DRD Project Services Pty Ltd T/A DRD Project Services
[2023] FWC 4
•25 JANUARY 2023
| [2023] FWC 4 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.319 - Application for an order relating to instruments covering new employer and non-transferring employees
DRD Project Services Pty Ltd T/A DRD Project Services
(AG2022/5571)
| Building, metal and civil construction industries | |
| DEPUTY PRESIDENT BEAUMONT | PERTH, 25 JANUARY 2023 |
Application for an order relating to instruments covering new employer and non-transferring employees
This decision concerns an application by DRD Project Services Pty Ltd (the Applicant) for an order under s 319(1)(b) of the Fair Work Act 2009 (Cth) (the Act) that the LNG Blue Enterprise Agreement 2020[1] (the LNG Blue EA) will cover the Applicant any new or non-transferring employees of the Applicant.
The Applicant is a privately owned technical recruitment provider specialising in sourcing and supplying highly skilled labour to the resources sector in the geotechnical, civil, structural, electrical, mechanical and building services industries.[2] It is wholly owned by DRD Group Australia Pty Ltd (DRD Group).[3]
Established on 9 June 2022,[4] the Applicant was said to have employed three employees who previously worked at LNG Blue Pty Limited (LNG Blue) (the Transferring Employees) on or around 13 December 2022.[5] LNG Blue is understood to be an associated entity of the Applicant, with DRD Group being the parent company of both LNG Blue and the Applicant.[6]
According to the Applicant, LNG Blue is no longer actively tendering for work, and it intends to cease operating and close down in due course.[7] The Applicant submitted that as part of a wider corporate restructure, and a shift away from the negative associations the term ‘LNG’ brings with it, the operations of LNG Blue had been taken over by the Applicant and it was this corporate vehicle which was now actively tendering for (and being awarded) work.
It is accepted that s 317 empowers the Commission to make certain orders, including orders under s 319 of the Act, if there is, or is likely to be, a transfer of business from an old employer to a new employer.
The Applicant has articulated the order sought in the following terms:
a)Pursuant to s 319(1)(b) of the Act, that the LNG Blue Enterprise Agreement 2020 [FWCA] 1717 will cover the Applicant and any new or non-transferring employees of the Applicant who work in a classification contained in the Agreement in respect of their employment with the Applicant; and
b)This Order will come into effect the date the Fair Work Commission makes a decision granting the s 319 application or when any new or non-transferring employees are employed by the Applicant and start to perform work in a classification contained in the Agreement, whichever is the later date.
It has, in addition, proffered the following undertaking:
The Commission notes that the Applicant undertakes that, as a minimum, all new or non-transferring employees will be paid at least 10% greater than the applicable classification base rate of pay in the Building and Construction General On-site Award 2020[8] (Award) (as at the date of the order).
In deciding whether to make the order, I am obliged to consider whether the Applicant has standing under s 319(2)(a) of the Act to apply for the order sought and to take into account various factors. Briefly stated, I am satisfied that there has been a transfer of business and that the Applicant has standing to make the application under s 319(2)(a).
The factors relevant to the application are set out in s 319(3) of the Act, and include:
a) the views of the Applicant and the employees affected by the order;
b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;
c) the nominal expiry of the LNG Blue EA;
d) whether the LNG Blue EA would have a negative impact on productivity of the Applicant’s workplace;
e) whether the Applicant would incur significant economic disadvantage as a result of the LNG Blue EA covering it;
f) the degree of business synergy between the LNG Blue EA and any workplace instrument that already covers the Applicant; and
g) the public interest.
Having taken into account each of the above factors, I am satisfied that they weigh in favour of granting the order sought.
An Order[9] that provides that the LNG Blue EA will cover the non-transferring employees of the Applicant who perform the same or similar work as the Transferring Employees is issued concurrently with this decision.
