Coal Mining Industry (Long Service Leave Funding) Corporation

[2020] FWC 6394

[2020] FWC 6394

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318—Transfer of instrument

Coal Mining Industry (Long Service Leave Funding) Corporation
(AG2020/3124)

Black coal mining industry
DEPUTY PRESIDENT SAUNDERS	NEWCASTLE, 27 NOVEMBER 2020

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

Introduction and background

[1] The Coal Mining Industry (Long Service Leave Funding) Corporation (Coal LSL) is a corporate commonwealth entity established by the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth). Coal LSL was established in 1992 for the purpose of regulating, administering and managing portable long service leave entitlements of workers in the black coal mining industry (the Scheme).

[2] As a corporate commonwealth entity, Coal LSL is expected to comply with certain policies of the Australian Public Service Commissioner (APSC).However,Coal LSL is not covered by the Public Service Act 1999 (Cth) and its employees are not part of the Australian Public Service.

[3] From 1993, the functions of Coal LSL and administration of the Scheme were outsourced through a contract for administration services. Up until 30 June 2017, the contract was held by Mine Super Services Pty Ltd (Mine Super)(previously known as Auscoal Services Pty Ltd). This meant Coal LSL did not have direct employees.

[4] On 30 June 2017, the contract with Mine Super ended and Coal LSL's operations were insourced. In doing so, the employment of 18 employees covered by the Auscoal Group Enterprise Agreement 2014-2017 (Agreement) was proposed to be transferred to Coal LSL from Mine Super. On 1 July 2017, 18 employees covered by the Agreement commenced employment with Coal LSL. Those 18 employees remained covered by the Agreement after the commencement of their employment with Coal LSL, by reason of the Agreement being a transferring instrument pursuant to Part 2-8 of the Fair Work Act 2009 (Cth) (Act).

[5] As at 14 October 2020, Coal LSL had approximately 110 employees, nine of whom are still covered by the Agreement (Transferring Employees).

[6] Five of the 18 employees who transferred from Mine Super to Coal LSL have moved into new roles at Coal LSL since the transfer of their employment and are no longer covered by the Agreement. They are covered by the Australian Government Industry Award 2010 (Government Award). The remainder no longer work for Coal LSL.

[7] Coal LSL’s employees, other than the Transferring Employees, are covered by the Government Award or are award-free.

[8] From 1 July 2017 onward, Coal LSL administered entitlements and benefits from the Agreement, the Government Award and individual employment contracts.

[9] Coal LSL seeks an order pursuant to s 318 of the Act that the Agreement not apply to Coal LSL and the Transferring Employees.

Procedural matters

[10] On the filing of Coal LSL’s application for an order pursuant to s 318 of the Act, I made the following directions on 19 October 2020:

“1. By 4pm on 23 October 2020, the applicant is directed to provide a copy of:

(a) its application to the Fair Work Commission (Commission) for orders in relation to a transfer of business (Application);

(b) the documents filed by the applicant in the Commission in support of the Application; and

(c) these directions,

to each employee of the applicant who is covered by the Auscoal Group Enterprise Agreement 2014-2017.

2. By 4pm on 30 October 2020, the applicant must file a statutory declaration setting out the steps it has taken to comply with direction 1 above.

3. By 4pm on 6 November 2020, any employee of the applicant who is covered by the Auscoal Group Enterprise Agreement 2014-2017 may file in the Fair Work Commission any submission, witness statement or document he or she wishes to rely on in relation to the Application and whether it should be granted. Any such material may be filed by sending it by email to [email protected].”

[11] I am satisfied on the basis of a statutory declaration made by Ms Brooke Donald on 28 October 2020 that Coal LSL complied with the directions I made on 19 October 2020.

[12] The Commission has not received any submission, witness statement, document or other communication from any of the Transferring Employees. Accordingly, I have determined this application on the basis of the information contained in Coal LSL’s application dated 16 October 2020, the documents attached to the application, the statement of Ms Darlene Perks, Chief Executive Officer of Coal LSL, dated 14 October 2020, and the statement of Mr Christopher Radvan,Chief People Officer of Coal LSL, dated 6 November 2020.

