Employment National Ltd v CPSU
[2000] FCA 452
•11 APRIL 2000
FEDERAL COURT OF AUSTRALIA
Employment National Ltd v CPSU [2000] FCA 452
INDUSTRIAL LAW – awards and certified agreement – privatisation of the services of a Commonwealth government department to which binding awards and certified agreement relate – whether the services of the department constituted “a business” within the meaning of section 149(1)(d) of the Workplace Relations Act 1996 – whether certain corporations became the “successors, assignees or transmittees” of the business – substantial identity between old and new activities – whether binding effect of awards and agreement limited to employment under the Public Service Act 1922 – whether the awards and agreement were in terms incapable of application outside the Australian Public Service – whether the making of an employer-specific award by the Australian Industrial Relations Commission constitutes an order ousting the effect of s149(1)(d) – meaning of “new employer” under section 170MB
CONSTITUTIONAL LAW – whether section 149(1)(d) of the Workplace Relations Act 1996, in operating to make awards binding upon an employer not party to the original dispute giving rise to those awards, is consistent with placita (xxxv) and (xxxix) in section 51 of the Constitution
WORDS AND PHRASES – “business” – “part of the business” “subject to any order of the Commission” – “substantial identity”
Workplace Relations Act 1996 ss 149(1)(d), 149(1A), 170MB(1) and 170LB(1)
Re-establishment and Employment Act 1945 ss 47 and 48
Public Service Act 1922 s 7(1)
Employment Services Act 1994 ss 3(1), 8, 18, 37(1), 68
Commonwealth Services Delivery Agency Act 1997
Acts Interpretation Act 1901 s 15ABCouncil of the European Communities Directive 77/187 of 1977 Articles 2 and 3(1)
North Western Health Care Network v Health Services Union of Australia [1999] 164 ALR 147 followed
The Queen v Cohen, ex parte Motor Accident Insurance Board (1979) 141 CLR 577 applied
Re Australian Industrial Relations Commission; ex parte Australian Transport Officers Federation (1990) 171 CLR 216 applied
R v Coldham; ex parte Australian Social Welfare Union (1983) 153 CLR 297 applied
Re Australian Education Union; ex parte Victoria (1994-5) 188 CLR 188 applied
Melbourne Corporation v Commonwealth (1947) 74 CLR 31 applied
Ex parte Professional Engineers’Association (1959) 107 CLR 208 applied
Queensland Electricity Commission v Commonwealth (1985) 159 CLR 192 applied
State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 distinguished
Health Services Union of Australia v North Eastern Health Care Network & Western Health Care Network [1997] 79 FCR 43 applied
Australian Federation of Air Pilots v Skywest Airlines Pty Ltd (Industrial Relations Court of Australia, Marshall J, unreported, 31 October 1995) referred to
Meat & Allied Trades Federation of Australia v Australasian Meat Industry Employees Union (1995) 58 IR 90 referred to
Crosilla v Challenge Property Services (1982) 2 IR 448 distinguished
George Hudson v Australian Timber Workers' Union (1922-3) 32 CLR 413 followed
Daily News Ltd v Australian Journalists Association (1920) 27 CLR 532 referred to
Construction, Forestry, Mining & Energy Union v Australian Industrial Relations Commission & Ors [1999] 164 ALR 73 followed
ACTEW Corporation Ltd v Media Entertainment and Arts Alliance (Industrial Relations Court of Australia, Moore J, unreported, 7 August 1997) referred to
Spijkers v Gebroeders Benedik Abbattoir CV and Anor [1986] ECR 1119 referred to
Attorney General NSW v Brewery Employees Union of NSW (1908) 6 CLR 469 appliedEMPLOYMENT NATIONAL LTD & EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD v CPSU, THE COMMUNITY & PUBLIC SECTOR UNION AND MINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS & SMALL BUSINESS
NG 181 OF 1998
MINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS & SMALL BUSINESS v EMPLOYMENT NATIONAL LTD & EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD AND CPSU, THE COMMUNITY & PUBLIC SECTOR UNION
NG 331 OF 1998
CPSU, THE COMMUNITY & PUBLIC SECTOR UNION v EMPLOYMENT NATIONAL LTD, EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD AND MINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS & SMALL BUSINESS
NG 402 OF 1998
EINFELD J
11 APRIL 2000
SYDNEYTABLE OF CONTENTS
Introduction 2
Legislative scene 3
The case 4
The awards and agreement 5
Historical background 6
First threshold question: Did the activities of the departmental entities constitute a ‘business’ for the purposes of section 149(1)(d)? 10
Second threshold question – Was the agreement capable of binding EN? 16
Transmission of the business 16
The law 16
The evidence 17
Question of fact 24
The same or different business 25
A ‘functions’ test? 28
Binding EN 30
Statutory purposes 31
‘Parties bound’ clauses and ouster 35
Public Service Act 38
Public service 41
A constitutional issue 41
Conclusion 43
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 181 OF 1998
BETWEEN:
EMPLOYMENT NATIONAL LIMITED AND EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
ApplicantsAND:
CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION
First RespondentMINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
Second RespondentJUDGE:
EINFELD J
DATE OF ORDER:
11 APRIL 2000
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.the awards and agreement set out in the attached schedule bound the applicants on and from 1 May 1998.
THE COURT DIRECTS THAT:
2.any other matters required to be dealt with by these proceedings be made the subject of consent orders or be listed for further hearing by not later than 28 April 2000
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
Schedule
The Australian Public Service, Administrative Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Employment Conditions Award 1995
The Australian Public Service, Professional Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Senior Executive Service (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Technical Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Specific Professional Classifications (Salaries and Specific Conditions) Award 1995
The Department of Employment, Education, Training and Youth Affairs Network Certified Agreement 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 331 OF 1998
BETWEEN:
MINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
ApplicantAND:
EMPLOYMENT NATIONAL LTD AND EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
First RespondentsCPSU, THE COMMUNITY & PUBLIC SECTOR UNION
Second RespondentJUDGE:
EINFELD J
DATE OF ORDER:
11 APRIL 2000
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.the awards and agreement set out in the attached schedule bound the first respondents on and from 1 May 1998
THE COURT DIRECTS THAT:
2.any other matters required to be dealt with by these proceedings be made the subject of consent orders or be listed for further hearing by not later than 28 April 2000
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
Schedule
The Australian Public Service, Administrative Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Employment Conditions Award 1995
The Australian Public Service, Professional Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Senior Executive Service (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Technical Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Specific Professional Classifications (Salaries and Specific Conditions) Award 1995
The Department of Employment, Education, Training and Youth Affairs Network Certified Agreement 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 402 OF 1998
BETWEEN:
CPSU, THE COMMUNITY & PUBLIC SECTOR UNION
ApplicantAND:
EMPLOYMENT NATIONAL LTD
First RespondentEMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
Second RespondentMINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
Third RespondentJUDGE:
EINFELD J
DATE OF ORDER:
11 APRIL 2000
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.the awards and agreement set out in the attached schedule bound the first and second respondents on and from 1 May 1998
THE COURT DIRECTS THAT:
2.any other matters required to be dealt with by these proceedings be made the subject of consent orders or be listed for further hearing by not later than 28 April 2000
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
Schedule
The Australian Public Service, Administrative Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Employment Conditions Award 1995
The Australian Public Service, Professional Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Senior Executive Service (Salaries and Specific Conditions) Award 1995
The Australian Public Service, General Service Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Technical Officers (Salaries and Specific Conditions) Award 1995
The Australian Public Service, Specific Professional Classifications (Salaries and Specific Conditions) Award 1995
The Department of Employment, Education, Training and Youth Affairs Network Certified Agreement 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
BETWEEN:
NG 181 OF 1998
EMPLOYMENT NATIONAL LIMITED AND EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
ApplicantsAND:
CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION
First RespondentMINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
Second RespondentBETWEEN:
NG 331 OF 1998
MINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
ApplicantAND:
EMPLOYMENT NATIONAL LTD AND EMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
First RespondentsSecond Respondent
CPSU, THE COMMUNITY & PUBLIC SECTOR UNION
Third RespondentBETWEEN:
NG 402 OF 1998
CPSU, THE COMMUNITY & PUBLIC SECTOR UNION
ApplicantAND:
EMPLOYMENT NATIONAL LTD
First RespondentEMPLOYMENT NATIONAL (ADMINISTRATION) PTY LTD
Second RespondentMINISTER OF STATE FOR EMPLOYMENT WORKPLACE RELATIONS AND SMALL BUSINESS
Third Respondent
JUDGE:
EINFELD J
DATE:
11 APRIL 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Introduction
There are three related proceedings before the Court. Employment National Ltd (EN) and Employment National (Administration) Pty Ltd (ENA) are applicants in the matter filed as NG 181 of 1998; in NG 331 of 1998 the applicant is the Minister of State for Employment, Workplace Relations and Small Business (the Minister); in NG 402 of 1998 the Community and Public Sector Union (CPSU) is the applicant. In each matter, the parties who are not applicants are involved as respondents. As the three cases raised common issues, it was ordered on 15 May 1998 that they be heard together.
By their original application of 6 March 1998, EN and ENA sought a declaration, pursuant to section 412 of the Workplace Relations Act 1996 (the WR Act), that four Australian Public Service (APS) Awards (the awards), and the 1998 Department of Employment, Education, Training and Youth Affairs (the department) Network Certified Agreement (the agreement) covering various departmental employees at the time made pursuant to section 170LK of the WR Act, are not binding on either of them in relation to their respective employees. By his amended application of 6 May 1998 the Minister sought an interpretation, pursuant to section 413 of the WR Act, that the awards and agreement do not bind the applicants. In its application of 30 April 1998 the CPSU sought declarations that the awards and agreement do bind and apply to the employees of EN and ENA.
As will appear, these proceedings arise from and as a result of a decision by the Australian Government to privatise or ‘outsource’ most of the work of the Commonwealth Employment Service (CES) and Employment Assistance Australia (EAA) from the department to, amongst others, EN and ENA. In the arguing of the case, no distinction between the legal status of EN and ENA material to this litigation emerged. Accordingly these reasons for judgment proceed on that basis, and normally refer to both companies simply as EN.
Legislative scene
Whether and in respect of which employees, the awards and agreement are binding on EN depends upon the effect of sections 149(1)(d) and 170MB(1) of the WR Act respectively. These provisions deal with the circumstances in which a relevant award or agreement will be binding on an employer where that employer becomes the successor, assignee or transmittee of the business, or part of the business, of an employer who was a party to the original dispute giving rise to the award or agreement, and who was bound by that award or agreement. Section 149(1) provides for award-binding of employers in part as follows [emphases added]:
(1)Subject to any order of the Commission, an award determining an industrial dispute is binding on:
(a)all parties to the industrial dispute who appeared or were represented before the Commission;
(b)all parties to the industrial dispute who were summoned or notified (either personally or as prescribed) to appear as parties to the industrial dispute (whether or not they appeared);
(c)all parties who, having been notified (either personally or as prescribed) of the industrial dispute and of the fact that they were alleged to be parties to the industrial dispute, did not, within the time prescribed, satisfy the Commission that they were not parties to the industrial dispute;
(d)any successor, assignee or transmittee (whether immediate or not) to or of the business or part of the business of an employer who was a party to the industrial dispute, including a corporation that has acquired or taken over the business or part of the business of the employer;
(e)all organisations and persons on whom the award is binding as a common rule; and
(f)all members of organisations bound by the award
“The Commission” is the Australian Industrial Relations Commission (the Commission).
