Damiano Banda v OCN Pty Ltd

[2016] FWC 7817

[2016] FWC 7817

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Damiano Banda
v
OCN Pty Ltd
(U2016/10052)

SENIOR DEPUTY PRESIDENT O'CALLAGHAN ADELAIDE, 28 OCTOBER 2016

Application for relief from unfair dismissal – minimum employment period – employee not a transferring employee.

[1] On 8 August 2016 Mr Banda lodged an unfair dismissal application, pursuant to s.394 of the Fair Work Act 2009 (the FW Act) in relation to the termination of his employment with OCN Services.

[2] The Employer’s Response (Form F3) to the application confirmed the respondent as OCN Pty Ltd (OCN). I have utilised the discretion in s.586 to amend the application accordingly.

[3] In his application, Mr Banda advised:

“Started work on this site in 1st July 2012 until 27th April 2016 when there was change of management to OCN.” 1

[4] OCN advised that Mr Banda commenced his employment on 28 April 2016. There is no dispute that the termination of Mr Banda’s employment took effect on 1 August 2016. OCN assert that Mr Banda had not completed the requisite minimum employment period so that he was not a person protected from unfair dismissal.

[5] This initial issue was the subject of a determinative conference in Perth with a telephone link to Sydney on 26 October 2016. In a decision 2 issued on 29 September 2016 I refused a request made for OCN to be represented by a lawyer or paid agent. At the determinative conference on 26 October 2016 Mr Banda represented himself and OCN was represented by its owner and Managing Director, Mr Itaoui. Both parties provided written material which I have taken into account.

The FW Act

[6] Section 382 of the FW Act establishes when a person is protected from unfair dismissal. The element of this definition relevant to Mr Banda is the requirement that he must have completed the minimum employment period. OCN employed more than 15 employees at the time of the termination of Mr Banda’s employment so that minimum employment period was a period of six months. Consequently, if Mr Banda’s employment commenced on 28 April 2016, he is not then a person protected from unfair dismissal and the application must be dismissed.

[7] Section 384 defines the period of employment in the following terms:

“384 Period of employment

(1) An employee’s period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee.

(2) However:

(a) a period of service as a casual employee does not count towards the employee’s period of employment unless:

(i) the employment as a casual employee was on a regular and systematic basis; and

(ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis; and

(b) if:

(i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and

(ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and

(iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised;

the period of service with the old employer does not count towards the employee’s period of employment with the new employer.”

[8] The meaning of the concepts of “service” and “a period of service” are defined in s.22 of the FW Act in the following relevant terms:

“22 Meanings of service and continuous service

General meaning

(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

…

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

Note: This subsection does not apply to a transfer of employment between non‑associated entities, for the purpose of Division 6 of Part 2‑2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2‑2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

…

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a) the following conditions are satisfied:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b) the following conditions are satisfied:

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(8) A transfer of employment:

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non‑associated entities if paragraph (7)(b) applies.”

[9] Consequently, it is apparent that there are two types of employment transfer situations whereby an employees’ employment with a previous employer will be taken into account for the purposes of calculating whether the employee has worked for the necessary minimum employment period. The first relates to a transfer of employment where the employee is employed within three months of the first employment ending and the first and second employers are associated entities. An associated entity is defined in s.12 in the following terms:

“associated entity has the meaning given by section 50AAA of the Corporations Act 2001.”

[10] Section 50AAA of the Corporations Act 2001 states:

“CORPORATIONS ACT 2001 - SECT 50AAA

Associated entities

(1) One entity (the associate ) is an associated entity of another entity (the principal ) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(c) the interest is material to the associate.

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(c) the interest is material to the principal.

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity ) has a qualifying investment in another entity (the second entity ) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[11] The second type of employment transfer whereby an employees’ employment with a previous employer will be taken into account in the consideration of the minimum employment period is where the two businesses are not associated entities but the employee is a transferring employee in relation to a transfer of business.

[12] The concept of a transfer of business is addressed and defined in s.311 which states:

“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).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.

New employer ceases to outsource work to old employer

(5) There is a connection between the old employer and the new employer if:

(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and

(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.

New employer is associated entity of old employer

(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.”

[13] Finally, s.384 establishes that, where the two relevant businesses are not associated entities and a person is a transferring employee, if the new employer provided that employee with written advice, before the employment started, that the service with the new employer would not be recognised, that earlier employment is not counted toward the minimum employment period.

[14] I have considered the evidence before me in this context.

[15] Mr Banda asserts that he was previously employed by ISS who operated under a contract to undertake Qantas cleaning work. Mr Banda asserts that he was advised that ISS management advised him that its contract had ceased and he had the choice of being transferred to the new contractor or going to work on a different ISS site. Mr Banda asserts that, by implication, there was some form of arrangement between ISS and OCN.