Background
I am assisted in this matter by the detailed application filed by the Applicant,[10] and the witness statements of Mr Mark Hudston, the Executive Director of MAPIEN, who was authorised by the Applicant to give evidence on its behalf, and Mr David Gray, sole Director of the Applicant and LNG Blue.[11]
Mr Hudston explained that prior to LNG Blue terminating the employment of the Transferring Employees, LNG Blue provided services under contracts for Prada Construction in Applecross, Western Australia (the Prada Construction Office Tower project (the Project)). The completion date for the Project was in December 2022.[12] The Transferring Employees were all considered to fall within the classification of ‘CW2’, presumedly in the Agreement. In any event, it is observed that the Agreement adopted the Award classification structure.[13]
The work was said to have been by casual engagement and semi-skilled. Mr Gray gave evidence that whilst working for LNG Blue on the Project, the Transferring Employees performed the following:
a) trade assistant duties;
b) the operation of mobile plant and hand and power tools;
c) measuring and levelling using specialised equipment;
d) manual handling; and
e) quality checks.[14]
Mr Hudston stated that on or about 28 November 2022, clients engaged the services of the Applicant in order to carry out similar scopes of work to that of LNG Blue, including but not limited to specific scopes of work – for example, building and construction work.[15] Expanding upon Mr Hudston’s evidence, Mr Gray detailed that in late 2022, the Applicant was successful in its tenders for a number of projects with clients and was engaged to carry out similar scopes of work to that previously performed by LNG Blue.[16] Mr Gray noted that the building and construction work was for a number of projects associated with lithium, rare earth metals, and iron ore.[17] In addition, the Applicant was engaged to provide services to clients working on solar, wind, and battery projects.[18] Mr Gray stated that the DRD Group had adopted a significant focus on renewables, and a move away from the negative association of fossil fuels for which LNG Blue was known.[19]
Mr Gray said the Applicant was aware that the Transferring Employees’ work on the Project would end on the completion of the Project. Instead of losing the Transferring Employees, the Applicant employed them in the context where they knew the Transferring Employees had the experience to effectively perform the duties they had undertaken for LNG Blue.
Mr Hudston said that the Applicant offered positions of employment to the Transferring Employees, which they accepted, and the work they carried out for the Applicant was the same, or substantially the same, as the work they carried out for LNG Blue.[20]
In support of its application, the Applicant filed the letters of offer that LNG Blue (the older employer) had provided to the three Transferring Employees.[21] Those three letters of offer outlined an ‘Expected Commencement Date (subject to change as per the Client’s Operation Requirements)’ of 21 November 2022 and were signed by all three employees on 21 November 2022.[22] It is observed that accompanying the letters of offer were employment contracts, which had been signed on either 16 November 2022 or 18 November 2022.[23] All offers were for casual employment.
Mr Gray clarified that the Transferring Employees signed contracts with LNG Blue on 16 and 18 November 2022 and commenced employment with LNG Blue on 21 November 2022, after signing a further letter of offer.[24]
In addition to filing the letters of offer that LNG Blue had provided to the Transferring Employees, the Applicant filed the letters of offer it had provided to the Transferring Employees. Those letters of offer were dated 13 December 2022, the employment was to take effect on 12 December 2022, but whilst all letters of offer were signed by the respective Transferring Employees, the signature clauses were left undated.
A further letter of offer was filed.[25] However, this letter was one from the Applicant to an employee who was not one of the Transferring Employees. Again, the offer was for casual employment, the letter of offer was dated 12 December 2022, employment was to take effect on or around 12 December 2022 and the offer was signed by the non-transferring employee on 12 December 2022.[26]
Transfer of business
Section 311 of the Act sets out the circumstances in which a transfer of business occurs.
Section 312 of the Act indicates that a ‘transferable instrument’ includes ‘an enterprise agreement that has been approved by the FWC’.
The Applicant submitted that the work carried out by the Transferring Employees for the Applicant was the same, or substantially the same, as the work that they carried out for LNG Blue within the three months prior to their employment ending with LNG Blue and commencing with the Applicant.[27] The evidence of Mr Gray supports this submission.
The Applicant asserts that there has been a transfer of business within the meaning of s 311(1) of the Act. It contends that the Transferring Employees:
a) ceased employment with LNG Blue as required by s 311(1) on or by 12 December 2022;
b) commenced employment with the Applicant on 13 December 2022, this being within the three months prescribed by s 311(1)(b);
c) perform the same or substantially the same work for the Applicant as they did for LNG Blue as required by s 311(1)(c); and
d) the Applicant is an associated entity of LNG Blue as per section s 311(6) of the Act.
