CSL Limited T/A Seqirus Pty Ltd

[2022] FWCA 2846

[2022] FWCA 2846

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.225—Enterprise agreement

CSL Limited T/A Seqirus Pty Ltd

(AG2021/8993)

Seqirus Enterprise Agreement 2020

Pharmaceutical industry
COMMISSIONER MCKINNON	SYDNEY, 19 AUGUST 2022

Application for termination of the Seqirus Enterprise Agreement 2020

1. Seqirus Pty Ltd is a division of CSL Limited which was formed in 2015. It manufactures influenza vaccines for both southern and northern hemisphere markets and produces anti‑venom and Q‑fever products for the Australasian market. Its heritage dates back to 1916 when the federal government established the Commonwealth Serum Laboratories (CSL). Seqirus operates in 20 countries and its global head office is in Maidenhead, UK. It has approximately 2,800 employees, including approximately 884 employees in Australia. These employees are employed by CSL Limited and work for the Seqirus division.

1. CSL Limited, trading as Seqirus Pty Ltd, has applied to terminate the Seqirus Enterprise Agreement 2020 (the Agreement), an enterprise agreement that covers employees of CSL Limited who perform work in its Seqirus division in the pharmaceutical industry in Victoria. The Agreement expired on 30 June 2021 and has since been replaced by the Seqirus Enterprise Agreement 2021 (the 2021 Agreement). The CPSU, the Community and Public Sector Union is covered by the Agreement and opposes termination of the Agreement.

1. The question is whether to terminate the Agreement.

Terminating an enterprise agreement after its nominal expiry date

1. Section 225 of the Act provides for an employer, employee or employee organisation to apply to terminate an enterprise agreement that covers them, if the agreement has passed its nominal expiry date.

1. Section 226 of the Act sets out the conditions which must be met for an agreement to be terminated under s.225 of the Act:

“226      When the FWC must terminate an enterprise agreement

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 it is not contrary to the public interest to do so; and

(b)       the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:

(i)           the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and

(ii)          the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”

1. CSL, as the employer covered by the Agreement, has applied to terminate the Agreement. The reason for the application is that CSL wants to transition Level 5 employees (who are employed as professionals, team leaders and subject matter experts) from enterprise agreement coverage to individual employment contracts (operating in conjunction with relevant modern awards). In return, employees will have access to a global remuneration model comprising their individual employment contract, annual market salary increases and targeted 10% short term incentives.

Is termination contrary to the public interest?

1. The CPSU submits that it would be contrary to the public interest to terminate the Agreement because there has been no attempt to bargain with the affected employees or to implement the global remuneration structure within the confines of the Agreement, and termination would not maintain an appropriate safety net of industrial standards, and there are no genuine public interest grounds in favour of termination.

1. I am satisfied that termination of the Agreement would not be contrary to the public interest. In this respect, it is not necessary for me to be satisfied that there are public interest grounds in favour of termination.

1. The Act does not require parties to first seek to bargain for a replacement agreement before an enterprise agreement is terminated and I do not find the application to be contrary to the objects of the Act, when those objects are considered together in all of the circumstances. Termination of enterprise agreements is a mechanism for which the Act provides. It forms part of the broader bargaining and enterprise agreement framework.

1. In any event, the parties in this case have successfully bargained for a replacement agreement. The bargain was struck on the basis that the 2021 Agreement would not cover Level 5 employees, even though the CPSU’s preference was for the existing scope be retained. The CPSU did not take active steps to secure this outcome (for example, through scope orders, good faith bargaining orders or protected industrial action). This was both because it was in a position of conflict - seeking to represent its members who supported the proposed agreement as well as those who opposed it, but also because ultimately the majority position of its members was in support of the 2021 Agreement.

1. I do not agree that Level 5 employees will lose the right to bargain collectively if the Agreement is terminated. They may not be included in future bargaining to replace the 2021 Agreement as it does not cover them, although equally they might. Level 5 employees retain the right to participate in bargaining under the Act if the Agreement is terminated. If employees wish to bargain in the future, they can seek the agreement of Seqirus to do so. If Seqirus does not agree to bargain, a scope order can be sought (in bargaining for the next replacement agreement) or a majority support determination sought to compel bargaining for an enterprise agreement to cover Level 5 employees.