[16] Mr Banda asserts that OCN advised him before the contract changed, that ISS employees would be continuing in employment under OCN. Mr Banda’s evidence was that:

“The week leading to the 28th of April I was briefed by Mr Satyam who introduced himself as the one who will be new contract manager of the new company – OCN. He said ‘I am Satyam, the new contract manager and everyone will continue in his role as he was working before and nothing will change.’ Although this communication was verbal, his words were very re assuring that the status quo remains the same and everyone should carry on doing his job and no one will lose his job. Indeed I continued as I was doing my job and find attached my payslips from both companies during this 28th April transition. This is when I made my choice to remain with the new company and if it was that at this time I was informed that there will be no continuation of my service from the old company and that I will be required to start over again and do probation, I could not have chosen to join the new company as I had already developed trust and relationship with my former employers. I could have chosen to be deployed anywhere else. At this point the only communication I received was the offer letter (attached) and no any other communication was sent to me regarding otherwise. The contract mentioned by Mr Fred (OCN) was only sent to me three months down the line as you can see the date I signed is the 21st of July 2016 and it is the same date I received it. I went ahead to sign it in good faith although I had questions in my mind of the intention of bringing me a contract to sign three months after and it contained clauses of probation backdated to 1 st May 2016.

Therefore, with all the communication I had during this time, it leaves me with no doubt that my period of service was a continuation from my previous employer as I was never communicated that my previous service will not count.” 3

[17] Mr Banda agreed that he was paid out his accrued employment entitlements on the cessation of his employment with ISS.

[18] On 26 April 2016 OCN provided Mr Banda with a letter in the following relevant terms:

“RE: PRELIMINARY LETTER OF APPOINTMENT

We are pleased to extend to you a preliminary offer of employment conditional on successful completion of all documents included in the Employee Starter Pack including the below screening process:

Security clearance checks
Medical clearance checks
DIMA Checks

Once all the above are completed a formal letter of offer detailing your roster will be sent. Please note the starting date will be 1^st May 2016.

Look forward to a long and successful working relationship.

Regards,

Payroll
OCN Pty Ltd” 4

[19] Mr Banda continued to work at the Qantas site when the contract changed. He confirmed that he used new cleaning equipment provided by OCN but advised that he continued to use cleaning chemicals that were initially provided by ISS. On 21 July 2016 OCN provided Mr Banda with a contract dated 26 May 2016 relative to his employment which had commenced on 28 April 2016. That contract specified a three month probationary period and was signed by Mr Banda on 21 July 2016. Mr Banda was advised of the termination of his employment during the following week.

[20] Mr Banda asserts that he was a transferring employee and that, as a consequence, he asserts that he had worked for the necessary minimum employment period so as to be a person protected from unfair dismissal.

[21] The OCN position is that Mr Banda was previously employed by ISS Facility Services Australia Ltd which is not an entity associated with OCN. Further, that there was no contract, understanding, agreement or arrangement between ISS and OCN which would permit Mr Banda to be regarded as a transferring employee. OCN assert that it did not utilise any ISS assets and simply took over the Qantas cleaning contract, using new equipment and materials and that it entered into a new employment contract with Mr Banda.

[22] In terms of s.22(7)(b) OCN asserts that Mr Banda cannot be regarded as a transferring employee as there was no transfer of business that met the requirements of s.311(3)-(6).

[23] Mr Itaoui asserts that he was the General Manager of a cleaning company, IPS Pty Ltd which tendered for, and won, the Qantas contract. When IPS Pty Ltd was taken over by a further contract cleaning company, OCS International Pty Ltd, OCS then decided to subcontract the Qantas cleaning work to OCN. Mr Itaoui then left IPS to become the full time General Manager of OCN. His evidence was that neither OCN, OCS nor IPS had any relationship with the previous contractor, ISS. Mr Itaoui advised that OCN did not use or acquire any ISS equipment or assets. Further, that there was no contractual obligation on OCN to engage the former ISS employees. Mr Itaoui stated:

“7. Prior to Mr Banda becoming an employee of OCN he was, so far as I am aware, employed by ISS Australia. OCN approached all the ISS Australia employees prior to April 2016 and offered them a preliminary position. The employees (including Mr Banda) were told the offers were subject to the employee passing the relevant police and security checks, and medical examinations. At this time, employees were also told that they would be new employees of OCN and that would be no entitlement from their employment with ISS Australia.” 5

[24] Mr Itaoui confirmed that OCN purchased new cleaning equipment and that it did not purchase any materials from ISS or deal with ISS in any manner.