I am satisfied that there was a transfer of business and that the Transferring Employees transferred to the Applicant under the terms of the Act. I am, in addition, satisfied that the LNG Blue EA is a transferrable instrument[28] to which this application relates, and it is evident that the Applicant is the new employer. As such, I consider the Applicant has standing to make the application under s 319(2)(a).
Legislative framework regarding transferable instruments
Section 314 of the Act makes provision for a transferable instrument to automatically cover non-transferring employees in certain circumstances. It provides:
314 When 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).
The Applicant is covered by the Award, which is a modern award within the meaning of s 314(1)(d) of the Act. Therefore, the coverage of the LNG Blue EA to the non-transferring employees, as contemplated by s 314, does not operate in relation to those employees.
However, the operation of s 314 is subject to s 319, which allows for the Commission to make an order notwithstanding the provisions of s 314, that a transferable instrument covers non-transferring employees.
Section 319(1) provides:
319 Orders relating to instruments covering new employer and non‑transferring employees
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.
Consideration of factors in s 319(3)
The discretion to make the order sought by the Applicant under s 319(1)(b) of the Act will only be exercised after taking into account the matters set out in s 319(3) of the Act. These factors, which must be read having regard to the objects of the Part, are intended to enable the Commission to balance appropriately the protection of employees’ entitlements under certain instruments with the need for some flexibility to depart from the default rules about coverage of instruments following a transfer of business.[29] I now deal with each of the matters under s 319(3) of the Act.
Views of the new employer – s 319(3)(a)(i)
Expanding upon the information detailed in the background of this Decision, the Applicant supports the application. The Applicant submitted that proposed order would assist in:
a) improving business efficiency and productivity;
b) enabling the non-transferring employees to be fully integrated into the employee management systems currently operating in the Applicant’s business;
c) avoiding the administrative costs involved in managing and ensuring compliance with multiple industrial instruments in relation to the same work;
d) removing any disincentive to the Applicant offering or continuing employment of the non-transferring employees;
e) providing the non-transferring employees with greater terms and conditions under the LNG Blue EA; and
f) enabling the closure of the LNG Blue entity as part of a corporate restructure.
Views of the employees who would be affected by the Order – s 319(3)(a)(ii)
The Applicant submitted that there was one non-transferring employee who would be affected by the order sought. It had met with the non-transferring employee to discuss the proposed order and provided the employee with an offer of employment that advised of the application. The Applicant noted that the non-transferring employee was specifically advised that by signing and returning the offer of employment, they were communicating their agreement to the Applicant making the application.[30] The non-transferring employee was given the opportunity to contact the Applicant to discuss matters relating to the application but, according to the Applicant, had not exercised that option and simply accepted the offer of employment.[31]
Whether any employees would be disadvantaged by the Order – s 319(3)(b)
The Applicant observed that the rates of pay provided by the LNG Blue EA are ‘base rates’ with penalty rates, overtime, and other loadings also payable. It submitted that it paid higher rates of pay to all employees (transferring and non-transferring) under common law contracts. Notwithstanding when the rates of pay in the LNG Blue EA and the Award were modelled for a 50hr-week, it was evident that for the ‘CW3’ classification, the LNG Blue EA provided rates of pay only 0.94% above those of the Award, and for the ‘CW4’ classification at 2.72% above the Award.
However, the application was accompanied by an undertaking which is attached to this decision and marked Annexure A. The Applicant submitted that where non-transferring employees were not entitled to higher hourly rates of pay under the LNG Blue EA than under the Award, they would be entitled to the applicable classification base rate of pay in the Award plus 10%. According to the Applicant, this ensured that non-transferring employees were not worse off in any way when working for the Applicant under the LNG Blue EA.
The Applicant submitted that by virtue of the order sought and the accompanying undertaking proffered, all non-transferring employees are better off overall being covered by the LNG Blue EA.
The nominal expiry date of the agreement (s 319(3)(c))
The LNG Blue EA has a nominal expiry date of 29 March 2024. The Applicant states that if the Commission makes the order sought, the non-transferring employees will have the benefit of established terms and conditions of employment set in place until 2024.
Productivity – s 319(3)(d)
The Applicant submitted that if the Award continues to apply to the non-transferring employees, it will create additional costs associated with the maintenance of two separate payroll systems of entitlements for its employees. Further, it would encounter employees who, having been engaged to perform the same duties, would be afforded different minimum entitlements. This, said the Applicant, could lead to additional administrative and regulatory burden, and dissatisfaction and confusion amongst employees.
