.

Matters that the FWC must take into account - Section 318

Section 318(3)(a) the views of the new employer or a person who is likely to be the new employer and the employees who would be affected by the order

  1. BlueFit, the likely new employer, has made the application under s.318 of the Act and supports the making of the order sought.

  1. Mr Reed, through his witness statement, says the order sought is required for the following reasons:

·   to avoid the need for BlueFit to develop a separate payroll system;

·   to reduce the risk of systemic compliance issues if BlueFit were to have two separate payroll systems; and

·   to allow the Transferring Employees to integrate into BlueFit’s existing business and workforce more effectively.

  1. BlueFit submits that in the absence of an order in the form sought, the Transferring Employees would otherwise be covered by the Agreement. As such, it would be necessary to reconfigure time, attendance and pay systems to accommodate two sets of employment conditions, despite the Agreement only covering approximately 3 per cent of BlueFit’s workforce, thereby undermining its administrative, human and financial management resources.

  1. Further, BlueFit submits that it would result in a small number of employees being remunerated on a different basis as the 1,367 employees covered by the Fitness Award, despite performing the same duties at the same worksite, thereby undermining the cohesiveness of its workforce.

  1. BlueFit ultimately contends that it is desirable for there to be similar terms and conditions where possible across the workforce given the size of the workforce.

  1. Mr Reed gave evidence that BlueFit obtained the views of the Transferring Employees by:

(a)organising an information session via zoom to discuss BlueFit’s acquisition of Swim Fit;

(b)providing the employees with:

(i)an information pack outlining the background to the asset sale transaction and a list of frequently asked questions;

(ii)proposed template contract of employment agreements tailored to casual employees, part-time and full-time employees who receive an hourly rate and part-time and full-time employees who receive a salary, setting out the proposed terms and conditions which would apply if they voted in favour of the order being sought. Copies of each of these template employment agreements were attached to Mr Reed’s witness statement;

(iii)a table with a high-level comparison of the key terms of the Fitness Award with the key terms of the Agreement, a copy of which was attached to Mr Reed’s witness statement; and

(iv)the current pay rates under the Fitness Award for casual employees and permanent employees paid on an hourly rate, a copy of which was attached to Mr Reed’s witness statement.

(c)organising an online consultation session to discuss the order sought by the application, including the implications were the order to be granted. A copy of the slides referred to in the consultation session were attached to Mr Reed’s witness statement;        

(d)conducting a vote in which the employees of Swim Fit could vote in favour of the proposed orders, vote against the proposed orders, or request further information to make a decision one way or the other; and

(e)engaging with those employees who had any questions.

  1. Mr Reed said that of the 57 Transferring Employees, 17 cast a vote. 16 of these 17 employees voted in favour of an order pursuant to s.318(1)(a) of the Act, with one employee voting that they required more information. Following the provision of further information, this employee voted in favour of the proposed order. A copy of the results of the votes cast were attached to Mr Reed’s witness statement.

  1. I consider that of the 57 Transferring Employees, 17 are supportive of the order being sought. As for the remainder of the Transferring Employees, I am satisfied they were on notice as to the application before me and had a reasonable period of time to file material should they have wished to do so. However, no submissions from these employees were filed in the Commission and I will therefore accord neutrality to their views in considering the application.

  1. Having regard to these matters, I have formed the view that on balance this factor weighs in favour of granting the order.

Section 318(3)(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment

  1. I have had regard to the fact that the Agreement was approved by the Commission on 1 July 2013 and has a nominal expiry date of 1 July 2017.[2] BlueFit has detailed that the order sought would result in the Fitness Award applying to the Transferring Employees.

  1. Mr Reed said BlueFit conducted a significant comparison and analysis of the terms under the Agreement against the terms of the Fitness Award to determine whether the Transferring Employees would be disadvantaged financially if the Fitness Award were to apply to their employment with BlueFit. Mr Reed affirmed that the analysis was performed by analysing the hours worked by employees in the previous financial year, in order to compare the total pay for all 57 of the Transferrable Employees under the Agreement to what would have been payable to these employees under the Fitness Award. A document containing the analysis was attached to Mr Reed’s witness statement.

  1. Mr Reed affirmed the results of the analysis were as follows:

(a)18 of the 57 Transferrable Employees are remunerated on a salary basis, of which:

(i)14 received remuneration in excess of what they would have received under either the Fitness Award or the Agreement;

(ii)The current salaries of 4 employees would not be sufficient to meet the minimum rates under the Fitness Award.