At the relevant time for this case, section 170MB(1) provided:
(1)If:
(a) an employer is bound by a certified agreement; and
(b) at a later time,
(i) if the application for certification of the agreement stated that it was made under Division 2 - a new employer that is a constitutional corporation or the Commonwealth or;
(ii) if the application stated that it was made under Division 3 - a new employer;
becomes the successor, transmittee or assignee (whether immediate or not) of the whole or a part of the business concerned, then, from the later time:
(c) the new employer is bound by the certified agreement, to the extent that it relates to the whole or the part of the business; and
(d)the previous employer ceases to be bound by the certified agreement, to the extent that it relates to the whole or the part of the business; and
(e)a reference in this Part to the employer includes a reference to the new employer, and ceases to refer to the previous employer, to the extent that the context relates to the whole or the part of the business.
The case
The central issues raised by all these proceedings are whether the activities of CES/EAA as departmental organisations who were parties to an industrial dispute from which the awards and the agreement originally resulted, constituted a ‘business’ for the purposes of the sections 149(1) and 170MB(1), and whether EN/ENA became and were the successors, assignees or transmittees of that business or part of that business.
It is therefore necessary for the Court to consider whether the relevant services provided by these departmental bodies, which the CPSU alleged are now effectively provided by EN, were capable of characterisation as a ‘business’ susceptible to transmission in the manner provided for by section 149(1). If they were, what is then largely a question of fact arises as to whether there was such a transmission. This exercise requires the Court to consider evidence relating to the respective businesses and activities of CES/EAA and those of EN in order to establish whether such a degree of identity existed between them at the relevant time as to support a conclusion that the business of the former was transmitted to the latter.
In addition to their contention that no transmission of business occurred, both EN and the Minister advanced an additional distinct argument. Relying on the fact that both the awards and the agreement set out in specific terms the parties to be bound by them, and that the binding force of awards on successors, assignees or transmittees provided for by section 149(1) is ‘subject to any order of the Commission’, they sought to argue that the specific references to the employer parties in the awards and the agreement amounted to, and were intended as, just such an order, so that no employers other than those named in the awards were bound by them. In other words, the ‘transmission’ of a business is subject to an order precluding the transmission of awards and agreements and the ‘parties bound’ clause of these awards was such an order. Additionally, it was contended that the awards were specific to the APS and were simply not able to operate outside that context, and that they bound only persons employed under the Public Service Act (1922) (PS Act) and could not apply to parties who could not employ persons under that Act such as EN. A constitutional argument was also raised.
The awards and agreement
The four awards at issue in the proceedings are part of a set of seven awards (sometimes said by EN/ENA, apparently incorrectly, to be nine awards), which were themselves a consolidation of some 130 awards applying across the APS. The awards, all made in 1995, are the APS General Employment Conditions Award, the APS Administrative Service Officers (Salaries and Specific Conditions) Award, the APS Professional Officers (Salaries and Specific Conditions) Award, and the APS Senior Executive Service (Salaries and Specific Conditions) Award. The agreement was made between the Minister and ‘non-SES DEETYA staff’ who were at that time employed by the department, normally in CES/EAA or another agency, or by the then Transition Services Units (TSUs). It was certified by the Commission pursuant to sections 170LK and 170LT of the WR Act in March 1998 during the privatisation process.
The CPSU was at this time concerned to establish exactly what terms and conditions of these awards and the agreement applied to employees of EN/ENA, and after submission of a log of claims on 10 October 1997, the Commission found a dispute on 27 March 1998. When discussions between the various parties did not result in agreement, EN/ENA commenced the current proceedings. Their application was amended by leave on 3 September 1998 to add the three other 1995 awards, the APS General Service Officers, Technical Officers and Specific Professional Classifications, in each case covering salaries and specific conditions like the first four. Neither of the other parties sought the same amendment and in fact CPSU said that no EN/ENA employee was, to its knowledge, covered by any of those additional awards. In the event, no separate consideration of these awards is necessary for the disposition of this litigation.
Historical background
Historically, the department and its predecessors have been responsible for the provision of employment services to the Australian public as one of six ‘programs’ it conducted or supervised.
CES was established by section 47 of the Re-establishment and Employment Act 1945. It commenced in 1946, and from that time until April 1998 was a part of the department or its predecessors. Section 48 of that Act described the statutory functions of CES as, in part:
…to provide services and facilities in relation to employment for the benefit of persons seeking to become employed, to change employment or to engage labour, to provide facilities to assist in bringing about and maintaining a high and stable level of employment throughout the Commonwealth…
In its actual operations CES served as a ‘labour exchange’ providing job placement and other services including the registration, screening and vetting of job seekers and the assessment of their needs, expectations and capabilities, the canvassing of employers for suitable vacancies, matching the two in order to place people in employment, and following up on referrals to achieve actual placements. Ongoing monitoring of placements also occurred.
The functions of CES also included the provision of ‘case management’ for those who were considered to be ‘long term’ unemployed, and for whom a structured or managed program was felt necessary in order to increase the prospect of finding employment for them. CES would sometimes contract with non-departmental bodies to provide job seekers with specific services such as short training courses. This element of its activities was referred to as the ‘labour market program’.
CES was administered according to area and there were at one time over 300 branches around Australia. Its services were free to the public, except for certain ‘advanced’ services offered to employers, such as ‘CES Plus’, for which a fee was charged. The employees of CES were public servants employed under the PS Act. For the most part, CES consisted of ‘employment officers’ who operated the ‘labour exchange’ system.
The Employment Services Act 1994 (ES Act) was introduced “to promote full employment by providing employment services that are free of charge to job seekers” (s.3(1)). CES came within that Act by virtue of section 8 but its statutory tasks were not further defined. By section 18 EAA was established, within the department, as a ‘sister’ organisation to CES, to take over the individual ‘case management’ of longer-term unemployed persons. Section 37(1) of the ES Act defined the provision of case management services as “assisting a participant in the case management system to obtain sustainable employment”. In the fulfilment of this task EAA had the services of up to 250 external contracted ‘case managers’, operating on a ‘fee for service’ basis. Section 68 of the ES Act established the Employment Services Regulatory Authority (ESRA) to regulate EAA’s ‘case management’ system. The scheme provided that ESRA would award tenders for the services on behalf of the Commonwealth to organisations it accredited for the purpose.
Participation in EAA’s case management system was only open to persons registered with CES and referred by it to the system according to guidelines provided in Part 4 of the ES Act. The system required each referred unemployed person to enter into a ‘Case Management Activity Agreement’ with a particular case manager. In general, Part 4 of the ES Act regulated the entire provision of the services established or consolidated under it. From the evidence presented to the Court, it is evident that the contracted services included amongst other things assessing each participant’s experience, abilities, goals and needs, identifying impairments to long term employment, providing information, advice and counselling, managing the signed Activity Agreement, surveying and liaising with potential employers, and generally monitoring the participant’s progress after employment was obtained.
In the August 1996 Budget, the Australian Government announced that it would change the way in which employment services were delivered and it set in motion what is today commonly described as the ‘outsourcing’, ‘mainstreaming’ or ‘contracting out’ of employment services previously carried on by the department through its own organisations. CES and EAA were for all relevant purposes to go out of existence (although the statutes establishing them still stand), and instead the services would be provided by contracted bodies who would compete first for government tenders and when won, then for ‘customers’, that is, job seekers. The contractors would be paid according to their success in achieving various performance indicators and ‘delivery outcomes’ set by the department. In effect, they would be paid by the Commonwealth according to how successful they were in placing people into jobs. The department’s Annual Report for 1996/7 at page 112 said that the scheme was intended:
… to assist the efficient and effective functioning of the labour market by reducing unemployment through the provision of services to job seekers and employers. These services include job brokerage, facilitating skills formation and retention in individuals, industries and regions, and ensuring that statutory case management services for the disadvantaged and long-term unemployed clients are provided cost effectively and fairly through open competition among providers.
The then relevant Minister issued a statement in 1996 (Ministerial Statement), entitled “Reforming Employment Assistance”, outlining and describing the proposed changes. The government was to retain some services, and all others were to be contracted out to the ‘Job Network’ of employment service providers, of which EN/ENA were to be established by the Commonwealth as one. The overall theme of the Ministerial Statement was that the incumbent system was to be transformed into a competitive market for employment placement services, with a focus on incentives to attain actual outcomes in the form of persons placed in sustainable employment. At page 17 of the Ministerial Statement, the Minister explained:
The Government has concluded that the public sector should continue to provide, through the service delivery agency, a uniform national service for the registration of job seekers; for the assessment of job seekers’ eligibility for employment assistance; for referral of clients to assistance in the employment placement market; and for administering the activity test and enforcing compliance with conditions of assistance. For client convenience, the agency will also provide access to vacancy information, self-help facilities and on the spot referrals to employers and employment placement enterprises (EPEs). With these exceptions, however, all other employment placement functions will be contracted out to [EPEs] including the corporatised EPE [that is, EN], in a fully contestable market for employment placement services.
This “service delivery agency” became Centrelink, created on 1 July 1997 pursuant to the Commonwealth Services Delivery Agency Act 1997 within the Department of Social Security (DSS). It is evident that it performs some of the functions previously carried out by CES, most notably the initial registration of unemployed persons, a function that it began in October/November 1997. Centrelink also makes available at some of its branches a ‘self-help’ computerised searchable database of employment opportunities that it is made aware of.
The Ministerial Statement described Centrelink as integrating some of the “public contact services” of both CES and EAA. It was conceived of as the ‘first port of call’ and a ‘one-stop shop’ to perform functions of the regional offices of DSS, and to provide the public with access to the employment scheme. Its employees are employed under the PS Act. In addition to its function as a place of registration for job seekers and a source of referral for these persons to Job Network entities such as EN, it administers the unemployment benefits scheme, which is a distinct social security function. Notwithstanding the creation of Centrelink, CES/EAA continued to provide their ‘labour exchange’ and ‘case management’ services until 30 April 1998.
Concerning the staff of CES/EAA, the Ministerial Statement said at page 23:
Many staff employed by the CES and [EAA] would eventually become employees of a new public employment placement enterprise [ie EN]. Other CES staff along with most staff in the current DSS delivery network would transfer into the proposed service delivery agency [ie Centrelink]. Others will remain with DEETYA…
EN was incorporated in the Australian Capital Territory on 7 August 1997 under the name ‘Public Employment Placement Enterprise Limited’. It is wholly owned by the Commonwealth, which provided its start-up capital. The shareholders hold all the company’s shares as representatives of the Commonwealth. It employs one person, a Managing Director.
