Construction, Forestry, Mining and Energy Union v LCR Group Pty Ltd

[2016] FWC 5823

[2016] FWC 5823

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.590(2)(c) – Application for Order for production of documents

Construction, Forestry, Mining and Energy Union
v
LCR Group Pty Ltd

(AG2016/4077; AG2016/4080)

Building, metal and civil construction industries
SENIOR DEPUTY PRESIDENT RICHARDS	BRISBANE, 18 AUGUST 2016

Application for termination of the LCR Group Pty Ltd/CFMEU Collective Agreement 2012 – 2016 - Application for termination of the LCR Group and CFMEU Union Collective Agreement 2011-2015 – Order for Production of Documents – Section 590(2)(c) – Transfer of business – Section 313 – Transferable instrument - Effect of a transfer of business upon an enterprise agreement – default coverage rules - Item 199 of the Fair Work Bill 2008 Explanatory Memorandum

[1] This is a procedural or interlocutory decision related to two applications (“the Applications”) (AG2016/4077 and AG2016/4080) made by the LCR Group Pty Ltd (“LCR”) under s. 225 of the Fair Work Act 2009 (“the FW Act) for the termination of the LCR Group Pty Ltd/CFMEU Collective Agreement 2012 – 2016 and the termination of the LCR Group and CFMEU Union Collective Agreement 2011-2015 (“the Agreements”).

[2] In dealing with the Applications, I sought submissions from the different branches of the union covered by both agreements, The Construction, Forestry, Mining and Energy Union (“the CFMEU”), who subsequently (through their Federal union branch) filed two identical form F52’s, Orders for production of documents (“the CFMEU applications”). These applications arise from s.590(2)(c) of the FW Act.

[3] LCR objected to the CFMEU applications on various grounds, which I set out on a truncated basis below. Following the CFMEU and LCR each putting their respective positions, I reach the following decision. I note that I have put this interlocutory decision into writing to allow an opportunity for either party to seek a stay order and the exercise of their usual rights, particularly as there is some novelty to the matter before me, as will be evident below.

Decision in relation to the CFMEU applications

[4] Item 1 of the CFMEU applications sought certain documents relating to the number of employees currently employed by LCR and covered by the Agreements.

[5] It appears to me that item 1 (a) in Schedule One of the CFMEU applications for an order to produce is not objected to by LCR (I presume because LCR will maintain its declared position that there are no employees covered by the agreements).

[6] Item 1 (b), as I understand it, is no longer pressed by the CFMEU.

[7] Item 2 concerns certain documents relating to the engagement of subcontractors and Labour Hire providers by LCR to perform work that may otherwise be performed by employees covered by the Agreements.

[8] Item 2 of the CFMEU applications is not objected to by LCR for its own purposes. I have not had need to consider the competence of such a term of an order. I understand from the formal submissions filed by LCR that it holds there are no such documents as no sub- contractors or labour hire providers have been engaged to perform work otherwise performed under the agreement.

[9] Item 3 of the application requests certain documents relating to the sale of assets attested to by Ms Candice Micairan at clause 2.2 of the forms F24C (Statutory declarations in relation to termination of an enterprise agreement after the nominal expiry date) provided as supporting material to each of the Applications.

[10] Item 4 of the application requests documents relating to or recording the transfer of employment of any of LCR's employees who were covered by the agreement within a three month period of its selling the assets (attested to by Ms Candice Micairan at clause 2.2 of her form F 24C).

[11] LCR objects to both items 3 and 4 on the basis that “the termination of the agreement in question has no bearing on the instrument that was transferred to the new owner.”

[12] The question that falls to me to determine is whether the CFMEU request is a relevant request. The relevance of the CFMEU’s request turns on whether the request requires the disclosure of materials that are relevant to the exercise of the jurisdiction under s.225 of the FW Act. This, in turns, requires me to construe the terms of s.225 of the Act in the context of the transmission of business provisions set out in Part 2-8 of the FW Act.

[13] LCR contends broadly that the termination of the Agreements have no implication for a transferable instrument that applies to a new employer. That is, a transferable instrument is a distinct species of Agreement or industrial arrangement that applies discretely to a new employer, and is therefore without any continuing nexus with the agreement that covered the old employer and its employees (before such time as they became transferring employees, or in the event of a part sale, who remained employees and did not become transferring employees).

[14] To this end, LCR argued that the term transferable instrument was given a separate meaning in section 312 of the FW Act and that section 320 of the FW Act provides a separate power to what is contained in part 2 – 4 of the FW Act to vary a “transferable instrument."

[15] I am not aware of this matter having been subject to any prior consideration by the Commission or the Court, though I add that my research in this respect has been limited given that it is important that I act with alacrity in relation to this procedural step in dealing with the applications.

Transfer of Business

[16] My own construction of Part 2-8 of the FW Act, as it relates to a transfer of business, differs from that pressed by LCR.

[17] Section 313 of the FW Act suggests that a transferable instrument covers both the old employer and the transferring employee, prior to the termination of the transferring employees employment with the old employer, and sets out various default rules relating to coverage that apply upon the transfer of business taking effect:

Section 313

Transferring employees and new employer covered by transferable instrument

(1) 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, then:

(a) the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time (the transfer time ) the transferring employee becomes employed by the new employer; and

(b) while the transferable instrument covers the new employer and the transferring employee in relation to the transferring work, no other enterprise agreement or named employer award that covers the new employer at the transfer time covers the transferring employee in relation to that work.

(2) To avoid doubt, a transferable instrument that covers the new employer and a transferring employee under paragraph (1)(a) includes any individual flexibility arrangement that had effect as a term of the transferable instrument immediately before the termination of the transferring employee's employment with the old employer.

