Capral Limited

[2014] FWC 6190

[2014] FWC 6190

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

Capral Limited
(AG2014/8707)

COMMISSIONER ROE MELBOURNE, 10 SEPTEMBER 2014

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

[1] Capral Limited is Australia’s leading aluminium extrusion and distribution company. It has approximately 750 employees. In October 2013 it acquired OneSteel Trading’s aluminium business. As a consequence 22 transferring employees who are covered by the OneSteel Distribution Agreement 2011-2014 (the Agreement) became employees of Capral. 3 of these employees are located at the Kiblurn SA site, 4 are located at Eastern Creek NSW, 6 at Salisbury Queensland and 9 at Bibra Lake in WA.

[2] Capral has applied for an order that the Agreement will not cover Capral or any of its employees.

[3] The Agreement has a nominal expiry date of 31 January 2014. One Steel Trading and its remaining employees have made a replacement agreement, the One Steel Distribution Agreement 2014-2015.

[4] A consequence of granting the order is that the transferring employees will in the future be covered by the following workplace instruments:

● Salisbury site: Bremer Park Regional Distribution Centre Enterprise Agreement 2012-2015.
● Other sites: the Modern Award (Storage Services and Wholesale Award 2010). That workplace instrument will be supplemented by common law employment contracts which specify over-award payments and conditions.

[5] I am satisfied that Capral can make the application for orders under Section 318(a) of the Fair Work Act 2009 (the Act) and that the Agreement is a transferable instrument which, absent the order, covers the transferring employees and Capral.

[6] In deciding whether or not to make the order I must take into account each of the matters set out in Section 318(3) of the Act.

The views of Capral and the transferring employees (Section 318(a))

[7] Capral is obviously in support of the making of the Orders and this is a factor which stands in favour of making the orders.

[8] In some circumstances employees other than those who are transferring may be affected by the making of an order but in this case I am satisfied that it is the views of the transferring employees which are of particular relevance. Some of the employees are members of the National Union of Workers (NUW) and there is evidence that employees at a number of the sites have been given the opportunity to consult with the NUW if they wish. I consider that the views of the NUW are relevant to understanding the views of employees. The NUW has advised that they do not oppose the making of the order. I am satisfied by the evidence from Ms Ridgill that the employees at Salisbury support the making of the order. The employees at the other sites have all signed new common law employment contracts. A term of those contracts is that the employee supports an application that the Agreement no longer covers them.

[9] I do have some concerns about the manner in which the views of employees have been sought. The information provided by Capral to employees is in some respects advocacy against collective agreements and in favour of individual employment contracts and individual performance pay. For example, a reader would get the impression from the material that performance pay is not possible under a collective agreement. There is no mention of the fact that an individual employment contract has different mechanisms for enforcement and disputes settlement than a collective agreement. The disputes settlement procedure under the Agreement provides for a party to be able access Fair Work Commission arbitration in respect of matters arising under the Agreement or the NES. Employees may therefore not have been aware of a significant disadvantage of moving from a collective agreement to an individual employment contract underpinned by the Award. Should the order be made Section 738 of the Act would limit the scope of any private arbitration without the consent of Capral to the NES and any safety net contractual obligation.

[10] However, given the involvement of the NUW I am satisfied on balance that the employees support the making of the order. This is a factor which stands in favour of making the order.

Will any employees be disadvantaged by the making of the order? (Section 318(3)(b))

[11] The Salisbury employees will be covered by a collective instrument which overall will not disadvantage them when compared to the Agreement.

[12] The employees at the other sites will be covered by the Award which in conjunction with the terms of the signed individual contracts will not disadvantage employees when compared to the Agreement except in respect to the issues of ease and scope of enforceability and disputes resolution to which I have referred earlier.

[13] Overall this is a factor which, to a modest extent, stands against the making of the order.

The nominal expiry date of the Agreement (Section 318(3)(c))

[14] The Agreement no longer applies to the vast majority of the employees who were covered by it because it has been replaced by a new agreement. To the best of my knowledge the transferring employees are the only employees to whom the Agreement applies.

[15] The fact that the Agreement has past its nominal expiry date and that employees therefore have bargaining and protected industrial action rights is a factor which stands in favour of making the order.

Will the Agreement have a negative impact on the productivity of Capral’s workplace? (Section 318(3)(d)

[16] Capral argues that if the order is not made the existence of the Agreement may encourage employees at other sites to seek to take industrial action in support of an enterprise agreement. They say that enterprise agreements at its small sites would lead to an inflated cost structure. Capral argues that inconsistent employment arrangements between its smaller sites would lead to less workplace harmony. The future location and structure of the Bibra Lake site may be subject to change. This could, at some future date, lead to more employees who are not covered by the Agreement working alongside those who are covered by the Agreement.

[17] I do not accept that collective bargaining necessarily results in an unsustainable and inflated cost structure. There is no evidence that supports such a conclusion in this case. I do not accept that the existence of the Agreement is likely to lead to industrial action at other sites in support of enterprise agreements. The only evidence before me is the evidence of Ms Ridgill that Capral is a model employer and that its employees at the smaller sites are very supportive of the individual employment contractual arrangements which are in place at those sites.