ENA is a corporation under the Corporations Law and a wholly owned subsidiary of EN, employing over 1000 persons. ENA was formed in September 1997 to provide services and employees to EN in order to enable EN to operate its business, which is essentially labour exchange services in accordance with what became known as the “FLEX” scheme eventually put into operation. For the period 1 December 1997 to 30 April 1998 (the transitional period) the CES/EAA were under the direct management of EN, with staff and services provided by ENA.
To give effect to the new scheme, EN entered into two contracts with the Commonwealth. The first, on 22 November 1997, covered the conduct or management of the work of CES/EAA for the transitional period (the transitional contract). The second, made on 26 February 1998, was called the Employment Services Contract (the principal contract) which obligated the supply of employment services to the department. To enable EN to fulfil its obligations under these contracts, the two corporations entered into an agreement with each other for the provision by ENA to EN of the relevant services. Employment conditions in ENA were to be covered by an Australian Workplace Agreement (AWA) until such time as a Certified Agreement was made. A study of the offer made by ENA to departmental staff sheds light on their contemplated activities when they transferred. The ‘core’ activities of ENA’s ‘employment consultants’, as they were to be called, were to be job matching, screening, and suitability assessments, as well as routine administrative activities associated with vacancies, placement and recruitment.
In addition to EN, some 310 other EPEs, consisting of both private and public or community organisations, were awarded contracts to provide services following a competitive tender process. The contracts, to all intents and purposes identical to the principal contract, were for approximately 18 months from 1 May 1998, whereupon the Commonwealth would call for new tenders. The department would monitor the performance of the EPEs under these contracts so that breaches of its code of conduct could result in cancellation of the contract. Payment would be in accordance with the contract.
First threshold question: Did the activities of the departmental entities constitute a ‘business’ for the purposes of section 149(1)(d)?
Before embarking on a comparison between the activities of EN/ENA and those of CES/EAA, a threshold issue arises as to whether the activities of these public entities, which were the subject matter of the awards and the agreement, constituted a ‘business’ that can be transmitted under the WR Act at all.
One immediate positive response to this question arises from the fact that if an activity carried on by employees can give rise to what is classified as an ‘industrial dispute’ under the WR Act, and is an activity that can be the subject of award proceedings, it is likely that Parliament would consider it a ‘business’. Such an approach reflects a broad, purposive and context-specific comprehension of the term ‘business’ as deployed in the legislation: see generally North Western Health Care Network v Health Services Union of Australia [1999] 164 ALR 147 (North Western), where at 154 Justice R D Nicholson, with whom Justices Spender and Madgwick agreed, held that
the words ‘the business’ take their colour and context from the reference to the ‘industrial dispute’ in relation to which the employer is involved.
The word ‘business’ is a term of ‘wide import’ and its particular meaning is much dependent upon the context in which it appears: The Queen v Cohen, ex parte Motor Accident Insurance Board (1979) 141 CLR 577 at 588-9 per Mason J. That this is so was made clear in the decision of the High Court in Re Australian Industrial Relations Commission; ex parte Australian Transport Officers Federation (ATOF) (1990) 171 CLR 216 where the Court said at 226:
The reference to the departmental activities standing outside the world of ‘productive industry and organized business’ ... should not be understood as a statement that the departmental activities did not constitute a business within the meaning of the eligibility rule. Of all words, the word ‘business’ is notorious for taking its colour and its content from its surroundings: see Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 C.L.R. 355, at p. 378-379. Its meaning depends upon its context. It is common and apt to speak of ‘the business of government’: see, for example, Conway v Rimmer [1968] A.C. 910, at p.952.
This approach is also indicated by an appreciation of the overall purpose of the WR Act within the wider Australian labour relations system, of which it is apparently the central pivot. It also follows from an appreciation of the manifest purpose of section 149(1) (and indeed the whole of Division 6 of Part VI of the WR Act in which it stands), the history of this particular provision, and its predecessors: see generally North Western at 156ff.
EN acknowledged that in some circumstances it is legitimate to speak of Government functions as a ‘business’, referring to reported cases where the term ‘business’ has been applied to some activities of the public service. However, it argued that the particular statutory context in which the word is here used is significant and serves to distinguish such cases. In particular it sought to distinguish ATOF on the grounds that in the particular context of transportation, it was inevitable that ‘business’ would extend to the public service, whereas here, ‘business’ is used in a completely different factual context and in two distinct statutory contexts, sections 149 and 170MB, with the meaning of the word in each case said not to be the same.
It was said of section 149(1) that it is intended to relate to ‘ordinary’ business, and not to the activities of the Commonwealth. For the purposes of this argument EN pointed to section 170LB, which it said distinguishes between a ‘business’ and activities carried on by the Commonwealth. Section 170LB(1) defines a ‘single business’ as:
(a)a business, project or undertaking that is carried on by an employer; or
(b)the activities carried on by:
(i)the Commonwealth, a State or a Territory; or
(ii)a body, association, office or other entity established for a public purpose by or under a law of the Commonwealth, a State or a Territory; or
(iii)any other body in which the Commonwealth, a State or a Territory has a controlling interest.
In my opinion, an interpretation of section 170MB so as to support this distinction, said to arise in and from section 170LB, cannot be sustained. In North Western at 156 Justice R D Nicholson said:
Prima facie the appearance of this section supports the appellant's contention that references to “the business” in the Act outside Pt VIB cannot extend to governmental activities. However, the provisions in Pt VIB are specific to that Part. Section 170LB is specific to the notion of single business. Section 170MB, for example, draws no such distinction and refers to a business transferred to the Commonwealth as a business. The case law has long recognized a wider interpretation of the reference to “the business” in s 149(1)(d). I consider s 170LB is confined to the particular issue of a single business and does not manifest a Parliamentary intention to confine other references to business in the WR Act so as to exclude activities of government.
Similarly, Justice Madgwick at 168 remarked that the definition of ‘single business’ in section 170LB must be understood within the context of Part VIB of the Act, so that the express reference to the activities of the Commonwealth in subsection (1)(b) has a particular purpose within that Part. I respectfully agree. That reference does not suggest that its absence in section 149(1)(d) means that transmission arrangements with respect to awards were not intended to include those transmissions where the Commonwealth was involved.
The specific reference to ‘business’ in relation to the Australian Capital Territory in section 149(1A), inserted into the predecessor of the WR Act by Act 109 of 1998, would likewise be of no assistance to EN: see North Western at 155. Justice Madgwick at 167 noted how section 149(1A) refers ‘quite naturally and without strain’ to ‘the business of the Australian Capital Territory’, and that it is evident that use of this term as a description of the employment of staff who performed the actual work of the services of the Territory was taken as a ‘plain and apt’ way of describing the services of government. No statutory extension of the meaning of the word ‘business’ was necessary.
The Minister joined in arguing that the particular context is here determinative that the activities of the Commonwealth were not a ‘business’ that could be transmitted or succeeded to. Instead, he contended that the activities of CES/EAA were a function of government in which there were none of the commercial features that were ordinarily characteristic of a ‘business’. It was pointed out that the departmental organisations were not geared towards profit-making, that they possessed no ‘goodwill’, and they did not charge ‘customers’ for their services. They carried on their publicly-funded activities for governmental and welfare purposes as part of the function or responsibility of a department of state, and their employees were public servants carrying out their duties according to legislative provisions. On more than one occasion this argument sought to draw a distinction between the statutory functions or duties of the department and the particular means by which it fulfilled these functions and duties. It was said that for the purposes of characterising a ‘business’, the activities of the department and its units were carried on to discharge their statutory responsibilities as a function of government, and so cannot be considered a ‘business’.
It is beyond argument that the concept of ‘industrial dispute’ extends to cover the activities of government, and it is not required that they be capable of characterisation as ‘commercial’ activities in order to be so considered: see R v Coldham; ex parte Australian Social Welfare Union (1983) 153 CLR 297 at 312 (the Social Welfare Case); Re Australian Education Union; ex parte Victoria (AEU) (1994-5) 188 CLR 188 at 222-223. However, industrial disputes will often have commercial elements, and whilst the particular context may be determinative, it is simply not true to say that the activities of a government department, by virtue of their capacity for characterisation as ‘governmental’, cannot also be considered as ‘business’ just, and within the same context, as they are considered to be ‘industrial’: see Melbourne Corporation v Commonwealth (1947) 74 CLR 31 at 74; ex parte Professional Engineers Association (1959) 107 CLR 208 at 235, 274-276; Queensland Electricity Commission v Commonwealth (1985) 159 CLR 192 at 214; AEU at 228-230. Of course not all activities of government are capable of characterisation as ‘business’: State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 at 297-298. However, the wide term ‘business’ does not simply refer to commercial enterprises carried on for profit, or to those which have monetarily quantifiable ‘goodwill’, or where the enterprise paid for the opportunity to become involved in the relevant activity. In many cases it will apply simply to activities which cost money or on which money is spent, in contrast to voluntary work for charitable and like purposes.
The High Court’s express acceptance in ATOF of the aptness to speak in some contexts of the ‘business’ of government, and its general reasoning on the subject were held in North Western to be “persuasive of the approach to be taken in relation to section 149(1)(d)”, despite the different factual and statutory contexts: per Justice R D Nicholson at 157. At 166 Justice Madgwick suggested that the same approach is applicable to the terms ‘successor, assignee or transmittee’, with which the term ‘business’ is used in the Act, and which must for similar reasons be interpreted generously:
Although these remarks [in ATOF] were, in my view, inessential to the Court's conclusions in that case …their authority and, with respect, their cogency are beyond question. Likewise, for reasons developed below, in the context of an eligibility rule of a registered organisation (the content of which has, of course, a special significance for the ability of the organisation to obtain award coverage of an industrial class of employees), the ATOF Case stands as authority for the proposition that the expression “successor or assignee or transmittee” is capable of application to a statutory rearrangement of governmental functions, among statutory authorities, that is, of a wider meaning than in many a commercial context.
Justice Madgwick noted that while at first sight it may seem strange that a term such as ‘business’, “common in commercial and revenue law contexts”, should be held to have the very broad meaning usually ascribed to it, this approach was necessary in order to avoid the “strange and…inconvenient” result that many awards would otherwise not survive a change of employer in situations where, had the ‘business’ been understood narrowly as a common commercial enterprise, they would have survived. Taking as a starting point the ‘landmark decision’ in the Social Welfare Case, and adding the modern phenomenon of ‘privatisation’, his Honour concluded that it is “both logical and unsurprising, having regard to the general subject matter, namely the legal regulation of industrial relations”, that ‘business’ should be construed broadly to include, where appropriate, services carried out by government. Referring to the use of the same term with reference to the Australian Capital Territory in section 149 (1A), his Honour held at 167:
It seems more likely that, after the Social Welfare Case, those who drafted what is now s 149(1A) assumed that “business” in what is now s 149(1)(d) would be understood as having a broad meaning in order to give full efficacy to awards made on the wider understanding of the constitutional and statutory award-making power that was revealed by that case, as well as to other awards…
Thus, to my mind, the text of s 149 itself makes it clear that “the business of an employer” may very well refer to governmental services in which employees are employed.