1. Each of these steps can be taken with the support and assistance of the CPSU. The CPSU may no longer have a direct role in representing Level 5 employees in discussions in relation to the 2021 Agreement, but it remains eligible to represent the employees generally, just as it retains the right to represent Levels 1-4 employees in discussions arising under the 2021 Agreement. The CPSU’s rights under the Agreement continue under the 2021 Agreement including in relation to union dues, training leave and delegates representational rights, although I accept that the application of these provisions may be narrower according to its level of membership among Level 5 employees.

1. As to whether Seqirus could have taken a different approach in relation to the global remuneration framework, for example by seeking to enter into individual flexibility agreements, it is difficult to see how this engages the public interest. Further, it is not the role of the Commission to step into the shoes of the business in connection with the decisions it makes. The important thing is that Seqirus, after having made its decision, was open and transparent with both employees and the CPSU about its intentions. It engaged meaningfully in consultation over the termination proposal as well as bargaining for a replacement agreement throughout the majority of 2021. It did not mislead anyone in relation to the proposal. The process led to the reaching of agreement, both with employees who would remain on an enterprise agreement and those who would transition away from an enterprise agreement to the global remuneration framework.

1. Finally, I do not accept that termination of the Agreement will leave Level 5 employees without an appropriate safety net of industrial standards. The safety net of minimum terms and conditions of employment comprises of the National Employment Standards and relevant modern awards. The safety net for Level 5 employees will remain if the Agreement is terminated, including for the large majority of these employees, through the terms and conditions of the applicable modern awards. While some of their benefits under the Agreement will be lost if termination is approved, these have mostly been preserved by the new contracts and Seqirus policies. Others are outweighed by the benefits offered by the new global remuneration model, which is likely to increase the earnings potential of employees while recognising their contribution to the business. In this way, the new model has the potential to enhance flexibility and business productivity. The fact that some employees are award-free does not change the position – for those employees, the safety net provided by the Act is and remains the National Employment Standards.

Is it appropriate to terminate the agreement in all the circumstances?

The views of each employer and their circumstances, including likely effect of termination on them

1. CSL supports termination of the Agreement and the subsequent transition of Level 5 employees to the global remuneration model. This is because this will more closely align the employment arrangements of Level 5 employees in Australia with their peers in other countries, and because the new model offers access to additional entitlements that reward contribution to the business. CSL anticipates that the consequences of termination will include improving its capacity to recruit and retain skilled employees, lifting productivity by rewarding performance and an overall increase in labour costs.

1. CSL has acted consistently with the position it put to employees at the outset – that is, that it would only apply to terminate the Agreement if a majority of affected employees supported the proposal. For this reason, employees were asked to vote on the proposal after a lengthy period of consultation. Once a majority of employees voted in favour of termination, the application was made.

The views of relevant employees and their circumstances, including the likely effect of termination on them

1. The Agreement has now ceased to operate except in relation to Level 5 employees because Level 1-4 employees are now covered by the 2021 Agreement. For these employees, termination of the Agreement will have no effect.

1. For the approximately 163 employees employed at Level 5, termination of the Agreement will mean that their employment becomes regulated by the new individual employment contracts together with any applicable modern award. The employees in question are professional employees, team leaders and subject matter experts. They have agreed, by majority, to terminate the Agreement, following a period of extensive and transparent consultation. They retain their rights in relation to collective bargaining in the future should they so wish.

1. The minimum salary for a Level 5 employee under the Agreement is $107,850. The individual employment contracts they have been offered will preserve some (but not all) of the benefits of the Agreement. Preserved benefits include redundancy and severance entitlements, 15 days personal leave after 1 years’ service, 2 additional days off each year and eligibility for overtime. There are entitlements in the Agreement that will cease to operate in relation to Level 5 employees and that will instead be provided by Seqirus policy, including salary continuance, shift and other allowances and certain leave entitlements. Remaining entitlements in the Agreement that have either not been dealt with in the employment contracts or policies will no longer apply. These include prescribed meal and rest breaks and grandfathered rostered days off.

