Creekgold Pty Ltd ATF The Zipf No 5 Family Trust

[2014] FWC 5492

[2014] FWC 5492

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.319 - Application for an order re instruments covering new employer and non-transferring employees in agreements

Creekgold Pty Ltd ATF The Zipf No 5 Family Trust
(AG2014/774)

Retail industry
COMMISSIONER BULL	PERTH, 14 AUGUST 2014

Application for an order re instruments covering new employer and non-transferring employees in agreements - Benefit of single industrial instrument not sufficient to grant order - Application dismissed.

[1] This decision concerns an application by Creekgold Pty Ltd ATF The Zipf No 5 Family Trust (the Applicant) for an Order under s.319 of the Fair Work Act 2009 (the Act) which relates to instruments covering a new employer and non-transferring employees.

Background

[2] The Applicant advises that on 11 February 2014, it purchased an IGA Supermarket located in Cooroy Queensland. 126 existing employees (the transferring employees) of the old employer were offered and accepted employment with the Applicant.

[3] The Applicant submits that the work the transferring employees perform is the same or substantially the same as the work that the transferring employees performed for the old employer.

[4] The transferring employees were covered by the Luke’s Supa IGA Cooroy (The Retailers Association) Employee Collective Agreement 2009 1(the Agreement) which was approved by the Workplace Authority on 19 August 2009 as having passed the No-Disadvantage Test. The Agreement has a nominal expiry date of 25 August 2014. The Agreement was made pursuant to s.327 of the Workplace Relations Act 1996 (the WR Act) and is a collective-agreement based transitional instrument as per Item 2(5)(c)(iv) of Schedule 3 of the Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (the Transitional Act).

[5] Since 11 February 2014, the Applicant has employed at least four non-transferring employees. The non-transferring employees are currently covered by the General Retail Industry Award 2010 (the Award) which is a modern award within the meaning of section 314(1)(d) of the Act.

[6] The Applicant seeks an order pursuant to s.319 of the Act that new non-transferring employees engaged subsequent to the purchase of the supermarket will be covered by the Agreement.

[7] Division 2 of Part 2-8 of the Act provides for the transfer of rights and obligations under enterprise agreements, certain modern awards and other instruments where there is a transfer of business from an old employer to a new employer (see s.310 of the Act).

[8] Section 311 of the Act provides the definition of transfer of business, old employer, new employer and transferring work. It also sets out the circumstances in which a transfer of business occurs.

[9] Section 312 of the Act defines transferable instrument. Item 8 of Schedule 11 of the Transitional Act modifies Part 2-8 of the Act to make it clear that the definition of transferable instrument in s.312(1) is extended to cover transitional instruments, other than workplace agreements and workplace determinations that have not yet come into operation.

[10] Section 319(1) of the Act provides that the Fair Work Commission (the Commission) may make certain orders in relation to a new employer and non-transferring employees. Section 319(3) sets out the matters that the Commission must take into account when deciding whether to make an order under s.319(3).

[11] Pursuant to s.311(1) the Act defines when 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

(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 the 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).

[12] In this application, the transferring employees were employed by the new employer within three months after termination by the old employer. The work that the transferring employees perform for the new employer is the same or substantially the same as the work performed for the old employer. Further, there is a connection between the old employer and the Applicant in that all of the business of the old employer was sold to the Applicant.

[13] Accordingly pursuant to s.311 of the Act, there is a transfer of business and the employees of the old employer are transferring employees within the meaning of the Act.

[14] The Agreement is a transferable instrument by virtue of s.312(1)(a) of the Act. Section 313 provides for the transferable instrument (the Agreement) to, in effect, transfer to the new employer (the Applicant) along with the employees who are transferred.

[15] Therefore, the Applicant and the transferring employees are already covered by the Agreement.

Non-transferring employees

[16] With respect to whether the Agreement should also cover the non-transferring employees. Section 314 of the Act makes provision for a transferable instrument to automatically cover other employees in certain circumstances.

[17] Section 314 of the Act states:

314 New non-transferring employees of new employer may be covered by transferable instrument

(1) If:

(a) a transferable instrument covers the new employer because of paragraph 313(1)(a); and

(b) after the transferable instrument starts to cover the new employer, the new employer employs a non-transferring employee; and

(c) the non-transferring employee performs the transferring work; and

(d) at the time the non-transferring employee is employed, no other enterprise agreement or modern award covers the new employer and the non-transferring employee in relation to that work;

then the transferable instrument covers the new employer and the non-transferring employee in relation to that work.

(2) A non-transferring employee of a new employer, in relation to a transfer of business, is an employee of the new employer who is not a transferring employee.

(3) This section has effect subject to any FWC order under subsection 319(1).

[18] The Applicant is covered by a modern award within the meaning of s.314(1)(d) of the Act. As the non-transferring employees were engaged subsequent to the Agreement covering the new employer and the employer is covered by a modern award, the broader coverage of the Agreement to the ‘new’ employees, as contemplated by s.314 above does not operate.