The cases considered in North Western at 156 make clear to me that a broad interpretation of the term ‘business’ is preferred in the context of the WR Act. The Full Court made a point of saying that the term is neither technical nor a term of art, noted that ATOF related the word “business” to the word “activities”, and found a long practice of interpreting the term in an industrial context by reference to the definition of ‘employer’.
The CPSU argued that since a government department can be an ‘employer’ in an ‘industrial dispute’, and may be party to and bound by awards in respect of the people it employs, the term ‘business’ therefore applies to those activities in which government employs people to do work covered by an award. It suggested that to hold otherwise would be to risk having a situation where section 149(1) does not apply to preserve employees’ rights in the event of transmission of a business for which the same Act provided an award. If so, the obvious purpose of the provision would be subverted. As I see the position, there is no reason to consider that the activities of public servants which are capable of giving rise to an ‘industrial dispute’ to which the employer is capable of being a party, and which leads to an award within the meaning of section 149, should not be construed as a ‘business’ for these purposes. As Justice Marshall said in Health Services Union of Australia v North Eastern Health Care Network & Western Health Care Network [1997] 79 FCR 43 (HSUA), the first instance decision that was subject to the appeal decided in North Western and of which the Full Court approved, it would indeed be a “strange result” if a certified agreement or an award could be made under the WR Act in respect of a business to which a government (in that case the State of Victoria) was a party, but the business did not come within the meaning of section 149.
It follows that the provision of the relevant employment services by employees of CES/EAA prior to 1 May 1998 constituted a ‘business’ capable of transmission to a successor employer within the meaning of section 149(1)(d). I would add that whilst on the facts, and on existing authority, the description and characterisation of the actual activities of CES/EAA constitute a ‘business’ of their own accord, such a factual inquiry may actually be superfluous since the proper construction of the statutory provision requires that the term ‘business’ take its meaning from the activity in which the employer was involved and from which the industrial dispute which led to the awards and the agreement arose: see North Western at 157. The result of this exercise for this case speaks for itself.
Second threshold question – Was the agreement capable of binding EN?
Almost as an aside, EN also argued that the agreement cannot bind it since section 170MB refers to a ‘new employer’, and therefore excludes an employer who was an employer at the time stated in subsection (1)(b). When the term ‘new employer’ is read in the context of that provision, it is clear, however, that the true meaning being conveyed is that of a ‘replacement’ employer, or a new employer in relation to that business, rather than of some newly created entity. To construe this enactment in the manner suggested would render the entire transmission protection of no effect. I reject the submission. Indeed it is more than a little strange that an agreement made on the eve of the changeover specifically to protect employees making the transition from public to private operation should be thought to have had any other intention than to cover the employees in question.
Transmission of the business
The law
In ATOF the High Court considered the meaning of the words ‘successor or assignee or transmittee’ in the context of the eligibility rule of a registered organisation under the predecessor to the WR Act. At 230 the Court said that
... on the reading of the clause which we favour, the ultimate issue is whether there is a substantial identity between the old activities and those now carried on by the RTA which correspond with the old activities.
The ‘substantial identity’ test laid down by the High Court is, for this Court at least, the correct test to be applied when considering whether a transmission under section 149(1)(d) has occurred: see North Western at 157, 162-163, 169, per R D Nicholson and Madgwick JJ respectively; Australian Federation of Air Pilots v Skywest Airlines Pty Ltd (Industrial Relations Court of Australia, Marshall J, 31 October 1995, unreported); Meat & Allied Trades Federation of Australia v Australasian Meat Industry Employees Union (1995) 58 IR 90 at 94.
Thus whether EN became a ‘successor or assignee or transmittee’ of the business of CES/EAA depends on whether, as a matter of fact, there is ‘substantial identity’ between the activities of the respective entities (or of their employees, whose activities go to make up what their employers do) in the corresponding business or part of the business. If so, transmission of the ‘business’ will have occurred.
The evidence
Rod Halstead, General Manager (Corporate Affairs) of ENA Pty Ltd, was EN’s principal witness. Mr Halstead had been employed within the department before joining the taskforce formed to institute the Government’s privatisation reforms. It is evident that EN’s submissions reflect and revolve around his testimony.
The central object of EN, as appears from Mr Halstead’s affidavit and from the company’s memorandum of association, is to provide employment services based on the assessment of the particular qualifications of job seekers for employment, and to increase their prospects of gaining it, in accordance with the requirements of the Commonwealth which bears the cost of their provision. Clause 3(e) of EN’s memorandum of association states that EN is to provide services by way of
(i)matching, with employers who are seeking staff, persons who are seeking employment;
(ii)counselling, training and mentoring or other relevant services to enhance the capacity of persons to gain employment; and
(iii)to perform any function which relates to the above objects and which will enhance its commercial viability, and its capacity to meet its other objectives.
The stated purpose of ENA is to provide EN with “administrative and other services”, although in reality it provides EN’s ‘employment services’ themselves, since EN has only one employee.
In the transitional period when the activities of CES/EAA were being wound down, and when EN managed both of them in accordance with the transitional contract, EN was providing what it described in its submissions at one point as “operational management and consultancy services”, and at another as:
EN provided DEETYA with operational consultancy services, the day to day supervision of the conduct of the core activities and management of the physical environment provided for the activities of CES and EAA.
The core activities were described in clause 2, as being the CES job brokerage activities and the EAA statutory case management services.
What was called “CES job brokerage activities” was described for the new providers such as EN after CES/EAA ceased to operate, as ‘labour exchange’ services. Organisations such as EN involved in the ‘Job Network’ program basically provide potential employers and job seekers with job matching services, job search training, general assistance, and sometimes longer term ‘intensive assistance’.
The principal contract consisted of six parts and five schedules. In the actual scheme established, there were three categories of service, labelled FLEX 1, 2 and 3, “FLEX” denoting ‘flexible labour exchange services’. Payment varied according to the category of person placed, and the minimum duration of time that each person remains in the employment arranged.
FLEX 1 contemplated ‘job matching’: canvassing employers for suitable vacancies and matching suitable job seekers to these vacancies. Payment depends on the provider placing a person into a job covered by an award or agreement complying with minimum legal standards for at least 15 hours in any period of five days, or direct placement into an apprenticeship or traineeship. Placement into certain types of employment will not attract the payment.
FLEX 2 is really ‘job search training’, ie training and assistance in acquiring skills for actually searching out and obtaining employment. The service provider and the job seeker together formalise a written plan called a ‘job skills search plan’, with the provider receiving FLEX 1 fees and a bonus if the relevant job seeker receiving FLEX 2 services remains in the job for 13 consecutive weeks, with other conditions.
FLEX 3 is a more complex set up wherein payment is made in stages. It contemplates the provision of services to a person in need of considerable assistance, training or re-training to obtain and hold a job. This intensive assistance is specified in an ‘Activity Agreement’ which is drawn up by the job seeker and the provider, although it is in fact an agreement with the Commonwealth and not the specific provider. The provider is to provide FLEX 3 services for a period of 52 or 78 weeks, depending on the category of job seeker. The provider receives FLEX 1 fees as payment for ‘FLEX 3 persons’ when FLEX 1 outcomes (the ‘primary interim outcome’ for a FLEX 3 job seeker) or employment for 13 consecutive weeks are attained. Payment is made partly when the support commences and the Activity Agreement is signed, as a type of ‘up-front’ fee. Further fees are payable upon ‘Final Outcome’, which is an ‘interim outcome’ followed by another ‘interim outcome’.
As was apparent from this scheme as set up under the principal contract, and from the evidence of employees who were transferred from the department to ENA, these are substantially the same activities as were previously carried on by CES/EAA. Indeed as regards the higher level services, EN is the largest single provider in the Job Network of ‘intensive assistance’ (42%), previously the business of EAA where it was labelled ‘case management’. The evidence of Mr Halstead made clear that aside from the new ‘FLEX 3’ environment within which it occurs, there was no significant practical difference between the ‘intensive assistance’ role of EN consultants and the ‘case management’ role of EAA and its outside contractors. In summary, his evidence was that prior to 1 December 1997, CES determined initial eligibility for intensive assistance/case management and would refer job seekers to EAA or contractors. After this date, Centrelink determined eligibility and provided the referrals. It continued to do so after 1 May 1998, the only difference being that it would refer job seekers to EN or one of the other providers. Centrelink does not embark on the detailed skills assessment except to the extent that it registers persons and refers them on.
Mr Halstead stated, and it is significant, that for the transitional period the bulk of these ‘transferred’ employees, now called “employment consultants”, did not receive any new training apart from one day’s classroom orientation relating to the new EN information database. In other words, they performed all relevant EN activities using the skills formerly at the disposal of the previous employer and covered by the awards. Also during the transitional period, briefings were held for potential recruits from CES in order to explain to them the ‘different operating environment’ that they would encounter in EN were they to take up employment there. It appears that these ‘training sessions’ and briefings were principally to instil an awareness in those previously working within the public service that EN would be competing operationally in the employment services market, and the corresponding adjustment to the employees’ thinking and practices that this imperative entailed. Such training was geared primarily not to re-training in new operating skills, since they were still to be operating a labour exchange, but was rather attitudinal, directed at behaviour and operation in a different trading environment. These facts all suggested that the employees were able to make the change relatively smoothly, and that the business of providing employment services for EN involved substantially identical tasks to those they had previously performed.
Even after May 1998, training of EN’s employees again predominantly focussed on instilling and ensuring an appreciation of the fact that the company was at large in the market and needed to perform efficiently in order to flourish there. EN may have offered this evidence as an indication of training for altered activities but my assessment of the various accounts of the nature of these briefings was that they amounted to nothing more than would be expected from the change of work ethos. They did not speak against transmission; if anything, they were to ensure that what was essentially a transmission of similar tasks went smoothly. Indeed, the evidence given by Robert Campbell, formerly an Assistant Secretary of the department, spoke only of instruction relating to the new computer system. In other words, only the particular software program for recording and ordering this information had changed.
On the other hand, Mr Campbell testified that in his opinion there were significant differences between the ‘business’ of the CES/EAA, and that now carried on by EN. Essentially, he put forward four such differences. Firstly, he cited the different framework within which employees operated. Second, EN was operating in a competitive, market-exposed environment. Third, the substantial focus for EN employees is now on ‘employment outcomes’. Fourth, the respective employees operated according to different procedural guidelines – where the CES had operated according to strict guidelines when referring persons to employers, EN consultants operate in a more ‘flexible’ environment.
Andre Kaspura, ENA’s General Manager (Operations) and a former departmental employee, also stated that the new employment consultants do not perform the same roles as CES officers. He said that unlike former CES officers, EN consultants do not register the unemployed (Centrelink now does), and do not conduct ‘case management’. He added that ‘there are no labour programs to be delivered…no advice to be gathered or conveyed on available training’.
Kevin Bird, ENA’s Regional Manager for country New South Wales, had worked for the department and CES for some 28 years. He conceded that the information an EN employee is after from job seekers is the same information that a CES employee would have required to “assess and process” such a person. Indeed, his evidence was not able to clearly identify any difference in duties or to counter the evidence of the former CES officers who are now EN consultants that their duties were substantially the same now as they were at CES. Looked at in terms of duties and taking any ‘lost’ duties into account, all he really said was that the software and some telephone numbers were different. The strength, if any, of Mr Bird’s assertions in this regard amounted only to the fact that consultants now do what they do for an outcomes-based fee.
