Commonwealth Bank of Australia

[2020] FWC 6160

[2020] FWC 6160

FAIR WORK COMMISSION

DECISION

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

Commonwealth Bank of Australia
(AG2020/3410)

DEPUTY PRESIDENT BULL SYDNEY, 26 NOVEMBER 2020

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

[1] On 11 November 2020, Commonwealth Bank of Australia (the applicant/CBA) lodged an application in the Fair Work Commission (the Commission) for orders under s.318 of the Fair Work Act 2009 (the Act) which relate to an instrument covering a new employer and transferring employees in the context of a transfer of business.

[2] Section 318(2) of the Act sets out who may apply for an order in relation to a transfer of business. The applicant is the likely new employer to which this application relates and therefore has standing to apply for the order under s.318(2)(a) of the Act.

[3] The agreement to which this application relates is the “EDS People” Agreement 2002 (EDS Agreement).

[4] Attached to the application was a statement of Scott Nolan the Executive Manager – Foundation Services (Active Directory & MyRAS) of CBA.

Orders sought

[5] The applicant seeks the following orders:

1. Pursuant to s.318(1)(a), the “EDS People” Agreement 2002 (EDS Agreement) does not, and will not, cover

a. Siva Kethees; and

b. Wing Yan Chan.

(together, the Transferring Employees), in respect of their employment with the applicant in the role of Senior Active Directory Engineer within the Enterprise Services team.

2. Pursuant to s.318(b), the Commonwealth Bank Group Enterprise Agreement 2016 (CBA Group EA) (and/or any successor agreement) covers the Transferring Employees in respect of their employment with the applicant in the role of Senior Active Directory Engineer within the Enterprise Services team.

3. Should the Commission determine it is appropriate to make these orders, they would come into effect on and from the later of:

a. The commencement of the Transferring Employees’ employment with the applicant; or

b. The date the orders are made;

in accordance with s.318(4) of the Act.

Background

[6] The CBA provides banking and various other financial products and services within Australia and overseas.

[7] In or around 1996, the CBA outsourced the provision of a wide range of IT services to Electronic Data Systems (EDS), an American multinational IT equipment and services company headquartered in Plano, Texas.

[8] In or around 2009, HP Enterprise Services acquired EDS, and continued to provide these services.

[9] On 3 April 2017, HP Enterprise Services merged with Computer Sciences Corporation to form DXC Enterprise Australia Pty Ltd (DXC), and since that time, DXC has provided IT services to the CBA under a services agreement (IT&T Agreement), which includes Active Directory services.

[10] Active Directory services are an IT function developed by Microsoft for Windows domain networks, and act as a set of processes and services that store data and allow data to be made available to network users and administrators.

[11] The CBA has recently identified an operational need to retain control of its Active Directory services and has decided that these services should be in-sourced and undertaken by CBA employees.

[12] The CBA has agreed with DXC that it will terminate the Directory Services Schedule of the IT&T Agreement, which includes the provision of Active Directory design and administration services (the Services). CBA issued a termination notice to DXC on 29 May 2020, with an approved termination plan exit date on 30 November 2020. The IT&T Agreement remains otherwise in force.

[13] The CBA wishes to have the Active Directory services performed by CBA employees on and from 1 December 2020. As CBA requires experienced and skilled employees relevant to the Active Directory services, CBA has offered employment to three employees of DXC who are currently performing this work.

[14] It is intended that the transferring workers will perform work for CBA that is substantially the same as the work that is being performed for DXC.

[15] This application and decision relates to two of those transferring workers, Siva Kethees, who is currently employed by DXC as an Senior Professional System Engineer; and Wing Yan Chan, who is currently employed by DXC as an Advisor System Engineer (together, the Transferring Employees). The Transferring Employees’ employment is covered by the EDS Agreement.

[16] CBA requires the Transferring Employees to be covered by the CBA Group EA in order to maintain standards and consistency, and to minimise the financial costs and operational issues associated with implementing and managing separate industrial agreements.

Relevant legislation

Transfer of business

[17] Section 317 of the Act provides that the Commission may make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer. The orders sought may be made ahead of the actual transfer of business as envisaged and defined in s.311 as CBA is “likely to be the new employer” as per s.318(2)(a) of the Act.

[18] Part 2-8 Division 2 of the Act provides for the transfer of rights and obligations under enterprise agreements, certain modern awards and other instruments where a transfer of business occurs from an old employer to a new employer. The definition of transfer of business, old employer, new employer and transferring work is provided in s.311 of the Act. This section also sets out the circumstances in which a transfer of business occurs.

“311 When does a transfer of business occur

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

311(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 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).”