1. One employee has given evidence against the application. Mr Daniel Abela, Operations Engineer, has not signed an individual employment contract because he does not agree to signing a document before it needs to become effective. He is also concerned that termination of the Agreement will reduce his entitlements over time. The main disadvantage identified by Mr Abela is the increase in ordinary hours of work from 36.75 to 38 hours per week (and the related loss of overtime pay). Even so, Mr Abela considers that he will likely be better off financially under the global remuneration framework.

1. I do not accept that employees were improperly influenced to support termination of the Agreement by the offer of a backdated merit increase and payment of $1000. The offer was made openly in connection with the offer of new contracts of employment. There is no evidence of any pressure being brought to bear on employees to accept the proposal, to sign new employment contracts (or to sign them quickly), or to vote in favour of termination of the Agreement. The offer of an incentive to encourage employees to accept new industrial arrangements is a common feature of bargaining under the Act. It is unsurprising that payment of the incentives is timed to coincide with termination of the Agreement given the linkage between termination of the Agreement and transition to the global remuneration framework. As the contracts are conditional upon termination of the Agreement, they only take effect upon that event.

1. As at 21 January 2022, the rate of take up of new individual employment contracts was 70%. The employment contracts will take effect upon termination of the Agreement. The level of acceptance of these arrangements is indicative of employee support for transition to the global remuneration framework, including by the termination of the Agreement.

The views of each employee organisation covered by the agreement and their circumstances, including likely effect of termination on them

1. The CPSU is opposed to termination of the Agreement. It submits that termination is not appropriate because the effect will be diminished working conditions and enforcement rights for employees. It further submits that employees were given incomplete information in the lead up to the vote to approve termination, and points to the divided opinions of employees about whether the Agreement should be terminated.

1. The CPSU submits that the explanation to employees about the proposal to terminate the Agreement was inadequate, including because it did not include a comparison of the Agreement and the relevant modern awards. I do not share the concern. The explanation given to employees was comprehensive in relation to the terms and conditions of the Agreement compared to the terms and conditions that would apply under individual employment contracts, supplemented by Seqirus policies. There was a lengthy consultation period during which there was adequate opportunity for employees to read, understand and make inquiries about what was proposed. That modern awards will now apply to employees is likely to operate in a way that enhances (rather than detracts from) their terms and conditions of employment. Modern awards are publicly available on the Commission’s website and through other means and are easily accessible to those who wish to find them. In the context of a group of employees who are professional, supervisorial and/or subject matter experts, I am not persuaded that there were inadequacies in the explanation such that their capacity for informed consent was undermined.

1. The CPSU submits that termination of the Agreement will mean that employees’ terms and conditions of employment will be less enforceable than they are now. While contracts and policies can be changed more readily than modern awards, contracts of employment are enforceable in the courts and changes to the contract of employment require the agreement of the parties. The prospect of Seqirus unilaterally withdrawing contractual benefits and reverting to modern award conditions alone is, in my assessment, remote. Policies of course can and do change over time. It is speculation to suggest that Seqirus will take away the benefit of these policies for employees at will. Any such changes are just as likely to improve the position of employees as they are to detract from it.

1. As to whether employees were divided in relation to the outcome, it is true that the vote to approve termination of the Agreement was close and that not all employees are in favour of termination of the Agreement. From a group of 163 relevant employees, 145 employees participated in the vote and a majority (51.03%) voted in favour of the termination while 48.96% voted against it.

1. Even so, a large majority of employees (70%) have accepted the new employment contracts, indicating their support for transition to the global remuneration framework. It was not necessary for Seqirus to conduct a vote of employees before seeking to terminate the Agreement as there is no such requirement in the Act. It did so to establish for itself whether employees supported the termination proposal. Having achieved majority support, the application was made. That the majority was only slim does not weigh against termination of the Agreement on its own.

1. On balance, I am satisfied that it is appropriate to terminate the Agreement.

Conclusion

1. Each of the pre-conditions for termination of the Agreement have been met and as a result, I must terminate the Agreement.

1. The Agreement is terminated with effect from today.

COMMISSIONER

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