Other evidence supported the findings of substantial identity of duties and there was no allegation that the witnesses who testified to this effect were somehow not representative of the class concerned. Indeed apart from management, there were no statements from employees testifying that their work was not in substance identical after transfer.
Samantha McGowan, an EN employment consultant, gave evidence that she was employed as an employment officer at CES for over six years. She described her actual roles in both positions and compared the generic duty statement of CES ‘employment officers’ to the duty statement of EN ‘employment consultants’ (covering essentially persons below management level). Despite EN’s emphasis that CES employment was tightly constrained by departmental directives, and that unlike current consultants there was little scope for use of initiative or response to market needs, a study of those duty statements shows that persons employed in both positions were and are undertaking substantially identical activities in a day-to-day sense. Indeed, Ms McGowan testified in her affidavit that EN’s ‘briefing sessions’ related to changes in management and in operating environment. Significantly, she said that during the transitional period [emphasis added]:
…we were encouraged to tell employers about the new arrangements and that except for the fact that there would be a charge, the service wasn’t going to change. Employers were encouraged to stay with the people they knew.
This evidence was not challenged.
Peter Schanka, a former CES officer and subsequently an employment consultant at EN, likewise testified that apart from some supervisory functions, all of his activities at CES over 5 years there ‘are part of my present duties at EN’, for which he is paid the same salary. Erica Aldridge, with CES for four years, said that she now worked in Gosford for EN. She explained that her office was fitted with the same equipment, and that she performed identical or very similar activities as at CES. Geoffrey Bisby, CES officer for over four years, testified that he now worked for EN from the very same office, at the same desk and using the same equipment as previously. He too testified that as an ‘employment consultant’, there were ‘no significant differences’ between the two roles. He said that some of the operating procedures are different, “but the basic function is the same”. Valinda Brushe was with CES for over three years. Working for EN in Coffs Harbour at the time of the case, she used the same office, the same desk, and even the same telephone number. The testimony of Marina Mossman, Lynette Payne, Roger Percy and Richard Walden was virtually identical to Ms Brushe’s and in agreement with the sentiments expressed in Ms McGowan’s affidavit. It is apparent that there was no interruption in the provision of the relevant services over the transfer time, and employees of EN transferring from the department like them required virtually no cross-training in order to continue provide labour exchange services.
I do not think that the 1998 changes, as fundamental as they were structurally, had a relevant impact upon the substantive activities of CES/EAA employment officers providing labour exchange services. That the structural or organisational framework altered upon transmission from government to ‘private’ employers is undoubted but in my opinion this change did not in itself mean that the actual ‘business’ or activities were any different. There is no reason to believe that public service personnel were not ‘substantially focussed’ on achieving the outcome of employment, and although obviously not as directly affected by actual placements as when success is linked to reward, individually they were surely required to perform in order to maintain their positions or gain advancement.
Furthermore, although in a government department operating pursuant to legislation, the employees will be constrained by government procedures, while full private competition required or permitted more relaxed and discretionary practices, the evidence established clearly enough that EN employees are subject to procedures that are not relevantly different. Indeed the CES duty statement established that its employees were expected to respond creatively to the labour market, and were required to exercise “discretionary and professional” skills, whatever the particular prescriptions governing their work. To borrow from the language utilised by EN in another context, the employees received only minor training on the adjusted means to carry out the same functions of providing labour exchange and case management services to the unemployed. That was the business transmitted. And in the performance by EN’s employees of these similar tasks, they used, by and large, the material assets of the previous employer including some of its premises, and much of its furniture, telephones, computers etc so that the transmission occurred effectively overnight, after the transitional period, on 30 April 1998.
Similarly, the differences in the duties highlighted by Mr Campbell were again only potential differences, or differences of form. They demonstrated, and he emphasised, the new aspect of competition in a results-based environment. Apart from the activities of Centrelink that EN has not taken over from the CES/EAA, the table prepared by Mr Campbell to emphasise the differences did not show anything actually done that is different, as opposed to the motivation or group ethos behind the day-to-day roles.
I find that any differences, if they in fact exist, are not relevantly significant. In the light of the ATOF test and its legacy, it is not significant, for instance, that Ms Mossman’s past visits to schools to tell them about CES, and her present visits to schools to advise them of substantially the same services now available elsewhere, still free to the unemployed, are different because if she now finds employment for people, the Commonwealth pays her company a fee. She and her employer are involved in substantially identical work and activities to those she undertook in before. Moreover, FLEX 3 services are to my mind substantially identical in character to EAA’s ‘case management’ services, and were intended to replace them. They are both directed at long term assistance, and the fact that FLEX 3 is now ‘outcomes’ based whereas case management presumably continued irrespective of success, does little to diminish their identity. Moreover, to credit too much to the profit factor would mean that no cases of ‘outsourcing’ from government could ever amount to transmission. In any case the employees themselves did not suggest that the change affected the substance of their actual activity.
The factual findings at first instance in North Western were summarised on appeal at 163:
The findings established that the same patients become the responsibility of the networks; the medical records and stock were transferred; leased assets were assigned; and staff were transferred. While the State retained control over funding and audit that was but the consequence of it having transferred the responsibility for the provision of the relevant mental health services so that it was now required to pay for the delivery of such services. What was involved was a transmission of the core of the relevant services not, as in Crosilla or Kelman v Care Contract Services (1995) ICR 260, a peripheral activity.
It was common ground in this case that assets and stock previously used by and belonging to the department were transferred to and are now being used by EN, including telephones, computers, furniture, etc. Leases of properties used by the CES/EAA were transferred to EN which used the premises to commence and conduct its business. EN took over much of the ‘customer’ base of CES/EAA, especially those on long term programs, and supplied services of a substantially similar nature to those previously provided. It took the benefit of relationships with particular employers and with job seekers formed before and during the transitional period.
As for the numbers of employees, most of those employed by CES/EAA were transferred to ENA when it commenced to deliver employment services. Even before 1 May 1998, approximately one hundred departmental employees on leave without pay formed a ‘start-up team’ at ENA in readiness for the commencement of operations after that date. When operations commenced, ENA had approximately 1200 employees, about 1100 of whom had been working in or for CES. Just over 700 of these were departmental employees while 400 had been temporary departmental employees. They all performed substantially the same tasks as they had done previously.
Question of fact
Much like the unsuccessful appellants in North Western, EN submitted that there was an insufficient nexus or legal dealing between it and the department to amount to, or to characterise the transaction as, a succession of the department’s business. This argument must be rejected. Section 149(1) includes parts of businesses and non-immediate transactions. If it were necessary, I would find that the facts in this case (the special place of EN in the scheme, its establishment by the Commonwealth, the contents of the incorporation documents, the contracts, etc) do establish privity or a nexus of the kind allegedly required. However, it is not necessary to establish a legal relationship of this kind. All that is required is to show a business transmitted for the purposes of the WR Act. In North Western at 154 and then 157, Justice Nicholson pointed out that the concepts of succession, transmission and assignment are to be given a general, non-legally specific characterisation, since strictly speaking there cannot be succession etc of a business in this sense. At 162 his Honour rejected the appellant’s argument that some type of legal nexus needed to be shown and held that transmission is a question of fact requiring an inquiry [emphasis added]:
I also do not agree that the primary judge fell into error because he looked at what was occurring before contracting out and contrasted it with what was occurring after contracting out without examining the nature of the nexus between the two stages. Once it is accepted that the reference to “the business” in s 149(1)(d) has the wide reference which the primary judge found, it is not necessary to search for some legal form of succession, assignment, transfer, corporate acquisition or takeover. What is necessary is to determine as a question of fact whether “the business” understood in the wide sense so found has been transmitted to other hands. That does not require a search for some legal mechanism as a nexus between the pre and post transmission stage.
Moreover, contrary to EN’s submission, there is no significance in the fact that it is not ENA but EN that is contracted to the department because section 149(1) would be rendered ineffective if employers were able to artificially avoid award obligations by utilising a holding or related company. In any case section 149(1) speaks of ‘successors etc’ whether ‘immediate’ or otherwise. However, it is significant that when EN managed the operations of CES/EAA for the duration of the transitional period, it was bound by and subject to the awards in question. I do not think it is in any way inaccurate to say, as the CPSU did in its submissions, that:
It is evident from the terms of the [transitional contract] that the Commonwealth intended that EN would manage the CES and EAA as part of a process of transition to a new system in which EN would play a major role. EN was deliberately placed in a special position in the existing system to facilitate its role in the new system.
The same or different business
EN argued that the different statutory regime and context showed that there exists a different business, irrespective of what the particular employees actually did and now do. Thus the Court need not make a comparative examination of the activities of the respective employers before and after the alleged transmission and that instead emphasis should be placed on the ‘business’ and whether it had been transferred, in the light of what were said to be wholesale structural and character changes. EN said that the crucial issue is thus not the fact that a large number of its employees were previously CES/EAA employees, but whether part or the whole of the business of these bodies was transmitted on 1 May 1998. The submission meant that it is not the tasks or activities actually performed that are the relevant consideration but that, irrespective of any apparent practical similarity of tasks within the post-May 1998 framework, the orientation, basis and context for employment operations were so altered by the privatisation process that if any business was transmitted, it was not the business which had been covered by the awards. EN urged the Court not to take the actual activities of the employees into account but rather the different operational, financial and competitive framework of the new entities.
As already noted in another context, the circumstances suggested to be fundamentally altered include that the whole departmental ethos had altered from the welfare provision of a public service to a profits-driven service operating in a fully competitive market. Where before the department had internal agencies to carry out its own policies, with Commonwealth monies paid simply for the attempt to obtain employment for job seekers, it now pays others to perform this task, on limited term contracts, and only according to the achieved ‘outcomes’ of persons actually successfully placed in employment. Other distinctive elements of the new system suggested were that the EPEs had limited geographical coverage and limited period contracts, and were subject to contract cancellation if standard departmentally-fixed criteria were not met.
In the part of the 1996 Ministerial Statement dealing with ‘implications for providers’, then Minister Vanstone wrote of the ‘radical and comprehensive’ and ‘significant’ adjustments that were envisioned. EN contended that it is this altered framework which has given the apparently similar provision of employment services by EN a very different character to the former activities of CES/EAA.
On the other hand, the CPSU submitted that the change in operating environment and ethos does not affect the matter for the purposes of the WR Act, and that the mere fact of a restructuring or streamlining for competitive market performance does not necessarily alter the character of the activities to which the conditions of the awards apply. The CPSU contended that EN was the ‘successor’ for the purposes of the WR Act because there is a ‘substantial identity’ between the activities or businesses of CES/EAA and those carried on by EN. It noted that a large number of employees of CES/EAA formed the body of employees in EN, without which it could not have managed a relatively seamless transfer of the business of providing employment exchange services. The CPSU pointed out that in order for EN to be able to fulfil its contracts, a substantial number of employees were ‘transferred’ to ENA pursuant to a notice from the Prime Minister under section 81C of the PS Act. This notice, the CPSU said, is ‘an essential fact’ in this case, is ‘strong evidence of transmission’ in itself, and distinguished EN from other private providers.