[25] Mr Itaoui confirmed the employment offer and contract arrangements relating to Mr Banda. He was not aware of any delay in issuing the employment contract dated 26 May 2016.

[26] Mr Itaoui advised that OCN became aware of the details relating to employees of ISS through contact made with those employees in the week before the contract commenced and that ISS did not facilitate this contact.

[27] In terms of the advice which Mr Banda asserts he was given by OCN before he commenced employment with OCN, Mr Itaoui asserts that Mr Banda, together with the other employees engaged by OCN, were advised that their employment was a new arrangement and was subject to the successful completion of medical and other checks.

Findings

[28] The evidence establishes that OCN and ISS are not associated entities. The issue then becomes one of determining whether Mr Banda was a transferring employee consistent with s.311 of the FW Act. Subsections 311(4), (5) and (6) are not relevant. The issue is whether or not there is a connection between ISS and OCN in accordance with an arrangement consistent with s.311(3).

[29] In Zabrdac v Transclean Facilities Pty Ltd 6 Bissett C considered the concept of an arrangement for this purpose in the following terms:

“[64] For there to be a transfer of business in this case the condition in s.311(3) of the Act must be satisfied. That is, there must be an arrangement between the new and old employer for the beneficial use of assets of the old employer that relate to, or are used in connection with the transferring work.

[65] If such an ‘arrangement’ as described in s.311(3) can be established then there is a connection between the old and new employer such that the requirements of ss.311(1)(a)-(d) of the Act have been met and there is a transfer of business for the purposes of the Act.

[66] The word ‘arrangement’ is not defined in the Act. The Explanatory Memorandum to the Fair Work Bill 2009 states that ‘the word arrangement is intended to be interpreted broadly.’ 29 This does not, however, suggest that it should be given a loose form. It must be a term that has some meaning.”

[30] The Commissioner then considered a range of authorities dealing with the concept of an arrangement.

[31] This issue was then considered by a Full Bench in John Lucas Hotel Management Services T/A World Square Pub v Ms Vanessa Hillie 7 in the following terms:

“[19] We agree with Commissioner Bissett in Zabrdac 8that guidance as to the use and meaning of the word “arrangement” can be found in a previous judgements concerning trade practices and taxation matters. In Australian Competition & Consumer Commission v CC (NSW) Pty Ltd9Lindgren J considered the meaning of “arrangement or understanding”. He noted:

‘135 In Newton v Federal Commissioner of Taxation [1958] UKPCHCA 1; (1958) 98 CLR 1 the Privy Council was concerned with the expression "[e]very contract, agreement, or arrangement" in s 260 of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth), and expressed the opinion (at 7):

"that the word `arrangement' is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons - a plan arranged between them which may not be enforceable at law." (emphasis supplied)

Clearly, the scope of ss 45(2) and 45A(1) with which I am concerned extends beyond legally enforceable agreements, that is, contracts.

136 In British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 1 WLR 727, the English Court of Appeal had to consider the meaning of the expression "any agreement or arrangement, whether or not it is or is intended to be enforceable" in s 6 of the Restrictive Trade Practices Act 1956 (UK). It was argued that the trial Judge had erred in holding that an arrangement within the meaning of the expression exists when, by communications between the parties, "each has intentionally aroused in the other an expectation that he will act in a certain way." It was submitted that the expression also required "that there must be mutuality in the acceptance of rights and obligations". In the Court of Appeal, Willmer LJ said (at 739):

" ..., I think it is highly significant that Parliament did not see fit to include any definition of `arrangement.' I infer from this that it was intended that the word should be construed in its ordinary or popular sense. Though it may not be easy to put into words, everybody knows what is meant by an arrangement between two or more parties. If the arrangement is intended to be enforceable by legal proceedings, as in the case where it is made for good consideration, it may no doubt properly be described as an agreement. But the Act of 1956 clearly contemplates that there may be arrangements which are not enforceable by legal proceedings, but which create only moral obligations or obligations binding in honour. This seems to me to be entirely consistent with the dictum of Upjohn J. to which I have already referred. Nor do I consider that there is any inconsistency between that and the view expressed by the judge in the present case. For when each of two or more parties intentionally arouses in the others an expectation that he will act in a certain way, it seems to me that he incurs at least a moral obligation to do so. An arrangement as so defined is therefore something `whereby the parties to it accept mutual rights and obligations.'"

