Compact Cranes Pty Ltd as Trustee for Summerhayes Family Trust
[2024] FWCA 2385
•27 JUNE 2024
| [2024] FWCA 2385 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Compact Cranes Pty Ltd as Trustee for Summerhayes Family Trust
(AG2024/1303)
COMPACT CRANES PTY LTD AS TRUSTEE FOR SUMMERHAYES FAMILY TRUST AND THE CFMEU (VICTORIAN CONSTRUCTION AND GENERAL DIVISION) MOBILE CRANE HIRING INDUSTRY ENTERPRISE AGREEMENT 2020-2023
| Building, metal and civil construction industries | |
| DEPUTY PRESIDENT MASSON | MELBOURNE, 27 JUNE 2024 |
Application for termination of the COMPACT CRANES PTY LTD AS TRUSTEE FOR SUMMERHAYES FAMILY TRUST and the CFMEU (Victorian Construction and General Division) Mobile Crane Hiring Industry Enterprise Agreement 2020-2023.
Compact Cranes Pty Ltd as Trustee for Summerhayes Family Trust (Compact Cranes) made an application to the Fair Work Commission (the Commission) on 18 April 2024, pursuant to s 225 of the Fair Work Act 2009 (the Act), to terminate the COMPACT CRANES PTY LTD AS TRUSTEE FOR SUMMERHAYES FAMILY TRUST and the CFMEU (Victorian Construction and General Division) Mobile Crane Hiring Industry Enterprise Agreement 2020-2023[1] (the Agreement).
The Agreement commenced operation 4 April 2023, the Construction, Forestry, Mining and Energy Union (CFMEU) are covered by the Agreement pursuant to s 201(2) of the Act and the nominal expiry date of the Agreement was 30 June 2023.
On 7 May 2024 following allocation of the matter to my Chambers, Directions were issued which required Compact Cranes to file materials in support of the application with the Commission and serve those materials on the CFMEU on or by the close of business on 21 May 2024. The Directions also required Compact Cranes to provide copies of the Directions and materials filed by it to all employees covered by the Agreement by that same date. The CFMEU and employees covered by the Agreement were then afforded an opportunity to file any material in reply by the close of business on 4 June 2024.
On 3 May 2024, the CFMEU wrote to my Chambers and advised that it did not oppose the application to terminate the Agreement. No employees covered by the Agreement filed any material in response to the application or materials filed by Compact Cranes.
The matter was listed for hearing on 26 June 2024 at which Compact Cranes was represented by Mr T Summerhayes, who is the Operations Manager of the Respondent. Mr Summerhayes gave evidence along with Brendan Cole who is the tax agent for the Respondent.
Background and evidence
Compact Cranes is a small Geelong based company that provides general crane hire services, predominantly for residential builders. It entered into the Agreement which was approved by the Commission on 28 March 2023 for the purpose of undertaking work on larger construction sites for one of its major clients. That work did not materialise as the client procured its own crane and no longer requires Compact Crane’s services.
Mr Summerhayes outlined that Compact Crane’s work had now returned to general crane hire for residential builders and the continued operation of the Agreement had left it struggling to compete with local ‘non-EBA’ companies. This had placed pressure on the company financially and on its ability to win work and had also forced it to secure casual labour at inflated prices through ‘cross-hiring’ from other crane companies rather than employing directly. There is only one employee currently employed under the Agreement, a decision having been made to cease employing casual labour because of the costs of the Agreement.
Mr Summerhayes referred to particular aspects of the Agreement that negatively impacted on Compact Crane’s ability to competitively bid for work. They were the minimum casual engagement period of eight hours under the Agreement versus four hours under the Building and Construction General On-site Award 2020[2] (the Award), the higher wage rates, additional superannuation contributions and higher daily fares and travel expenses compared to the Award. The combination of these benefits rendered Compact Cranes uncompetitive on minimum 4-hour crane hire rates according to Mr Summerhayes.
Mr Cole gave evidence that the impact of the Agreement on Compact Crane’s financial position has been significant. Its revenue has reduced by 13% YTD compared to the 2022/2023 financial year, profitability has been eroded dramatically and intervention is now required to rectify the business performance. Recent steps have been taken to sell one of the company cranes in order to inject some money into the business. The cost of the Agreement was also revealed in the share of overheads that labour costs now represent. Since the Agreement came into operation, the wages overhead expressed as a percentage of revenue has increased from 21.82% of revenue in the 2022/2023 financial year to 31.3% YTD for the 2023/2024 financial year. The above factors have combined to reduce profitability year on year by 58% for the 2022/2023 and 2023/2024 financial years.