[18] I agree that there is some potential for lack of harmony at the Kilburn site where employees on other instruments at that site work alongside those covered by the Agreement. However, I do not consider this to be probable or significant.

[19] Overall I am not satisfied that the Agreement would have a negative impact on the productivity of Capral’s workplace. This is a neutral factor.

Will Capral suffer significant economic disadvantage if the order is not made? (Section 318(3)(e))

[20] Capral raise similar matters to those raised in respect to productivity. I accept that there are some administrative costs associated with maintaining the Agreement arrangements at these sites whilst there are different arrangements at most of the other smaller sites. The costs of the wages and conditions will be almost identical whether or not the order is made as Capral have committed to maintaining the Agreement conditions for the transferring employees.

[21] I am not satisfied that the additional costs of maintaining the Agreement will result in significant economic disadvantage. This is a neutral factor.

The degree of business synergy between the Agreement and any workplace instrument that already covers Capral

[22] At the Salisbury site another collective agreement covers employees and would cover the transferring employees if the order was made. I accept the submissions of Capral that there is greater business synergy with the terms of that agreement than there is with the Agreement.

[23] The individual employment contracts which Capral has with its other employees are not workplace instruments (see Section 12 of the Act). In respect to the other sites, other than Salisbury, it is the modern Award which is the workplace instrument which already covers the site. The modern Award is not tailored to the particular requirements of those sites. The Agreement is at least tailored to the aluminium and steel distribution business in a general sense. However, I accept the submission that there are aspects of the Agreement which do not have synergy with Capral’s business. For example, the default superannuation fund, employee share funds, and the skills matrix. I also accept that there is some lack of synergy between the business practices operating at the other small sites and the arrangements under the Agreement. The individual performance pay arrangements are an example of this. These arrangements are able to operate more easily under the Award than they could operate under the Agreement.

[24] I am satisfied that there is some lack of business synergy between the Agreement and the arrangements which would operate under the Award at the particular sites and those which currently operate under the Award at other sites. I am satisfied that in respect to the Salisbury site there is greater business synergy under the existing agreement which operates for the other employees. This factor stands in favour of the making of the order sought.

Is it in the public interest to make the order sought?

[25] Capral argues that it is in the public interest for its employees at the smaller sites, including the sites where the Agreement applies, to be covered by individual employment contracts and to be not covered by collective enterprise agreements. Capral argues that if the order is not made it may lead to collective bargaining and collective agreements at other sites than those where the Agreement applies. Capral also argues that this will lead to an inflated cost structure which could put aspects of its business and the level of employment at risk. Capral points to the intense international market competition which it faces. Capral also repeated its argument about lesser productivity.

[26] I do not doubt that Capral faces strong competitive pressures particularly from overseas imports.

[27] However, I am not satisfied that there is any established link between enterprise agreements and inflated cost structures and reduced productivity. I am not satisfied that there is any evidence in support of that contention generally or in the case of this particular business.

[28] The Act suggests that it is not generally in the public interest to decrease the coverage of enterprise agreements. I particularly refer to the object of the Act:

“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:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(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; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(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; and

(g) acknowledging the special circumstances of small and medium-sized businesses.”

[29] I particularly refer to Object 3(f). I also consider, having regard to the particular objects in other parts of the legislation and the overall scheme of the legislation, that pursuit of Object (f) generally enhances and is enhanced by pursuit of Objects (a), (b), (c), (d), and (e). It would not be consistent with the Object of the Act to find that it is in the public interest to decrease the coverage of employees by enterprise agreements. In this case the order would mean that the employees at the sites other than Salisbury would no longer be covered by an enterprise agreement. I do not consider that this is in the public interest and I cannot identify countervailing public interest factors in the circumstances of this case which stand in favour of the making of the orders.

[30] The general scheme for enterprise bargaining under the Act is that if there is an agreement in place then the parties have the advantage of bargaining for a new agreement whilst that agreement remains in place even if the nominal expiry date has been passed. A consequence of the making of the order at the sites other than Salisbury would be that employees would in the future bargain from the safety net of the modern award rather than the safety net of the Agreement. However, the fact that individual employment contracts have been signed which preserve most of the wages and conditions of the Agreement significantly reduces this disadvantage.

[31] I am satisfied that the public interest favours the granting of the order in respect to the employees at the Salisbury site. I am not satisfied that the public interest favours the granting of the order in respect to the other sites.

Conclusion

[32] In weighing the factors considered above I have had regard to this Object of Part 2-8 Transfer of Business of the Act as set out in Section 309. That requires me to balance the protection of employees and the efficient running of business. I have decided, on a fine balance, to make an Order that the OneSteel Distribution Agreement 2011-2014 (the Agreement) will not cover Capral Limited or any employee of Capral Limited.

[33] Consistent with Section 318(4) of the Act the Order shall operate from today’s date.

COMMISSIONER

Appearances:

Ms M Ridgill appeared for Capral.

Hearing details:

2014

Melbourne

September 4

Printed by authority of the Commonwealth Government Printer

<Price code C, PR555160>