(b)      39 of the 57 Transferrable Employees are paid an hourly wage, of which:

(i)31 had an entitlement under the Fitness Award which exceeded entitlements under the Agreement;

(ii)2 had entitlements under the Fitness Award which were equivalent to the Agreement; and

(iii)6 would have been disadvantaged financially, with a cumulative loss of $1,311.41.

(c)it would have cost BlueFit $116,351.59 more to remunerate the Transferrable Employees employed on a casual and part-time basis (who are each paid on an hourly basis) under the Fitness Award over the 2021/2022 period.

  1. Mr Reed affirmed that 10 out of the 57 Transferring Employees would have been worse off under the Fitness Award:

(a)4 employees were engaged on a salaried basis and would not have been on a sufficient salary in order to meet the minimum requirements under the Fitness Award. Mr Reed said it was decided by BlueFit that:

(i)offers of employment would be made to two of these employees on the basis that their salary would be increased to a level sufficient to surpass the minimum obligations under the Fitness Award (by reference to the hours worked in the previous financial year);

(ii)offers of employment would be made to the two remaining employees to be engaged on a full-time basis and be paid as Level 5 employees under the Fitness Award at an hourly rate instead of a salary;

Mr Reed’s evidence was that the difference in treatment of the four salaried employees as outlined above, was determined by looking at each employee’s work patterns in the 2022 financial year, and assessing, based on these work patterns, which method of remuneration would be more advantageous for the employee in the circumstances.

(b)6 employees employed on an hourly rate basis would have been worse off under the Fitness Award. Mr Reed outlined that if these employees were to accept offers of employment with BlueFit, each employee will receive a one-off bonus in the first pay run following completion of the proposed transaction, in consideration of any potential disadvantage.

  1. Accordingly, Mr Reed asserted that on commencement with BlueFit, the Transferring Employees will not be disadvantaged in relation to their terms and conditions of employment when employed by BlueFit under the Fitness Award. I have reviewed the remuneration information under each offer of employment pertaining to the 10 Transferring Employees who were deemed worse off under the Fitness Award.

  1. Based on the contents of Mr Reed’s affidavit and having considered the material before me, I am on balance satisfied that the Transferring Employees will not be disadvantaged by the order in relation to their terms and conditions of employment. This factor weighs in favour of granting the order.

Section 318(3)(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement

  1. As outlined in paragraph [27] above, the nominal expiry date of the Agreement is 1 July 2017. This does not weigh against the granting of the order sought.

Section 318(3)(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace and Section 318(3)(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer

  1. Mr Reed affirmed that BlueFit utilises a specialist labour management software to facilitate compliance with the Fitness Award and to effectively manage the large, multi-skilled and dispersed workforce of BlueFit. He outlined the key features of the payroll system, including:

·   the internally developed system to manage employee personal information, skills, and qualifications, and the onboarding, offboarding and cross-boarding of employees, called “SALT”;

·   the time and attendance platform called “Deputy”, which he described as an online software-as-a-service product. Deputy has been configured to reflect BlueFit’s interpretation of the Fitness Award to allow BlueFit to forecast the cost of planned rosters, process and approve timesheets and code any approved timesheets with the applicable pay rates for each employee depending on their classification under the Fitness Award. The platform can assess when provisions of the Fitness Award may be contravened as a result of rostering arrangements and provide visibility as to penalty rates or overtime that may be payable. In certain circumstances, managers will receive a ‘warning’ from the Payroll System to rearrange a shift to ensure compliance with the Fitness Award; and

·   the payroll system called “Cloud”, which BlueFit has configured to interact with and receive input from Deputy. Once Cloud receives input (such as shift information) from Deputy, it produces a payslip using the master rate data and employee information from SALT.

  1. BlueFit submits that the processes that would be required to ensure compliance with the Agreement after the transfers of employment, should this be required, would have a negative impact on the productivity of its workplace and result in it incurring significant economic disadvantage for the following reasons:

  1. a large proportion of its workforce is covered by the Fitness Award and it has invested approximately $105,000 and a period of nine months on developing and configuring its payroll and accounting systems, namely the “Deputy” platform, to ensure ongoing compliance with the Fitness Award;

(ii)BlueFit estimates that it will cost the business approximately a further $100,000 and a further nine months to reconfigure its payroll systems to comply with both the Fitness Award and Agreement in light of the differences between the Agreement and the Fitness Award;

  1. BlueFit would experience a significant increase in administration costs to audit any new or amended systems to ensure compliance with both the Fitness Award and the Agreement, which will be a complex, time consuming, and financially detrimental process; and

(iv)the Agreement would require BlueFit to undertake an annual reconciliation for all Transferring Employees of the amounts that would have been payable under the Fitness Award and make payments to these employees if their entitlements under the Fitness Award exceeded their entitlements under the Agreement. This would require BlueFit to effectively run a “shadow pay roll” for the Transferring Employees in order to comply with the Agreement.