Section 318 of the Act

[13] The issue I need to determine in this matter is whether or not to exercise my discretion under section 318(1) of the Act to make the order sought by Coal LSL. Section 318(3) of the Act provides that, in deciding whether to make the order under section 318(1), I 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.”

Should the order be made?

[14] I consider each of the mandatory factors set out in section 318(3) of the Act below in turn.

Section 318(3)(a) - the views of the new employer and the employees who would be affected by the order

[15] Coal LSL clearly supports the order sought by it under section 318(1) of the Act for the reasons set out in the witness statement of Ms Perks. By way of summary, Coal LSL submits that the Agreement:

•  bears little, if any, relevance to Coal LSL’s organisation;

•  poses a range of internal challenges for Coal LSL;

•  results in inconsistent benefits and entitlements for employees; and

•  is inconsistent with some of Coal LSL's obligations as a corporate commonwealth entity and alignment with APSC policies.

[16] I do not have any direct evidence from the Transferring Employees about their views.

[17] Attached to Ms Perks’ statement are the results from an anonymous survey of the Transferring Employees. Eight out of the nine Transferring Employees participated in the survey. Seven of the eight Transferring Employees who participated in the survey support the application made by Coal LSL for an order pursuant to s 318 of the Act. The eighth participant in the survey neither supports nor opposes the application made by Coal LSL for an order pursuant to s 318 of the Act.

[18] This factor (s 318(3)(a) of the Act) clearly weighs in favour of making the order sought by Coal LSL.

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

[19] Section 318(3)(b) requires a comparison between the “terms and conditions of employment” applicable to the employees with their former employer (in this case, Mine Super) and those that would be applicable (in this case, with Coal LSL) after the transfer of business if an order under section 318(1) were made. Because the inquiry is directed to “terms and conditions of employment” and not simply to the terms of different industrial instruments, the contractual terms and conditions of employment may in particular cases have a bearing on the analysis required by section 318(3)(b) of the Act. 1

[20] While the terms and conditions of employment to which an employee is entitled (including under an enterprise agreement) with a new employer may be different to those provided by a former employer prior to the transfer of business, the Commission should consider whether “overall, the employees would not be disadvantaged” 2 by making an order under section 318 of the Act. In the event that employees would be disadvantaged overall to any significant extent by the making of an order under section 318 of the Act in relation to their terms and conditions of employment, this factor would, in my view, weigh considerably against granting an order under section 318.3

[21] If the order sought by Coal LSL were made, the Transferring Employees’ terms and conditions of employment would be governed by the Government Award, a common law contract of employment, and an individual flexibility agreement (IFA), should they so choose. In that regard, the Transferring Employees have been informed of the option for them to enter into an IFA, the purpose of which is to:

•  vary weekly ordinary hours under the Government Award (36.75 hours per week) to be consistent with Coal LSL's usual weekly hours (37.5 hours);

•  preserve the higher overtime rates that arise under the Agreement compared with those which arise under the Government Award; and

•  provide some additional remuneration in view of the slightly extended hours of work.

[22] The IFAs are being proposed to full-time employees as a means of maintaining their ordinary hours of work as 37.5 hours per week if the Agreement no longer applies. The remainder of Coal LSL's full-time employees under the salary barrier (as described in the Government Award) have IFAs that vary their hours of work.

[23] New contracts of employment will be offered to the Transferring Employees if the order sought by Coal LSL is made. Those contracts contain more beneficial terms, in some areas, for the Transferring Employees compared to the Government Award, including in relation to redundancy pay, remuneration and birthday leave.

[24] The remuneration paid to the Transferring Employees is higher than the minimum rates of pay under either the Agreement or the Government Award. Further, and importantly, the remuneration of the Transferring Employees will not be reduced if the order sought by Coal LSL is made.

[25] The Agreement does not provide for automatic annual increases in remuneration or base rates of pay (other than those that applied under the Banking, Finance and Insurance Industry Award 2010 (BFI Award) or a CPI increase where eligible). Accordingly, Transferring Employees will not suffer any disadvantage on remuneration increases if the Agreement ceases to apply.