[19] However, the operation of s.314 is subject to s.319 of the Act which allows for the Commission to make an order notwithstanding the provisions of s.314, that a transferring instrument cover non-transferring employees.

[20] Section 319(1) provides for Orders that the Commission may make:

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 non-transferring employee because of subsection 314(1) does not, or will not, cover the non-transferring employee;

(b) an order that a transferable instrument that covers, or is likely to cover, the new employer, because of a provision of this Part, covers, or will cover, a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;

(c) an order that an enterprise agreement or a modern award that covers the new employer does not, or will not, cover a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer.

Note: Orders may be made under paragraphs (1)(b) and (c) in relation to a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer, whether or not the non-transferring employee became employed by the new employer before or after the transferable instrument referred to in paragraph (1)(b) started to cover the new employer.

[21] Section 319(3) sets out the matters that the Commission must take into account when issuing an order pursuant to s.319.

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.

Applicant’s submissions

[22] In its application the Applicant has addressed each of the matters that the Commission is required to consider when issuing an order under s.319. The application was accompanied by an affidavit (the Affidavit) by Ms Johanna Probert a Workplace Relations Consultant with Haycroft Workplace Consulting Pty Ltd, outlining the argument for the Applicant as to why the Agreement should apply to non-transferring employees.

[23] The Applicant submitted that if the Order was made, all employees working in the supermarket would receive the same entitlements and conditions, and that as a result, the performance of the Applicant’s administrative functions would be simplified.

[24] In attempting to obtain all information relevant to the matters listed in s.319(3) of the Act the Commission sought from the Applicant further information including indicative rosters and wage calculations to demonstrate whether employees would be disadvantaged should the requested Order issue.

[25] Following a request for further information on 23 April 2014, and a written response having been received on 1 May 2014, a telephone conference was held on 12 May 2014, during which further information was requested by the Commission concerning rostering over public holidays, the views of new employees and the prospects of a replacement enterprise agreement being negotiated.

[26] Further written advice was received from the Applicant addressing the issues raised by the Commission.

[27] Each of the matters under s.319(3) of the Act is dealt with below.

Views of the new employer - s.319(3)(a)(i)

[28] The Applicant wishes the Agreement to apply to its non-transferring employees because it will avoid some employees being covered by one industrial agreement and receiving different entitlements, whilst other employees in the same workplace are covered by a modern award, all performing similar or the same work.

[29] The Applicant stated that it would be an administrative challenge to apply two different industrial instruments to employees in one workplace; it would incur additional training costs and require the need to upgrade the payroll and rostering systems.

Views of the employees - s.319(3)(a)(ii)

[30] The Application did not initially address the views of non-transferring employees on the basis that none had been employed. Subsequently the views of four new employees were provided via affidavits who indicated that they wished to be covered by the Agreement and had been given a copy of the Agreement to consider its terms and that Ms Probert had explained to them how the terms of the Agreement would affect their employment. The Applicant provided rosters for the weeks of 21 and 28 April 2014, for the four non transferring employees which indicated for them, little work was undertaken on weekends or public holidays.

Whether any employees would be disadvantaged by the order - s.319(3)(b)

[31] The Applicant indicated that some employees working particular rosters at the supermarket would receive lesser rates than the Award and therefore would be disadvantaged. In terms of a financial disadvantage this revolves around whether employees are working overtime, public holidays or outside the span of hours under the Award.

[32] As was put in Ms Probert’s Affidavit 2, permanent employees would be worse off under the Agreement when working:

● After 6:00pm Monday to Friday;
● Sundays; and
● Public holidays.

[33] Whereas casual employees would be worse off under the Agreement when working:

● Saturdays;
● Sundays; and
● Public Holidays.

[34] It was said that these disadvantages should be set off against the higher ordinary rates of pay under the Agreement. Based on the rosters provided by the Applicant it was clear some of the existing employees who will remain on the Agreement would have been better off under the Award, but the majority would be better off under the Agreement. On a yearly average calculation undertaken by the Applicant on two x one week roster periods which were subject to some modification, some employees currently covered by the Agreement would be worse off by more than $2,000 per annum and some better off by more than $2,500 per annum.

[35] In terms of disadvantage as compared to the Award it was acknowledged that the Agreement:

● does not contain a flexibility clause;
● has lower penalty and casual rates, no leave loading, no meal allowance;
● is contrary to some NES conditions;
● has a wider span of hours;
● contains lesser consultative provisions; and
● provides for limited choice of superannuation funds.

[36] On the other hand the Agreement is said to provide better benefits in terms of:

● anti discrimination;
● confidentiality;
● redundancy for employees with 10 years’ service;
● higher minimum rates of pay;
● ability to cash out annual leave; and
● a weekly $10.00 service bonus for employees who exceed 5 years service.

[37] The Applicant made reference to the decision in Lime 1 Pty Ltd 3 in support of approving the application, despite the potential of some employees being disadvantaged. In that decision despite some casual wages being below the Award, higher wage rates on public holidays and Saturdays and the payment of overtime to casuals was accepted as offsetting any disadvantage.