[19] The applicant submits that there will be a transfer of business as defined at s.311(1) of the Act on the basis that:

(a) The applicant has made offers of employment to the Transferring Employees, which were accepted by the Transferring Employees on 2 November 2020;

(b) It is proposed that the Transferring Employees would commence employment immediately following the termination of their employment with DXC (i.e. within a three month period after the termination of their employment with DXC);

(c) The work that the Transferring Employees would perform for the applicant is the same, or substantially the same as the work the Transferring Employees currently perform for DXC; and

(d) There is a connection between DXC and the applicant within the meaning of s. 311(5) of the Act given that:

i. The applicant originally made the decision to outsource the IT services rather than employ in-house staff to perform this work; and

ii. The applicant has now decided to terminate the Directory Services Schedule to its Services Agreement with DXC that relate to the Active Directory design and administration services and will employ employees to perform the Services instead.¹

[20] Based on the above I am satisfied there will be a transfer of business pursuant to s.311 of the Act.

Transferable Instrument

[21] The definition of a transferable instrument is provided in s.312 of the Act. Item 8 of Schedule 11 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act) modifies Part 2-8 of the Act to establish that the definition of transferable instrument found in s.312(1) of the Act is extended to cover transitional instruments, other than workplace agreements and workplace determinations that have not yet come into operation.

[22] Pursuant to s.312(1)(a), the EDS Agreement constitutes a transferable instrument for the purposes of the Act.

[23] Section 313 of the Act provides that if a transferable instrument covered the old employer and a transferring employee immediately before the termination of the transferring employee’s employment with the old employer the transferring instrument covers the new employer along with the employees who are transferred and were covered by the transferable instrument.

[24] Therefore, the applicant and the Transferring Employees will be covered by the EDS Agreement on the Transferring Employees commencing employment with CBA.

[25] The applicant seeks that the EDS Agreement does not cover the applicant and the Transferring Employees.

Orders Relating to Instrument Covering New Employer and Transferring Employees

[26] Section 318(1) of the Act provides that the Commission may make orders in relation to a new employer and transferring employees as follows:

“S.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.”

[27] The orders sought by the applicant are consistent with those able to be made by the Commission pursuant to s.318 of the Act.

[28] Section 318(3) of the Act sets out the criteria that the Commission must take into account when deciding whether to make the order sought as follows:

“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.”

Consideration

[29] In its application, the applicant has addressed each of the matters the Commission is required to consider when issuing an order under s.318. As stated above the application was accompanied by a witness statement of Scott Nolan, the Executive Manager – Foundation Services (Active Directory & MyRAS), dated 11 November 2020, which attached the following documents:

1. “EDS People” Agreement 2002

2. Commonwealth Bank Group Enterprise Agreement 2016

3. High Level Comparison between the Commonwealth Bank Group Enterprise Agreement 2016 and the “EDS People” Agreement 2002

4. Employee Questionnaire: DXC workers covered by the “EDS People” Agreement 2002, signed by the Transferring Employees on 2 November 2020

Section.318(3)(a)(i) – Views of the new employer or the likely new employer

[30] Mr Nolan’s witness statement affirmed that the applicant does not wish to have two agreements operating in relation to employees performing the same or similar work in its IT operations. The reasons for this are:

a. to ensure terms and conditions of employment are standardised and consistent at IT operations for employees who are performing the same or substantially similar roles;

b. to ensure that its employees are governed by a single industrial instrument that was negotiated specifically for the applicant (being the CBA Group EA);

c. to maintain productivity of the applicant’s IT operations;

d. to avoid employee dissatisfaction arising from the application of inconsistent terms and conditions of employment, and the impact on employee morale between the Transferring Employees and their colleagues covered by the CBA Group Agreement;

e. to encourage a harmonious, single workplace culture in respect of the applicant’s IT operations; and

f. to avoid the costs, inefficiencies and potential errors associated with implementing and managing two separate agreements.

s.318(3)(a)(ii) - Views of the employees who would be affected by the order

[31] Mr Nolan stated that he conducted an engagement session with each of the Transferring Employees on 29 October, where Mr Nolan explained the background, process and impact of the application with the Transferring Employees. It was stated that the Transferring Employees were also provided with:

•  copies of each of the EDS Agreement and the CBA Group EA ;

•  a high level one page document comparing the two agreements;

•  a detailed document comparing rates of pay, allowances and other entitlements under the agreements; and

•  a questionnaire to complete.

[32] Mr Nolan’s statement confirmed that the Transferring Employees were provided with the opportunity to raise any questions or concerns.

[33] At the engagement session, the Transferring Employees were each provided with a questionnaire to complete, which asked them:

“If your employment transfers from DXC Technology to the Commonwealth Bank of Australia, would you support the “EDS People” Agreement 2002 not transferring with your employment?”