  1. Mr Reed asserted that if the Agreement was to continue to apply to the Transferrable Employees post-completion of the proposed asset sale transaction, it would be administratively burdensome on its administrative, human, and financial departments. He proffered it would lead to inefficiencies and additional costs because the Agreement contains different terms and conditions to those in place within the workplace and therefore, a different set of payroll rules would have to be developed to accommodate the varied terms and conditions of employment for 3 per cent of its total workforce. He submitted that making the order sought would eliminate any such economic or administrative burden.

  1. I accept the apprehension expressed by Mr Reed is not without foundation and consider the matters outlined above weigh in favour of granting the order sought.

Section 318(3)(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer

  1. BlueFit submits a lack of synergy arises should the order sought not be granted because:

(a)   BlueFit’s processes and systems have been developed over an extensive period of time to align with the requirements of the Fitness Award;

(b)   base rates of pay, applicable overtime rates and penalty rates are different between the Agreement and the Fitness Award. As such, despite employees potentially completing the same work, at the same time, and at the same location, they would be entitled to different rates of pay under the Agreement as opposed to the Fitness Award;

(c)   BlueFit’s extensively developed payroll system estimates labour costs which assists with rostering and financial forecasting, which will not be possible where some employees cannot be integrated into the existing system;

(d)   the payroll system allows employees without extensive human resources or award compliance experience to accurately roster, forecast, and ultimately pay employees, including the applicable penalty rates and allowances, pursuant to the Fitness Award. Complying with the Agreement will require those employees to receive significant training on the variance between the two instruments, how those variances are applied, and monitoring and reporting on the differences; and

(e)   the Agreement was drafted more than 9 years ago, with several outdated, inconsistent, or omitted clauses when compared with the Fitness Award, including:

(i)Clause 6.3(b): Ordinary hours of work under the Agreement are listed as being between 4:00am and 10:00pm, Monday to Sunday. Under the Fitness Award, ordinary hours of work are between 5:00am and 11:00pm on weekdays, and between 6:00am and 11:00pm on weekends. This discrepancy, largely on weekends and during early mornings shifts, means employees under the Fitness Award would be receiving overtime while working at the same time, at the same location, and doing the same work as employees under the Agreement, who would not be receiving overtime;

(ii)Clause 11.1: Employees are to receive at least 5 clear days’ notice ahead of time for the days they will be expected to attend to work. Under the Fitness Award, an employee must be notified of their rostered hours, and given at least 7 days’ notice of any change in their rostered hours; and

(iii)There is no clause in the Agreement which addresses broken shifts, whereas under the Fitness Award, broken shifts are permissible provided the shift is broken into no more than two parts, the length of each shift is not less than 3 hours, and the combined span of hours over the broken shifts does not exceed 12 hours.

  1. I am persuaded by these submissions, and I have noted the identified differences between the Agreement and the Fitness Award, suggesting there would be reduced business synergy if both were to apply to BlueFit.

  1. I have formed the view that these factors weigh in favour of granting the order sought.

Section 318(3)(g) the public interest

  1. BlueFit submits that there is no reason why it would not be in the public interest to grant the order sought for the following reasons:

  1. there is no significant economic disadvantage to employees if the order sought is made;

(ii)the Transferring Employees have been consulted and do not object to the order sought being made;

  1. the Agreement would impose administratively burdensome requirements on BlueFit that would be costly and unproductive; and

(iv)the Agreement passed its nominal expiry date over 5 years ago, on 1 July 2017.

  1. Having regard to all the material before me, I am not of the view that there are any public interest reasons not to make the order sought.

Conclusion

  1. Having considered each of the matters set out in s.318(3) of the Act, I am satisfied that the following order should be made, with immediate effect (s.318(4)(b)):

The Swim Fit Group Pty Ltd ATF The Swim Fit Group Unit Trust Agreement 2013 will not cover BlueFit Pty Ltd and employees of Swim Fit S.E.Q Pty Ltd or Swim Fit Sunshine Coast Pty Ltd ATF the Swim Fit Sunshine Coast Unit Trust in respect of their employment with BlueFit Pty Ltd.

  1. An Order to this effect will be issued along with this decision.

DEPUTY PRESIDENT


[1] AE402100.

[2] AE402100 at clause 3.

Printed by authority of the Commonwealth Government Printer

<AE402100 PR748771>

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