Having considered the Applicant’s evidence and submissions, I am persuaded that there will be no negative impact on productivity if the order sought is made. In contrast, it would seem that the administrative and operational procedures of the Applicant would run more efficiently if one industrial instrument applied consistently to each non-transferring employee, and there would be less risk of disharmony in the workplace.
Economic disadvantage – s 319(3)(e)
The Applicant pressed that it would not incur significant economic disadvantage as a result of the proposed order being granted. However, it noted that it would suffer some disadvantage should the order not be granted as it would need to implement and maintain additional payroll and employee management systems and maintain two separate systems for the employees.
In short, I am satisfied that the Applicant would not incur significant economic disadvantage as a result of the transferable instrument covering it.
Degree of business synergy – s 319(3)(f)
The Applicant submitted that the LNG Blue EA and the Award have little business synergy as they provide different minimum employment conditions in several key aspects, including due to the differences in rates of pay, shift penalties for some types of work, some allowances and inclement weather terms. According to the Applicant, the LNG Blue EA is highly relevant to the Applicant as opposed to the Award, as it provides flexibility in terms and conditions and rostering arrangements, taking into account that the Applicant works across different sites with different working scenarios.
If the proposed order is granted, it will, in my view, confirm a single framework of regulation that has been negotiated and approved in the same general context in which it has applied and will continue to apply. This will likely enhance the degree of synergy that exists within this part of the DRD Group’s business.
Public interest – s 319(3)(g)
The public interest in this context is influenced by the objects of this Part of the Act in s 309 and those adopted by the Act more broadly.
It is not apparent that it would be against the public interest to issue the order sought. The evidence before me points to the proposed order allowing for non-transferring employees to be afforded the benefit of increased minimum terms and conditions of employment under the LNG Blue EA (inclusive of undertaking) than they would otherwise receive if covered by the Award.
This may lead to a conclusion that the public interest in this matter is served by facilitating arrangements that permit the maintenance of the presently approved employment conditions that apply to the Transferring Employees to extend to the non-transferring employee(s), pending the making of any new instrument that might apply in the years to come.
Conclusion
I have considered the material provided by the Applicant in support of its application and the matters set out in ss 314 and 319 of the Act. I am satisfied the materials provided by the Applicant, when considered against the matters set out in s 319(3) of the Act, support the making of the Order.[32]
In accordance with s 319(4) of the Act, the Order will not come into operation in relation to each non-transferring employee until the later of the following:
a)the time when the non-transferring employee starts to perform the transferring work for the new employer; or
b)the day on which the Order is made.
DEPUTY PRESIDENT
Determined on the papers
Annexure A
[1] AE507620 (Agreement).
[2] Form F40 Application for orders in relation to a transfer of business, [2.3(2)] (Application).
[3] Ibid [2.3(1)].
[4] Ibid [2.3(3)].
[5] Ibid [2.3(4)].
[6] Ibid [2.3(14)]; Witness Statement of Mark Hudston, [6] (Hudston Statement).
[7] Application (n 2) [2.3(45)].
[8] MA000020.
[9] PR749348.
[10] Application (n 2).
[11] Witness Statement of David Gray, [5] (Gray Statement).
[12] Hudston Statement (n 6) [14].
[13] Agreement (n 1) cl 6.1.
[14] Gray Statement (n 11) [13].
[15] Hudston Statement (n 6) [16].
[16] Gray Statement (n 11) [16].
[17] Ibid.
[18] Ibid.
[19] Ibid [17].
[20] Hudston Statement (n 6) [17].
[21] Ibid annexure MH4.
[22] Ibid.
[23] Ibid.
[24] Gray Statement (n 11) [11].
[25] Hudston Statement (n 6) annexure MH5.
[26] Ibid.
[27] Application (n 2) [2.3(7)].
[28] Fair Work Act 2009 (Cth) s 312(1)(a).
[29] Explanatory Memorandum, Fair Work Bill 2008 (Cth) [1259].
[30] Hudston Statement (n 6) annexure MH5.
[31] Ibid.
[32] PR749348.
Printed by authority of the Commonwealth Government Printer
<AE507620 PR749347>
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