By returning the business to its ‘ground roots’ in residential building construction without the additional overhead burden imposed by the Agreement, Compact Cranes hopes to retain its remaining employee and rebuild its business with the expectation of re-employing staff directly in the future. Mr Summerhayes expressed concern that unless Compact Cranes was able to compete on a level playing field with other ‘non-EBA’ crane hire companies, the business would struggle to survive.
Statutory Provisions
Section 226 of the Act sets out the circumstances in which an enterprise agreement must be terminated where an application is made under s 225. Section 226 relevantly provides as follows;
“226Terminating an enterprise agreement after its nominal expiry date
(1) If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a)the FWC is satisfied that the continued operation of the agreement would be unfair for the employees covered by the agreement; or
(b)the FWC is satisfied that the agreement does not, and is not likely to, cover any employees; or
(c)all of the following apply:
(i)the FWC is satisfied that the continued operation of the enterprise agreement would pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the agreement;
(ii)the FWC is satisfied that the termination of the enterprise agreement would be likely to reduce the potential of terminations of employment covered by subsection (2) for the employees covered by the agreement;
(iii)if the agreement contains terms providing entitlements relating to the termination of employees’ employment— each employer covered by the agreement has given the FWC a guarantee of termination entitlements in relation to the termination of the agreement.
(1A) However, the FWC must terminate the enterprise agreement under subsection (1) only if the FWC is satisfied that it is appropriate in all the circumstances to do so.
..……………
(3) In deciding whether to terminate the agreement, the FWC must consider the views of the following covered by the agreement:
(a)the employees (unless there are no employees covered by the agreement);
(b) each employer;
(c)each employee organisation (if any).
Note: The President may be required to direct a Full Bench to perform a function or exercise a power in relation to the matter if any of the employers, employees, or employee organisations, covered by the agreement oppose the termination (see subsection 615A(3)).
(4) In deciding whether to terminate the agreement (the existing agreement), the FWC must have regard to:
(a)whether the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees as the existing agreement; and
(b)whether bargaining for the proposed enterprise agreement is occurring; and
(c)whether the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.
(5) In deciding whether to terminate the agreement, the FWC may also have regard to any other relevant matter.”
Consideration
As there is no opposition to the termination application by an employee, employer or an employee organisation, ss 615A(3) of the Act is not engaged and I can determine this application in my capacity as a single member of the Commission.
I am satisfied based on the material filed and on the unchallenged evidence of Mr Summerhayes and Mr Cole that the continued operation of the Agreement would pose a significant threat to threat to the viability of the business carried on by Compact Cranes (s 226(1)(c)(i)). That risk is illustrated by its decline in revenue, the even greater decline in its profitability over the past 12 months and the significant rise in the labour overhead cost expressed as a percentage of revenue. The fact that Compact Cranes have already taken steps to shore up the business financially by selling one of its cranes reinforces the difficult financial position the business is presently in. I am further satisfied that termination of the Agreement would be likely to reduce the potential for termination of employment of the sole employee that remains covered by the Agreement (s 226(1)(c)(ii)).
Compact Cranes has provided an undertaking to preserve relevant termination entitlements contained within the Agreement in respect of employees that would be covered by the Agreement but for its termination (s 226(1)(c)(iii)). This undertaking is included as Annexure A to this decision and will operate for up to a maximum period of four years from 26 June 2024 or a lesser period if a new enterprise agreement were to commence operation prior to that date (s 226A(4)).
In making this decision, I have taken into account the views expressed by Compact Cranes in support of its application to terminate the Agreement (s 226(3)). The employees covered by the Agreement have not expressed any views. The CFMEU which is covered by the Agreement advised that it does not oppose the application and did not file any material in objection to the application.
None of the circumstances referred to in s 226(4) are evident in this case. There are no
other relevant matters to be considered pursuant to s 226(5) of the Act.
In all of the circumstances, I am satisfied that termination of the Agreement is appropriate. Accordingly, pursuant to s 227 of the Act I terminate the Agreement with effect from midnight on 27 June 2024. An order giving effect to this decision will be issued in conjunction with this decision.
DEPUTY PRESIDENT
Appearances:
T Summerhayes for the Applicant.
Hearing details:
2024.
Melbourne (via Microsoft Teams):
June 26.
Annexure A
[1] AE519569.
[2] MA000020.
Printed by authority of the Commonwealth Government Printer
<AE519569‑‑PR776455>
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