[34] Attached to Mr Nolan’s witness statement were copies of the Transferring Employees’ completed questionnaires, where they each answered ‘yes’ to the above question.

[35] The applicant has made offers of employment to each of the Transferring Employees, who have both accepted the offers.

s.318(3)(b) - Whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment

[36] The applicant submits that overall, the terms of the contracts and remuneration packages on which it has offered to the Transferring Employees exceed the benefits that they would be entitled to under the EDS Agreement.

[37] The comparison document attached to Mr Nolan’s witness statement provides that the Transferring Employees would be better off under the CBA Group EA when compared to the HPA Agreement, in that:

•  The Transferring Employees would become eligible to receive performance bonuses under the CBA Group EA;

•  The Transferring Employees would become eligible to receive additional allowances and loadings under the terms of the CBA Group EA;

•  The Transferring Employees will receive additional leave entitlements, including up to 15 days’ additional personal leave, 12 weeks’ paid parental leave as a primary care giver or eight weeks as a secondary care giver, and the option to purchase additional annual leave; and

•  Should the Transferring Employees’ employment be terminated due to the redundancy, they will receive more generous entitlements.

[38] Based on the above the Transferring Employees will not be disadvantaged by being covered by the CBA Group EA.

s.318(3)(c) - the nominal expiry date of the agreement

[39] The EDS Agreement nominally expired on 31 May 2005, whereas the CBA Group EA has a nominal expiry of 30 June 2017.

s.318(3)(d)- Whether the Agreement would have a negative impact on the productivity on the new employer’s (the applicant) workplace

[40] It is submitted by the applicant that if the EDS Agreement were to apply, it would have a negative impact on the productivity of the applicant’s workplace for the following reasons:

•  The administration of the two agreements would lead to operational inefficiencies as it would require the applicant’s highly complex payroll and rostering system to be reconfigured; require additional time and effort to be spent by payroll employees to ensure the Transferring Employees receive appropriate and accurate information regarding their remuneration; and increase the risk that wrong information or pay could be provided to the Transferring Employees.

•  The administration of multiple agreements would also require additional training of the applicant’s IT operations and staff to ensure that these employees understood the differences between the agreements and applied them correctly to relevant employees.

•  There is also the potential for morale issues among the applicant’s workforce if employees are on different terms and conditions performing the same or substantially the same work side by side.

s.318(3)(e)- Whether the applicant would incur significant economic disadvantage as a result of the Agreement covering it

[41] The applicant submitted that in order to administer the EDS Agreement, the applicant would need to make substantial modifications to its existing human resources and payroll systems, which would result in significant costs. These costs would include training, additional administration resources and costs associated with tailoring the Transferring Employees’ rostering and other arrangements to ensure agreement compliance.

s.318(3)(f) – The degree of business synergy between the Agreement and any workplace instrument that already covers the new employer

[42] It is submitted by the applicant that there is very little business synergy between the EDS Agreement and the CBA Group Agreement. DXC and the applicant are very different businesses, with DXC involved in the provision of IT services, and CBA being a large financial institution.

s.318(3)(g)- The public interest

[43] The applicant submits that the Transferring Employees are in support of this application, and that the applicant is not aware of any person opposing the application. In any event, this application only has implications for the Transferring Employees.

[44] The Full Bench decision in Kellogg Brown & Root Pty Ltd and others v Esso Australia Pty Ltd² explained the public interest test in a matter dealing with the termination of a certified agreement:

“[23] The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.”

[45] I am satisfied that the application does not offend the ‘public interest’ in that it has no impact outside the parties involved.

Conclusion

[46] I am satisfied that the EDS Agreement is a transferable instrument as described in s.312(1)(a) of the Act and that the circumstances described are a transfer of business within the meaning of s.311 of the Act.

[47] The Act requires the Commission to take into account the circumstances of the transmission of business under the various headings listed above and then to balance these considerations in reaching a conclusion.

[48] Having regard to the grounds and reasons stated in support of the application, I am satisfied that the requirements of the Act have been met. With respect to the considerations above I am satisfied that the orders sought should be granted.

[49] For the reasons set out above, an order [PR724902] in the terms sought will issue that the EDS Agreement will not cover the Transferring Employees on commencing employment at CBA and their employment will be covered by the CBA Group EA.

[50] The orders will operate from the date of this decision or upon the Transferring Employees’ commencement date with CBA, whichever is the later as per s.318(4) of the Act.

DEPUTY PRESIDENT

Matter dealt with on the papers

Printed by authority of the Commonwealth Government Printer

<PR724618>

1 Witness statement of Mr Nolan at [32]

2 PR 955357