A section 81C certification applies only where a function that has been performed by persons employed under the PS Act is to be performed by a Commonwealth authority not subject to that Act. In a letter to the Prime Minister dated 13 February 1998 requesting the section 81C certification, Minister Kemp wrote that one of the reforms that required the certification is the ‘creation of [EN] as a successor to [CES]’. In response the Prime Minister certified that:
Supervisory, clerical and administrative support functions in support of employment services, that have been performed by persons appointed or employed under the Act in the [department] are to be performed by [ENA], a Commonwealth authority within the meaning of sub section 7(1) of the Act.
The CPSU submission was that the certification by the Prime Minister in these circumstances is to the very effect that most functions of CES are now performed by EN, and those functions constitute the relevant business.
EN somewhat tentatively retorted that the only purpose of the section 81C notice was to give effect to a guarantee from the Government that former APS employees would not be disadvantaged, but I think that the notice had the purpose that most clearly appears from its terms and background circumstances, viz. that EN be assisted in its performance of the principal contract to provide employment services by the transfer of employees from the department. That this arrangement also secured the employment of the particular people during the ‘outsourcing’ process was an ancillary gain.
In any event, all this type of controversy strikes me as, to a large extent, an exercise in semantics, if only in a practical sense. What is essentially a question of fact should not be dressed up as a question of law. For fundamental to the resolution of the transmission question is to discover whether in fact EN employees did substantially similar tasks to those of CES/EAA for whose benefits the awards were originally made, as a means of determining whether EN was continuing the same ‘business’. This exercise calls, at least at a first step, for an examination of whether EN’s employees are undertaking in fact substantially identical tasks to those of the employers originally bound by the awards. Of course the different context, the new orientation to profit, and the other matters referred to are factors to take into account in the factual determination of whether what has been received is not the same business so that the awards cannot survive. But an appreciation of what day-to-day tasks were then and are now actually undertaken has a direct bearing on that question. The process may well have altered the framework so that there is no ‘substantial identity’ and the employees are not in fact working in the same business. However, the fact that the same or similar activities are carried on within an altered structure does not dictate the conclusion that the business was not transmitted. Awards and employment contracts are about the working conditions of workers. The issue raised by the legislation is not whether the businesses were structurally different, but whether the workers are doing, and therefore the employer is delivering, the same or different work.
There is in my view no doubt that both EN and ENA are, as the CPSU put it, ‘emanations of the Commonwealth’. If it is significant, each is, as the Prime Minister certified, a ‘Commonwealth authority’ for the purposes of section 7(1) of the PS Act. While they are run as fully competitive enterprises along commercial lines, both in their conception and in their operation they essentially provide services in accordance with departmental policy. The Commonwealth is in complete control of the companies. Not only is it the sole shareholder but it determined in a real sense the content of the companies’ incorporation documents. It is artificial to conceive of them as anything other than two Commonwealth corporate entities in the business of providing employment services to the community relevantly indistinguishably from CES/EAA. The fact that in a media release by Minister Vanstone of 10 December 1996 EN was described as the ‘successor’ to CES, and in a media release of 26 February 1998 by her successor Minister Kemp, it was said that EN ‘replaced’ CES, is also interesting, and may also be illustrative of the factual position, albeit of less importance since over 300 other Job Network agencies also took on the work.
A ‘functions’ test?
Another formulation of EN’s argument was that a distinction should be drawn between the functions of the department and its agencies and the means of discharging those functions. The department’s principal function is to ensure that employment services are provided. Even if this function can be a ‘business’, which EN disputes, it said that the department has in essence retained this function, and so no transmission has occurred. What has changed are the means of discharging the function.
The same distinction between the retained functions of government and the outsourced means of performing these functions was soundly rejected by Justice R D Nicholson in North Western for reasons that are, with respect, equally applicable in this case. His Honour noted the appellant’s contention there that the responsibility for the provision of health services still rested with the State of Victoria, and that the only difference of the new system of delivering the services was that the method or means of doing so had been re-organised. In other words, it was not shown that the function of providing health services had been transferred, but that it continued where it had always been: Crosilla v Challenge Property Services (1982) 2 IR 448 at 456-7. His Honour rejected this distinction at 163:
I do not accept the primary argument for the appellant that nothing has changed because the function of providing mental health services remains with the State of Victoria and all that has changed are the "means of performance". Once it is accepted that the object of the transmission must be "the business or part of the business of an employer who was a party to the industrial dispute" attention is directed to what it is that the employer who is party to the dispute is doing. It is that which identifies the object of the transmission. The fact that government as an employer may have continuing functions in relation to the provision of mental health services is not a determinative factor in relation to whether there has been a transmission of the relevant business of the employer. Specifically, transmission of part of the business is expressly made possible by the section in determining the extended application of an award.
In one sense, by relying on the effects of a change in environment rather than in activities, EN has not in substance disputed that there is substantial identity between the activities of EN employees and those of CES/EAA. If so, the ATOF test is satisfied and transmission occurred. If, however, the factual dispute is maintained, EN’s argument stands or falls either on the acceptability of the distinction between ‘function’ and ‘means’, or on factors such as its having only limited operational areas, a limited contract period, and altered service delivery criteria now geared to achieving outcomes for profit in a competitive market.
The ‘functions’/‘means’ dichotomy cannot be sustained. True, the department remains in existence and retains its overall functions, but the business of CES/EAA, ie the day to day activities that kept their employees ‘busy’, is quite capable of transmission even if ultimate responsibility for ensuring that services are provided is not relinquished. A conclusion that there has been no transmission simply because there are continuing functions of government in the subject area of EN’s business must be rejected.
As to the other distinguishing factors suggested, it is clear, as in North Western, that the so-called ‘core’ services of the employers originally bound by the awards involved in this case have been outsourced. The fact that EN is in competition with over 300 other providers adds nothing of relevance to the question of whether this step amounts to a transmission, amongst other reasons because what is added by the competition cannot be determined when the other providers are not parties to this litigation. In terms of the construction of section 149(1) and its application to the facts of this case, the position is quite unaffected. In my view, the identity between the basic activities of CES/EAA and those now carried on by EN is of particular importance. While the factors pointed to by EN may have substantially affected features, even important features, of the business or businesses in question, I consider that the businesses themselves did not materially change. The ethos and legal framework changed so that the governing regime moved from a statutory base to a contractual base. However, EN is in the business of providing labour exchange and intensive or longer term assistance services, and these businesses were transmitted to it from CES/EAA. I find that a transmission of the businesses to which the awards and agreement related occurred on 1 May 1998.
Binding EN
Three arguments were said to support the fact that irrespective of a transmission of the business or part of the business, the awards and the agreement are not binding on EN.
The first argument was that the references to the specific parties bound by the awards constitute an order of the Commission of the kind provided for in the opening words of section 149(1) that an award determining an industrial dispute is binding on successors etc ‘subject to any order of the Commission’. Such an order ousts the effect of subsection (1)(d), and avoids the transmission of award burdens to parties not specifically named. Secondly, it was said that the awards are so specifically directed at the public service that they cannot, on their terms, feasibly operate outside of it. Thus even if a business has been transmitted, the awards cannot make the same journey. Related to this was a third argument, that if the awards and agreement bind at all, they only bind in respect of persons employed under the PS Act because of the express references to employment under that Act. Clearly, EN does not and cannot employ persons under that Act. This argument was also put forward as establishing or supporting the existence of an exclusionary order.
The first point to note is that as there is no provision in section 170MB for a qualifying or exclusion order by the Commission as there is in section 149(1), any argument going to the incapacity for transmission of the agreement must rely on the contention that the agreement is not suited for operation upon a successor because its binding clause refers to employees under the PS Act. The preamble to the agreement states that it is providing for departmental staff who may be adversely affected as a result of the cessation of CES. Clause 3 says that the agreement shall apply and be binding upon ‘Non-SES DEETYA staff’ who are employed in CES/EAA/TSUs. It states that the agreement binds the Commonwealth in respect of specific categories of staff, which are defined in clause 4 as “people employed under the PS Act who are employed in or who are unattached from and last held office in [CES, EAA or TSUs]”.
To somewhat similar effect is clause 5.2 of each of the awards which states:
This Award shall apply and be binding upon all Ministers of the Crown for the Commonwealth and the presiding officer(s) in respect of employees under the Act.
Clause 3.1 defines “the Act” as the PS Act.
EN argued that these specific references were or amounted to an ‘order’ of the Commission excluding EN from the operation of the awards. The primary argument of the Minister was that on the proper construction of this clause, an order of the Commission which restricts the operation of subsection (1)(d) blocks transmission of the awards and confines them to the original named parties.
The CPSU submitted that ‘parties bound’ clauses are not orders of the Commission. The basis of this argument was that all such awards are employer-specific as to the parties to be bound by the award and the clauses exist simply to identify who is becoming a party to the award when it is made. Section 149(1), on the other hand, exists precisely for the transmission of an award to a different employer to the one originally bound. It would be a meaningless provision, the CPSU argued, if it could not operate independently of those specified parties. In this case, there is no obvious or even apparent order of the Commission to the contrary.
Statutory purposes
It is surely beyond argument that the WR Act has a remedial purpose and through it the legislature seeks to ensure industrial peace and justice: George Hudson v Australian Timber Workers' Union (1923) 32 CLR 413 at 434-435 per Isaacs J, 454-455 per Starke J. Section 149(1) and its predecessors seek to remedy the particular industrial injustice of the evasion by succeeding employers of obligations created by awards binding on their predecessors: Daily News Ltd v Australian Journalists Association (1920) 27 CLR 532 per Higgins J at 545. In North Western Justice R D Nicholson noted at 154 that the purpose or policy objective of section 149 is:
to make the power to settle industrial disputes effective by extending the instrument of settlement to “the ever changing body of persons within the area of such disturbances”...
Of particular relevance to this case, his Honour added:
It does not therefore seem to be to the point that “outsourcing” or “mainstreaming” may not have been in contemplation at the time the section was enacted.
Similarly, Justice Madgwick emphasised that the purpose of section 149(1)(d) generally indicated that a broad approach to the section was to be adopted. Referring to the interpretation of the term ‘business’, his Honour alluded at 165 to the danger, should a narrow approach be adopted, that “many award conditions and prescriptions would not survive a change of employer, until any conscious change or abrogation of [the conditions], notwithstanding that the body of employees and their work remained substantially the same”.