[38] In answering the question posed by s.319(3)(b) it is clear some, but not the majority, of non-transferring employees would be worse off under the Agreement if working the rosters of existing transferring employees.

Expiry date of the agreement s.319(3)(c)

[39] The nominal expiry date of the Agreement is 25 August 2014.

[40] In response to a question from the Commission regarding the negotiation of a new enterprise agreement during the 12 May 2014, telephone conference, the Applicant advised that there were no plans to renegotiate the Agreement. In its written correspondence of 26 May 2014, the Applicant states that it will sustain costs in negotiating and drafting a new enterprise agreement.

[41] The Applicant argues that as the nominal expiry date of the Agreement will still be in term, this favours the making of the Order and relies on the decision in Zancott Recruitment Pty Ltd 4. While this decision was overturned on appeal5, the remaining nominal life of the Agreement is only a balance of a few weeks. The Applicant states that if a majority support determination was issued by the Commission it would undertake negotiations for a new agreement.

Productivity s.319(3)(d)

[42] The Applicant submitted that the Agreement would not have a negative impact on the productivity of the workplace as it is a tailored instrument designed to suit the operations and circumstances of Cooroy Supa IGA including providing for a broader span of hours, that is, 05:00am to 12:00 midnight, seven days a week as compared to the Award.

[43] It was also said that productivity is improved under the Agreement as regular patterns of work are not required at the time of engagement for part-time employees as required by the Award.

Economic disadvantage s.319(3)(e)

[44] The Applicant stated that they would not incur any significant economic disadvantage as a result of the Agreement covering non-transferring employees. It was stated by the Applicant that there would be operational and administrative inefficiencies arising from having to administer the terms of an additional industrial instrument.

Degree of business synergy s.319(3)(f)

[45] The Applicant argued that there is little business synergy between the Agreement and the Award as they provide for different minimum employment conditions and that as a result of having to operate under two industrial instruments there would be a high risk of industrial disharmony.

Public interest s.319(3)(g)

[46] The Applicant submits that by making the Order sought it would support the objects of the Act by acknowledging the special circumstance of medium sized businesses, such as, the Applicant’s including flexible part-time hours and an increased span of hours.

[47] The Full Bench decision in Kellogg Brown & Root Pty Ltd and others v Esso Australia Pty Ltd 6 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.

[48] In respect of Award coverage the Application seeks to place non-transferring employees on an Agreement that is not underpinned by the relevant modern award being the General Retail Industry Award 2010, but which was approved under a “no-disadvantage test” under the previous legislative regime, the Workplace Relations Act 1996. If the Order was granted there appears no or little incentive for the employer to renegotiate a new replacement agreement.

Conclusion

[49] The Act requires the Commission to take into account the circumstances of the transmission of business under the various headings laid out above and to then balance these considerations in reaching a conclusion. The Applicant referred the Commission to the decision in Shop Distributive and Allied Employees Association 7 (SDAEA) to support the argument that although the transferring employees8 will in part be disadvantaged by the Order sought the Commission should balance these considerations against the interest of the employer running their business efficiently.9 In the SDAEA matter the Commission concluded that any disadvantage to employees when compared to the award would only be transitional with the disadvantage eliminated within a defined period and there was strong support from the union involved. These circumstances do not exist in this application.

[50] Having regard to the objects of the Act it is clear that the making of enterprise agreements is intended to be the principal means under the Act whereby working conditions and arrangements are negotiated to meet the needs of individual workplaces. However, the maintenance of proper industrial standards via the requirement to have regard to an appropriate safety net of “fair, relevant and enforceable minimum terms and conditions” of employment is also an object of the Act.

[51] On the Applicant’s own submission it is not likely that in the near future a new agreement will be negotiated and be tested against the Award as is now required under the Act 10 through the application of the minimum terms and conditions of employment contained in the General Retail Industry Award 2010.

[52] The Agreement was negotiated in 2009 and has operated for 5 years and is about to reach its nominal expiry without the prospect of a replacement agreement being negotiated in the short term. The Agreement is inferior to the Award in a number of significant areas some of which have been listed above, although the employer argues that in most cases this is compensated by a higher hourly rate of pay.

[53] Taking into account each of the matters set out in section 319(3), I am not satisfied that the order sought should be granted. I accept the desirability of having a single industrial instrument for the employer to operate under, but clearly the Act countenances that this will not be the determinative factor, but a consideration amongst others.

[54] This decision will not impact on the existing 126 transferring employees, only those non-transferring employees.

[55] For the above reasons the application is dismissed.

COMMISSIONER

 1 AC325924.

 2   At paragraphs 27 and 28.

 3   [2012] FWA 9115.

 4   [2013] FWC 8865.

 5   [2014] FWCFB 351.

 6   [2005] AIRC 72.

 7   [2013] FWC 6310.

 8   The disadvantaged employees will be any non-transferring employees, not the transferring employees who remain covered by their Agreement.

 9   Originating application at paragraph 21.

 10   s.193 of the Act - Passing the Better Off Overall Test.

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<Price code C, AC325924  PR554194 >