In the same case, Diplock LJ said that there were many ways in which arrangements might be made and (at 747):

"[I]t is sufficient to constitute an arrangement between A and B, if (1) A makes a representation as to his future conduct with the expectation and intention that such conduct on his part will operate as an inducement to B to act in a particular way, (2) such representation is communicated to B, who has knowledge that A so expected and intended, and (3) such representation or A's conduct in fulfilment of it operates as an inducement, whether among other inducements or not, to B to act in that particular way." (at 747)

137 In Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286, a Full Court of this Court had to consider the expression "a contract, arrangement or understanding to the extent that it is in restraint of trade or commerce" in the then s 45(2)(b) of the Act. Smithers J referred to Newton and British Basic Slag and said (at 291) of the expression "arrangement", that by parity of reasoning with British Basic Slag:

" ... the existence of an arrangement of the kind contemplated in s.45 is conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, in the role of a reasonable and conscientious man, to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement."

His Honour added:

"Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act."

138 In Trade Practices Commission v Nicholas Enterprises Pty Ltd(No 2) (1979) 40 FLR 83, Fisher J considered the notion of a "contract, arrangement or understanding" in the context of s 45 of the Act. After setting out certain passages from the cases, his Honour concluded (at 89):

"A significant feature of each of the above passages is the emphasis placed upon the necessity for each of the parties to have communicated with the other, for each to have raised an expectation in the mind of the other, and for each to have accepted an obligation qua the other. These are in my opinion the essential elements of the requisite meeting of minds." (emphasis supplied)

(His Honour appears to have seen the words "arrangement" and "understanding" as synonymous in the present context, as Toohey J seems to have done in Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 32.)

139 On appeal in the Nicholas Enterprises case (see Morphett Arms Hotel Pty Ltd v Trade Practices Commission [1980] FCA 46; (1980) 30 ALR 88), the Full Court expressed agreement with Fisher J's statement and application of the relevant principles of law subject to one qualification: the Court thought it possible to have an understanding restricted to the conduct which one of the parties to it would pursue "without any element of mutual obligation, in so far as the other party or parties to the understanding are concerned" (at 91-92). It was not, however, necessary for their Honours to reach any final view on this question which has since been left open, although the view has been expressed that in an arrangement or understanding where one party assumes an obligation, a reciprocal obligation would commonly be assumed by the other party or parties; see Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383 (Lockhart J) at 395-397; Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 27; (1985) 5 FCR 140 (Fox J) at 144; Trade Practices Commission v Service Station Association Ltd [1993] FCA 405; (1993) 44 FCR 206 (FC) at 230-231 (Lockhart J), 238 (Spender and Lee JJ).

140 The present case does not raise the issue of the undertaking of an obligation by one Tenderer and not by the others: the positions of all four Tenderers were relevantly identical.

141 The cases require that at least one party "assume an obligation" or give an "assurance" or "undertaking" that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the Meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have "aroused" that expectation by things he said at the Meeting. But these factual expectations do not found an "understanding" in the sense in which the word is used in ss 45 and 45A. The conjunction of the word "understanding" with the words "agreement" and "arrangement" and the nature of the provisions show that something more is required. With respect, the first passage set out above from the judgment of Smithers J in Top Performance Motors, although addressing the term "arrangement", seems to me to describe appropriately that further necessary element of the "understanding" to which the provisions refer.’

[20] In accordance with the Explanatory Memorandum the word “arrangement” should be interpreted broadly. It certainly need not imply a formal let alone legally enforceable agreement between the two parties. However the expression must still be given some content. From the authorities it can be concluded that for an “arrangement” to exist one party must have assumed at least a moral obligation, or given an “assurance” or “undertaking” that it will act in a certain way.”

[32] The application of this approach to the circumstances of the employment, by OCN of Mr Banda, as a former ISS employee, must lead to the conclusion that there was no transfer of assets and no “obligation, legal, moral or otherwise on the part of” 10 OCN. The employment offers were simply offers of convenience such that I cannot conclude that the requirements of s.311(3) were met.

[33] It follows that Mr Banda was not a transferring employee and that he had not completed the requisite minimum employment period. The application must be dismissed for that reason. An Order (PR586991) to this effect will be issued.

Appearances:

D Banda on his own behalf.

F Itaoui for the Respondent.

Hearing (Determinative Conference) details:

2016.

Perth:

October 26.

 1   Form F2, para 1.1

 2   [2016] FWC 6969

 3   Exhibit A1

 4   Exhibit RI, Annexure B to Statement of Mr Itaoui

 5   Exhibit RI, Statement of Mr Itaoui, para 7

 6   [2011] FWA 4492

 7   [2013] FWCFB 1198

 8   Peter Zabrdac v Transclean Facilities Pty Ltd [2011] FWA 4492

 9 (1999) 92 FCR 375, 406-409

 10   [2013] FWCFB 1198, para [21]

Printed by authority of the Commonwealth Government Printer

<Price code C, PR586990>