I respectfully agree that the nature of the scheme of which it is a part and the policy reasons for the provision strongly indicate that a broad approach to section 149(1) should be adopted. While it is convenient and proper to consider the various issues of ‘business’, ‘transmission’ and ‘whether an order is to be inferred’ separately, its resonating theme suggests that the section, and the alleged transmission, be looked at wholistically. Justice Madgwick’s remarks in North Western at 170 are, with respect, instructive of the lens through which it should be viewed. His Honour said:
Finally, I would say that, although it has been convenient to segregate arguments and questions about “business”, the successor terminology and (to a lesser but still appreciable extent) what is necessary to constitute an overriding order of the Commission, they are in truth but aspects of a single, overriding conception. That is that settlements by award-making, aimed at quelling present industrial disputes and the prevention of future disputes, should be kept effective, pending conscious variation or replacement of the award, regardless of mere changes in arrangements as to which legal entity might be the employer of an unchanged industrial class of employees, regardless of such matters as whether the original employer had other classes of employees as well and may have remained their employer, and regardless of whether the legal ownership of all of the plant and equipment used by the employees for their work and the other resources of the employer utilised in the undertaking should have likewise changed.
Indeed, for the efficacy and coherency of the process, the courts have always made clear that this type of dispute settlement and prevention power must be construed, so as to extend, in appropriate cases, beyond the specific parties to the dispute: George Hudson Ltd at 455 per Starke J. In that case Isaacs J explained why the forerunner of section 149(1)(d) should be given a broad or liberal and purposive interpretation, saying at 435-6:
Parliament knew ... that a successor to a business could not become so without knowing the statutory obligations of his predecessor to his employees. Parliament does not act in such a case without a comprehensive view of the situation. Let us suppose the settled rights of those employees, and the rights of competing employers under the same or a corresponding statutory obligation, and also the general rights of the public to a maintenance of industrial peace, to be placed by Parliament in one scale of justice, and the claims of the successor of the business to disregard individually the declared right of the employees to settled remuneration and other industrial conditions in the other scale: which can we suppose to weigh the heavier? In other words, applying the test as stated in Maxwell, on which side is justice? What case is made for restricting the application of the statute to the smallest ambit consistent with any possible construction of its words? To my mind the very opposite construction should be given to it as a remedial statute – as a statute which endeavours to replace strikes and lockouts with public examination and decision and to remove industrial discontent by abolishing industrial injustice. The effort may or may not be successful, it may or may not be attended with difficulty and error, its policy may be right or wrong – that is for the Legislature to decide; but, as long as it is the legislative will to maintain it, ... it is, I apprehend, the function of this Court to construe it in the spirit of its manifest purpose.
This approach was expressly re-affirmed only last year by a Full Court of this Court in Construction, Forestry, Mining & Energy Union v Australian Industrial Relations Commission & Ors [1999] 164 ALR 73 (CFMEU), at 104 when Justices Wilcox and Madgwick approved of and adopted the words of Justice Moore in ACTEW Corporation Ltd v Media Entertainment and Arts Alliance (Industrial Relations Court of Australia, unreported, 7 August 1997) at 7 that:
The first point to be made about the operation of s 149 is that it should be beneficially construed so that employers do not ‘avoid the settled rights of employees’: see George Hudson Ltd v Australian Timber Workers’ Union (1923) 32 CLR 413 at 435-436, per Isaacs J. Thus, in my opinion, whether there has been succession, transmission or assignment of a business should not be approached on some narrow basis.
The Court added (and in this respect Justice Moore agreed with Justices Wilcox and Madgwick):
Only in compelling circumstances should the Court construe an award in such a way as to allow its frustration by transmission of the business.
These views compel a construction of section 149(1)(d) that preserves the award coverage until such time as it is clearly and unambiguously altered by order or agreement.
Further support, if any were needed, for such an approach may be derived from recent European Community (EC) and United Kingdom jurisprudence and legislation dealing with the safeguarding of employees’ rights under the social policy legislation of the EC. Recently the European Court of Justice (ECJ) has had occasion to interpret an EC Directive (Dir 77/187) safeguarding employees’ rights arising from a contract of employment or from an employment relationship in the event of ‘transfer of the undertaking, business or part of the business’. Articles 2 and 3(1) of that Directive provide that the transferee who becomes the employer in respect of the undertaking etc receives all the rights and obligations arising from the employment relationship existing at the time of transfer. In this sense it is somewhat similar to section 149(1)(d).
While the legislative scheme is obviously somewhat different, it is worth noting that the protective nature of Australian federal legislation and our courts’ approaches to these issues accords with developments in the EC member states. Some of the European cases have even dealt with the corporatisation or privatisation of so-called ‘government functions’. The approach adopted in those cases is broadly supportive of the construction that this Court has in the past given to transmission arrangements, and in particular to findings as to whether transmission occurred. Commencing in 1986 with Spijkers v Gebroeders Benedik Abbattoir CV and Anor [1986] ECR 1119, the ECJ has repeatedly emphasised substance over form in finding whether a transfer of business has occurred, in a manner reflective of the approach of this Court generally favouring transmission and the corresponding protection.
Indeed although parallels are not exact, the last decade has seen somewhat of a harmonization of Australian industrial relations law with standards adopted in other countries. In many respects Australia’s example is the leading one. Prof R McCallum has written in ‘The Internationalisation of Australia’s Industrial Law’ [1994] 15 Syd LR 122, esp 133-134, that in much recent federal legislation, the Australian Parliament has drawn on international sources in line with ILO conventions on establishing a minimum ‘safety net’ for employees upon transfer, which has also influenced EC policy directives and corresponding member state legislation. Judged from its decision in Spijkers at 1121, the ECJ has apparently taken a particularly ‘realistic and robust view’ in applying transmission provisions and has made particular note of the protective purpose of this type of legislation.
‘Parties bound’ clauses and ouster
In HSUA Justice Marshall rejected the submission that the making of an employer-specific award could be construed as the Commission having made an order ousting the effect of section 149(1)(d). The reasoning by which his Honour reached this conclusion has application beyond the particular awards in question and is, with respect, persuasive. His Honour said at 58:
It will not often be known with any certainty when an award is made whether an employer bound by it will transmit part of its business to another entity. If the other entity finds the provisions of the award unsuitable to its business, it is open to it to apply to the Commission to have the award varied or set aside in so far as it applies to it. If it was the intention of the Commission in making the 1994 Award it would have been an easy task for it to provide that s 149(1)(d) of the Act did not apply by adding a provision which had that effect. No such clause found its way into the 1994 Award.
On appeal the appellant submitted, in much the same way as EN has done here albeit in respect of different awards, that the ‘parties bound’ clauses constituted orders of the Commission to the effect that the awards would not bind any successor, and that by virtue of these clauses of the awards being orders of the Commission specifically binding the parties named, the operation of section 149 had been displaced. It was also submitted (see North Western at 163-164) that the awards by their very nature were public sector specific, and unlike industry awards the terms of which are easily translated from one employer to the next, the terms of these awards meant they could not apply to the appellant’s employees. Justice R D Nicholson did not accept either leg of this approach. His Honour said at 164-165:
The opening words of s 149(1) require an order having the displacing effect. The order making the Awards did not have that effect. It determined the application of the Award. It did not seek to displace the effect of s 149. In my view the displacement of that section could not be left to an implication from an order having a different objective.
In CFMEU the Full Court dealt with the same argument, viz. that the ‘parties bound’ clause of the relevant award, which referred to the employer bound by name, was an order of the Commission excluding the operation of section 149(1)(d). While the Court “recognised the force of this submission” and noted that “the award came into existence only because of Gordonstone’s [the named employer] conduct”, it rejected the submission that this was an ‘order’ of the Commission. The Court said at 104:
However, it is not apparent that Commissioner Hodder intended the award not to apply to a successor of Gordonstone. To impute that intention to the Commissioner would be to assume he was willing to allow the interests of the former employees, which he sought to protect, to be defeated by a transmission of the business. The reference to Gordonstone in cl4(b) can readily be understood as a reference to the operator for the time being
The Full Court was prepared in principle, it appears, to consider whether the intention of the Commissioner that the award not apply to any successor could be ascertained, where it was not obvious that an applicable award existed. EN raised a similar argument in this case.
There are two responses to this argument. Firstly, contrary to EN’s submissions, such an intention on the part of the Commission is simply not apparent in this case. EN cited passages of transcript from the original award proceedings where the public service is referred to repeatedly. Some of these references amounted to no more than highlighting in bold where the letters “APS” appeared in the transcript. The relevant awards dealt with the APS. It is not surprising that they and the parties to them would have referred to the APS repeatedly. This recurrence does not amount of itself to any intent capable of affecting transmission. Certain arguments of the parties to the Commission might go towards indicating some common intention with regard to who should be bound by the awards at that time, but it does not indicate a common intention that there should be no future transmission of the awards.
In addition, EN referred to the intention of the parties in the same breath as the intention of the Commission. Yet the intention of the Commission is the only relevant intention to consider. Parties cannot remove employees’ future award coverage simply by stating that they did not intend the award to bind any successor. For the purposes of section 149(1), it is the Commission which must make an award to that effect. And nowhere in the materials was it clearly apparent that here the Commission (or, if it matters, the parties) even contemplated the concept of transmission. An ‘order’ cannot be inferred on the facts of this case even if it is a legitimate construction of section 149(1) that an order can be inferred where it does not appear in some clearly overt and identifiable way or place. This leads to the second response.
If CFMEU appeared to leave some space for inferring an intention by the Commission to exclude successor employers from a possible intention of the parties, the later Full Court in North Western did not advert to any such inference as a basis for excluding award coverage from successor employers. Justice Nicholson’s reference to the statutory requirement for an ‘order’ (extracted at [98]) suggests that something more obvious is required than merely the ‘parties bound’ clause. As Justice Marshall noted in the passage in HSUA quoted at [97], it is relatively simple for the Commission, if it deems it appropriate, to insert an order excluding the binding effect of the award should transmission occur. It might even mention section 149(1)(d) expressly.
In my opinion, any ‘order’ ousting the operation of section 149(1) must be apparent from the face of the order and not simply a reference to the parties bound for the time being. In other words, in the absence of a clear exclusion, an order cannot be inferred from an existing clause that already obviously serves the function of naming the parties bound by the award when it is made. Once it is accepted and understood how impractical and illogical it is for ‘parties bound’ clauses to be tailored to meet circumstances of unknown future successors of the business in which the award conditions might be called upon to operate, the conclusion is obvious that an important provision such as section 149(1) would be trivialised if simple reference to the parties bound could be held as constituting an order precluding transmission of awards otherwise applicable. Of course awards will refer only to the specific parties, because they are made with the object of being appropriate to them. If references to the parties bound by an award were taken alone as being an ‘order’ preventing transmission, the transmission provisions would be rendered completely ineffectual and the very object of protection upon transmission that the courts have been careful to stress would be defeated. In other words, to allow exclusionary orders to be constructed almost accidentally from the circumstances would, unless exceptional circumstances exist, undermine the whole concept of protection upon transmission.
The CPSU argued that although section 149(1) speaks of ‘any order’, a formal determination that makes specific reference to the matter that the order seeks to qualify is required. This submission is supported by the fact that the predecessor of section 149(1) was not qualified in any way as it is now. The amendment to the present form was to allow the Commission to exclude a binding on transmission where, previously, awards were binding until set aside. The CPSU argued that the protective object of section 149(1) is best served by construing the power to make such an order expressly, formally and actually referring to what it is doing such as in a precise and formal written form as contemplated by section 143 of the WR Act. It was argued that as an ‘award’ in section 4(1) is defined as including an order affecting an award, the more precise requirements of section 143(1) are relevant.