(3) This section has effect subject to any FWC order under subsection 318(1). [My emphasis]

[18] Item 1231 of the Fair Work Bill 2008 Explanatory Memorandum provides as follows in relation to s.313:

Clause 313 – Transferring employees and new employer covered by transferable instrument

1231. Clause 313 sets out the default rules that apply to the coverage of transferable instruments when a transfer of business occurs. The effect of subclause 313(1) is that a transferable instrument that covered an old employer and a transferring employee immediately before that employee’s employment was terminated covers the new employer and the transferring employee in relation to the transferring work:

· after the time the transferring employee becomes employed by the new employer; and

· any other enterprise agreement or named employer award (that is not a transferable instrument) which covers the new employer does not cover the transferring employee. [My emphasis]

[19] Item 1232 of the Fair Work Bill 2008 Explanatory Memorandum similarly provides:

1232. This means, for example, that an enterprise agreement or named employer award that already covered the new employer would not cover a transferring employee who is covered by a transferable instrument even if it is capable of doing so on its terms.

[20] Section 313 of the FW Act does not suggest a transferable instrument is a new or distinct statutory instrument created in the transfer of business process. A transferable instrument applies to both the old and the new employer subject to the default coverage rules, which are set out in Part 2-1, Division 3 of the FW Act.

[21] It appears to me, therefore, that the effect of a transfer of business upon an enterprise agreement is to widen the coverage of the instrument to extend to the new employer and the transferring employees, preserving the same coverage rules in the process.

[22] It is true, as the LCR pointed out, that section 320 of the FW Act facilitates modification of the application of the transferable instrument, upon the new employer. But that does not support a contention that the transferable instrument is “a different instrument to that of an enterprise bargaining agreement”, as LCR alleged.

[23] Section 320 of the FW Act does what it purports to do, which is to facilitate (by way of the Commission taking into account particular circumstances of the new employer etc.) the modification of the default rules under s.313 of the FW Act in relation to the application of the transferable instrument upon the new employer. But other than this potential “carve out” in particular circumstances, the default rules apply.

[24] LCR took me to Item 199 of the Fair Work Bill 2008 Explanatory Memorandum, which provides as follows:

199. A modern award or enterprise agreement covers a person if, in effect, the person is within the scope or coverage of the award or agreement, even if the instrument does not actually confer entitlements or impose obligations on that person at a particular time (because the instrument is not yet in operation or because it has been displaced by or under the Bill by other entitlements and obligations which operate instead). This is subject to any contrary provision of the Bill or an order made under the Bill – e.g., in a transfer of business situation, FWA can order that a transferable instrument that covers a transferring employee does not in fact cover the employee (see, generally, Part 2-8).

[25] Item 199 of the Fair Work Bill 2008 Explanatory Memorandum does not affect my construction rendered above. Section 320 of the FW Act does provide for a modification of the default rules for the new employer, depending on various criteria being considered by the Commission. But as I have mentioned above, this is a carve out from the default coverage arrangements established at s.313 of the FW Act. It has not been put to me that there has been such a coverage modification in the current context, to the extent it had any relevance to the application. That is, there had been no Commission decision put to me to the effect that the transferable instrument did not cover the new employer(s).

[26] Contrary to the argument put to me by LCR, it appears to me that a transferable instrument is subject to the ordinary application of the FW Act in relation to section 209 (variations) and s.223(1)(a) and s.226 of the FW Act (in relation to terminations), which require consideration of the views of the employees and each employer.

[27] Thus the transferable instrument is affected in the same manner as the agreement for the particular purposes, for reasons it is the same instrument (subject to any decision of the Commission under s.320 of the Act – to which Item 199 of the Fair Work Bill 2008 Explanatory Memorandum refers).

[28] LCR put to me a scenario in which the old employer made an application for the enhancement of wages under the old agreement and that if approved that variation would create a new obligation for the new employer "in circumstances where it was not a party to the application for variation or was it even notified of the matter.” LCR maintained that this was an absurd outcome that would not be reasonably contemplated under the FW Act.

[29] I agree that this would not be an outcome contemplated the FW Act, but for different reasons. It appears to me that where a variation application is made or where a termination application is made (as in this case) there are multiple employers (the old employer and the new employer) and the employees covered by the agreement extend to the employees covered by the transferable instrument. Again, this is because the effect of the transfer of business on the original agreement is to extend its coverage or application to the new employer and the transferring employees. The same applies in respect of variations to enterprise agreements that have become transferable instruments as a consequence of a defined transfer of business process.

[30] There does not appear to me to be any incompatibility in the provisions of the FW Act in allowing the various provisions to operate conjunctively in this manner.

[31] If a situation did emerge where a transferring employer and the transferring employees were not engaged in an application under s.210 or s.225 of the FW Act, it would follow that the relevant decision had been reached contrary to jurisdiction. I have said as much above at paragraph [26].

Conclusion

[32] I have provided a perfunctory interpretation of Part 2-8 of the FW Act, but nonetheless am satisfied that the construction proposed supports the relevance of Items 3 and 4 of the CFMEU application referred to above.

[33] Whilst I have some sympathy to not divulging the identity of the employers who have taken possession of the old employer's assets, that concern would appear to be without any practical expression, in the context of the applications before me. This is because, absent a consent arrangement, the identity of the employers covered by the transferable instrument and their (transferring) employees must be disclosed for the purposes of seeking their views in relation to the termination agreements (consistent with the requirements of section 223 and 225 of the FW Act).

[34] The CFMEU is now asked to reformat its application in light of the agreed matters and my decision, and to submit that document as soon as it practicable.

SENIOR DEPUTY PRESIDENT

Written submissions:

Mr Boncardo for the CFMEU.

Ms Moltoni of IRIQ on behalf of the Objector.

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