[26] The minimum rates of pay under the Agreement are equivalent to the BFI Award rates. Those rates are lower than the Government Award rates. As a result, the Transferring Employees will receive better 'safety net' pay entitlements under the Government Award than they would under the Agreement.

[27] In 2020 Coal LSL implemented new Leave and Benefits Guidelines (Guidelines).Coal LSL has preserved a number of entitlements from the Agreement in the Guidelines, including:

•  travel allowances (for certain classifications);

•  payment of death, illness and total and permanent disability insurance;

•  payment of income protection insurance;

•  natural/environmental disaster leave;

•  first aid training;

•  superannuation matching on additional superannuation contributions;

•  payment of prescription glasses for employees; and

•  additional birthday leave.

[28] The Guidelines provide consistent application of these benefits and others to all Coal LSL employees, including the Transferring Employees.

[29] Assuming the order sought by Coal LSL were made, the main disadvantages to the Transferring Employees would be:

•  the Transferring Employees would not receive, upon termination, payment of an amount equivalent to their accrued but unused personal leave at their ordinary rate in the form of an ex gratia payment;

•  Coal LSL would no longer permit the Transferring Employees to salary sacrifice their personal leave entitlements into superannuation; and

•  the Transferring Employees would not automatically be eligible for pro-rata long service leave on termination if they resign after 7 years' service.

[30] In respect of the payment of an amount equivalent to accrued but unused personal leave on termination, the Workplace Bargaining Policy 2018 provides that workplace arrangements 'will not allow the cashing out of personal/carer's leave'.

[31] In respect of long service leave, Coal LSL’s employees are covered by the Long Service Leave (Commonwealth Employees) Act 1976 (Cth) (Commonwealth LSL Act).The Commonwealth LSL Act permits payment of pro-rata long service in a limited range of circumstances and does not permit pro-rata payment on resignation for employees with less than 10 years' service. Accordingly, and to maintain consistency with other public agencies and the Commonwealth LSL Act, Coal LSL accrues and pays long service leave in accordance with the Commonwealth LSL Act.

[32] In addition to the main disadvantages set out in paragraph [29] above, there are some other less significant disadvantages which, together with relevant advantages, are explained in attachments B and F to the application filed by Coal LSL. I have had regard to those disadvantages and advantages.

[33] I accept that the Transferring Employees will suffer some but not significant disadvantage in relation to the terms and conditions of their employment, particularly those provided to employees on a routine and day to day basis. This factor (s 318(3)(b) of the Act) weighs slightly against making the order sought by Coal LSL.

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

[34] The nominal expiry date of the Agreement was 31 March 2017. The Agreement has been effectively replaced by a new enterprise agreement at Mine Super. This factor (s 318(3)(c) of the Act) weighs in favour of making the order sought by Coal LSL.

Section 318(3)(d) – whether the Agreement would have a negative impact on the productivity of the new employer’s workplace

[35] The result of the Agreement applying to Coal LSL and the Transferring Employees has been inconsistency in employment terms, conditions and entitlements. Such inconsistency has had a negative impact on the productivity of Coal LSL’s workforce in a number of ways. For example, since the transfer of business in 2017, Coal LSL has made substantial investment in infrastructure to employ its workforce pursuant to two industrial instruments. This has involved the preparation of new employment contracts, administering differing entitlements, employment terms, accruals and the like, and configuration and maintenance of a payroll system to support payment and accrual of two instruments. This work has come at a financial cost, productive time loss for managerial and other staff, and inconvenience to Coal LSL. Should the Agreement continue to apply to Coal LSL, this will continue to impose an administrative burden on Coal LSL in applying two instruments.

[36] This factor (s 318(3)(d) of the Act) weighs slightly in favour of making the order sought by Coal LSL.

Section 318(3)(e) – whether Coal LSL would incur significant economic disadvantage as a result of the Agreement covering Coal LSL

[37] There are various areas where Coal LSL has suffered economic disadvantage as a result of the application of the Agreement. These include:

•  payment of overtime at higher rates under the Agreement than those which apply under the Government Award;

•  payment of an ex gratia amount equivalent to an employee's unused personal leave accrual on termination (clause 13.13 of the Agreement). This term was not and is not available to Coal LSL's other employees;

•  greater and more expansive allowances available to the Transferring Employees e.g. travel (clause 10.5 of the Agreement). Such allowances were not and are not available to Coal LSL's other employees;

•  payment of death, illness and total and permanent disability insurance and income protection insurance (clause 21 of the Agreement). This insurance was not available to Coal LSL's other employees; and

•  productive time loss of senior employees of Coal LSL a result of attending to administrative matters related to the Agreement and its operation.