It is not necessary for the resolution of the present case to rule on all aspects of this contention. All I need say, consistent with HSUA and North Western, is that given the implications for employees otherwise covered by an award, the existence of an ‘order’ excluding its operation should be apparent from the face of the award, and it should not be necessary, and is not appropriate, to coax its existence out of the circumstances, or to imply it from a clause having a completely different purpose. Evidence as to the intention of the Commission may be helpful in interpreting an order if there is relevant ambiguity (cf Acts Interpretation Act 1901 s.15AB in relation to statutes), but in my view it cannot be used to identify whether in fact an order has been made at all where it is not obvious on the face of the existing orders. The concept of an ‘order’ suggests a deliberate and formal determination that makes its own existence and effect clear. The actual terms of the awards in this case do not support the argument that common clause 5.2 is an ‘order’. In addition, there is nothing to indicate that the Commission had transmission in mind when it formulated the ‘parties bound’ clauses in the awards in question. It apparently expected the awards to operate in the usual way. There was certainly no reference to excluding the operation of section 149(1)(d). As in North Western, I am of the opinion that none of the award provisions have had the effect of displacing the operation of section 149(1).
Public Service Act
It remains to consider the argument that, even if not an ‘order’, the parties bound clauses in the awards and the agreement limit their binding effect, even upon transmission, to employment under the PS Act. EN sought to illustrate this argument by asserting that other awards ‘usually bind parties by reference to the industry or type of work’, whereas here the specific Act is mentioned. It was also said that there are so many references to the peculiarities of the APS, and to the PS Act itself, in the awards and in the agreement that they would be unworkable outside of it.
EN argued that the awards have a special character derived from this link to the PS Act, which itself determines the character of the employment covered as being in the APS. It contended that as such they are not capable of or suitable for transfer outside of that particular context. There are a limited range of bodies which can be staffed in accordance with the provisions of the PS Act. It was argued that the awards recognise this situation and accordingly limit their binding effect by reference to that employment alone excluding employers who are not employers under the PS Act.
The Court was taken to the history of the awards which were part of a ‘package’ of awards resulting from a process of major rationalisation of awards applicable to the APS which, it seems, commenced in December 1992. It was argued that in the process the awards were reduced to those specific to the APS, ie APS awards for persons employed under the PS Act, and non-APS awards relating to Commonwealth public sector employees not employed under the PS Act. The conclusion was presumably that the awards in question here would only now apply to relevant Centrelink staff employed under the PS Act.
The argument has superficial appeal: if the awards were not intended to and did not bind the original employer in respect of persons not employed under the PS Act, how can they bind a successor employer in respect of persons who are not and cannot be employed under the PS Act?
EN relied on George Hudson, considered in part earlier, saying that it is clear from that case that awards relate not merely to the actual disputants themselves but to classes of employees, and that it is beyond constitutional limits that an award made in one context can have effect in a totally different context. Here it says that the dispute giving rise to the awards was between a class (‘those employed under the PS Act’) and the Commonwealth. In contrast to HSUA, this dispute thus limited the scope of the awards to that class of persons.
I have already noted that the continued references to the APS in the awards and in the transcript of the award proceedings have an obvious explanation: the awards were for the benefit of public servants engaged in the business of the government parties to the awards. The point of the WR Act providing for successors etc is that once a transmission has occurred, the original name will be ‘replaced’, as it were, by the successor’s name for the purpose of binding it. If this were not the case, there would be a vacuum of protection until a new award was negotiated, a situation that section 149(1)(d) is precisely designed to remedy. The subsection is clearly intended to protect workers whose employer’s business is being transmitted, and to ensure the continuity of awards during that process, provided the employer is succeeding to a business which is substantially identical to the one bound by the original awards. In this case the legislative policy and intent is that workers should continue to be protected.
In my view the references to the PS Act in the awards are not really conclusive of anything relevant to this case. They may conceivably have been inserted simply to identify the parties to the awards and to enable a differentiation between persons within the APS employed under different enabling legislation. If the statutory or contractual basis for workers’ employment changes, the task of the Court is to look at the facts of the ‘business’ and decide whether there was a ‘transmission’. If so, the employees are entitled to the continued operation of the award, unless there is an order of the Commission to the contrary. As I see the position, EN’s focus on the original employees’ link to the PS Act is misplaced – and inconsistent with its earlier exhortation to the Court not to have regard to who the employees were and what they did. For the WR Act focuses on the business transmitted, and what was transmitted here was the business of employment services with respect to the class of employees who provided these services. When the class came to be employed by a new employer, the awards continued to operate and apply to that class even though the workers did not continue to be employed under the PS Act.
To the extent that EN maintained its submission that the settlement of a dispute by an award transmitted to a successor is only appropriate where the successor is engaged in the same industry or ‘same type of work’, and so excluded persons employed otherwise than under the PS Act, it was in my opinion wrong. The ATOF test is not whether the industry or work classification is the same but whether the activities are ‘substantially identical’ with those carried on before. The precondition for this whole controversy is that the statutory or contractual framework within which those activities occur changes with the business transmitting. That is why this argument cannot support EN’s submission. It is precisely why the protection exists.
Public service
The associated argument that the awards are so full of references to the APS and matters peculiar to the APS that they are of themselves or in their terms simply incapable of operating outside the APS is also misconceived. The intention and operation of section 149(1)(d) is that unless excluded or qualified by order of the Commission, awards operate automatically upon transmission of a business. Once the conditions for transmission have been satisfied, that is, once it is shown that as a matter of fact the business or part of it was transmitted, and that the Commission has made no order bearing on or affecting the automatic transmission of the awards, there is no room for any inquiry into the suitability of the award to the new circumstances. Thus if the award is not appropriate to the business of the successor for whatever reason, it may have to be varied but its legal transmission is unaffected. The fact that an award is inconvenient or not ideally suited to the circumstances of the ‘transmittee’ is not relevant. Indeed, the purpose of the transmission provisions of the Act is precisely to guard against an employer deciding of its own accord that the award conditions, which are part and parcel of the business to which it has succeeded, do not suit its wishes or operating conditions. There is adequate provision for the alteration of the content of an award after transmission where the employer has or perceives difficulties in observing its terms. If EN considered that the award was so APS-specific that it was totally unsuitable to its employees or employment environment, it could energise those processes. But as a matter of law the award transmission is unaffected.
A constitutional issue
Oddly enough having regard to the executive and legislative intents to which I have previously referred when no such doubts were thought to emerge, the Minister gave notice that these proceedings might involve a constitutional matter within the meaning of section 78B of the Judiciary Act 1903 (Cth). The concept raised was whether section 149(1)(d) can, in the light of placita (xxxv) and (xxxix) of section 51 of the Constitution, operate to make an award binding on a successor etc to a business or part of a business. The appropriate notices to the various Attorneys General having been given, the Attorney General of New South Wales exercised his right to intervene.
No party disputed the validity of section 149 in any general sense to the extent of arguing that it was not within the powers of the Commonwealth to enact: see George Hudson Ltd at 420-424 per Knox CJ and at 455 per Starke J; North Western at 164. Rather the argument was that consistent with the Constitution, subsection (1) can only operate with reference to the particular dispute giving rise to the award, which cannot then bind a successor in a context that is completely different to the one in which the award was made.
It is unnecessary to determine this matter as, in my view, the issues can be determined and disposed of on the facts and circumstances of the case, and it is desirable that this course be adopted: see for example Attorney General of NSW v Brewery Employees Union of NSW (1908) 6 CLR 469. Awards can transmit if the affected employees are a class covered by the dispute, accepting that this will be ‘an ever-changing body of persons’. The references to the PS Act did not establish or confine the relevant class. Nor did the class of employees delivering employment services change when the identity of the employer changed. New employees who joined that class became entitled to the benefits of the relevant awards, which suggests that employment under the PS Act under which the original class was employed do not preclude the awards applying to persons who could not have been employed under that Act. The problem with the Minister’s argument is that it concedes that the constitutionality issue only arises where the competing contexts in which the award is sought to be applied are different and distinct, which is, as I have found, not this case where they are materially identical. Hence the issues that might form the basis of the projected constitutional challenge do not arise in and on the facts of this case.
However, because it is important to an understanding of the approach to the interpretation of section 149(1), and given the long influence on our law of the decision in George Hudson, the question whether the very wide construction invariably given to this section by the courts is within the ambit of the relevant heads of power should be considered, albeit for present purposes quite briefly. There can be no doubt that an effective system of award transmission is conducive to the peaceful and ordered functioning of the existing system of conciliation and arbitration of industrial disputes. George Hudson is central to this argument. A widely construed and effective system is contemplated. It is manifestly clear that section 149(1)(d) is designed to encourage and maintain industrial harmony and preserve settled rights. The system makes adequate provision for the peaceful adjustment to arrangements arising out of disputes.
The emphasis in George Hudson was on stability and the need to avoid any undermining of the industrial relations system. As is clearly evident from the decisions of the Full Courts in North Western and CFMEU, this policy requires that the approach apply equally to both public and private sector employees. Thus, all other things considered, the section must apply to public sector transfers of business or ‘outsourcing’. No compelling circumstances exist, either on any of the separate issues in this case, or when the matter is looked at as a ‘single, large conception’, for construing these awards so as to allow for their frustration by the transmission of the relevant business to EN. There is no constitutional reason to give section 149(1)(d) such a narrow construction that it has no practical effect on the ‘outsourcing’ of part of the business of government, where it is clear that even the somewhat profound attitudinal and structural changes that occurred in this instance do not remove what is a ‘substantial identity’ between what the relevant employees did then and now do, and where there is no indication that the Commission did not intend the conditions of the awards and agreement to transmit. Rather, in the light of their protective purpose, there are compelling reasons for the Court to give full effect to the operation of the transmission provisions as entirely consistent with the constitutional provisions applicable to their subject matter.
Conclusion
It follows that the awards and the agreement bound EN/ENA when together they became the successors, assignees or transmittees of the business of CES/EAA on 1 May 1998. Orders will be made in the three sets of proceedings accordingly.
I certify that the preceding one hundred and twenty (120) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marcus Einfeld AO. Associate:
Dated: 11 April 2000
Counsel for Employment National Ltd & Employment National (Administration) Pty Ltd: Mr J. L. Trew QC with Mr L. Kaufman
Solicitor for Employment National Ltd & Employment National (Administration) Pty Ltd: Andersen Legal
Counsel for the Minister of State for Workplace Relations & Small Business: Mr P. Kite SC with Mr G. Bennett
Solicitor for the Minister of State for Workplace Relations & Small Business: Australian Government Solicitor
Counsel for the Community & Public Sector Union: Mr K. Bell QC with Ms C. Howell
Solicitor for the Community & Public Sector Union: Mr S. Ramsey
Attorney General for New South Wales intervening: The Hon. J.W. Shaw QC MLC with Mr P. Taylor
Dates of Hearings: 18 and 22 June 1998
14-15 September 1998
23-25 June 1999Written submissions completed: 8 September 1999 Date of Judgment: 11 April 2000
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