[38] Were it not for the Agreement, Coal LSL would not have a number of these conditions. However, Coal LSL has retained many of them at substantial cost to the business, for the benefit of its employees.

[39] One of the most significant costs to Coal LSL is the payment of death, illness and total and permanent disability insurance and income protection insurance. Coal LSL now provides this benefit to all its employees as a matter of fairness. Currently, this costs Coal LSL $147,883 per annum. With Coal LSL's forecasted employee headcount to increase to 180 employees over the next 18 months, it expects these premiums will cost upwards of $250,000 per annum.

[40] This factor (s 318(3)(e) of the Act) weighs in favour of making the order sought by Coal LSL.

Section 318(3)(f) – the degree of business synergy between the Agreement and any workplace instrument that already covers Coal LSL

[41] There is a lack of business synergy between the Agreement and the Government Award. The areas where the lack of business synergy is apparent include:

•  the Agreement covered Mine Super and its employees who worked for one of Mine Super’s three related entities. Mine Super administers the coal mining industry superannuation fund and provides financial advice and services. Coal LSL does not provide superannuation services, nor does it provide financial advice/services;

•  the Agreement is underpinned by the BFI Award, which has no relevance to Coal LSL's operations and would not apply to Coal LSL in the absence of the Agreement;

•  Coal LSL, as a corporate commonwealth entity, is expected to comply with the APSC’s Workplace Bargaining Policy 2018, which applies to all APS and non-APS entities and provides a framework for such entities creating workplace arrangements, including that the APS Commissioner is to be fully appraised of, and approve, the terms and conditions of enterprise agreements. The Agreement was not approved by the APS Commissioner; and

•  some of the Agreement's terms are inconsistent with Coal LSL's obligations at law and under APSC policy. For example, there is inconsistency between long service leave payments on termination (after 7 years' service) under the Agreement with Commonwealth long service leave laws.

[42] This factor (s 318(3)(f) of the Act) weighs slightly in favour of making the order sought by Coal LSL.

Section 318(3)(g) – the public interest

[43] The order sought by Coal LSL will assist it to promote a harmonious, cohesive and productive workplace. Further, industrial consistency in Coal LSL’s organisation will enable Coal LSL to operate with greater efficiency. These matters are in the public interest.

[44] If the order sought by Coal LSL were made, the Transferring Employees would not be covered by an enterprise agreement. However, in those circumstances the Transferring Employees would be covered by the Government Award, which would set their minimum terms and conditions of employment. Coal LSL is proposing to provide (and continue to provide) terms and conditions of employment which are fair, relevant, competitive, enforceable and reflect appropriate industrial standards. I accept that the order sought by Coal LSL promotes the objects of the Act, such as by promoting productivity and providing fair and flexible terms and conditions of employment to employees.

[45] I accept that Coal LSL’s application for an order pursuant to s 318 of the Act is compatible with the public interest. This factor (s 318(3)(g) of the Act) weighs in favour of making the order sought by Coal LSL.

Conclusion

[46] Having considered each of the matters set out in s 318(3)(a) to (g) of the Act, I am satisfied that it is appropriate in the circumstances to exercise my discretion to make the order sought by Coal LSL. The factors which weigh in support of making the order outweigh those tending in the other direction.

[47] An order [PR724952] will be issued with this decision.

DEPUTY PRESIDENT

<AE409640 PR724950 >

 1   CEPU; CSIRO [2010] FWA 1171 (CSIRO) at [102]

 2   Stratco (NSW) Pty Ltd [2010] FWA 7036 (Stratco) at [25]

 3   Stratco at [25]; Sonic HealthPlus Pty Ltd [2015] FWC 6460 at [95]; CSIRO at [101]