Estia Investments Pty Ltd T/A Estia Health
[2023] FWC 859
•11 APRIL 2023
| [2023] FWC 859 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
Estia Investments Pty Ltd T/A Estia Health
(AG2023/456)
| DEPUTY PRESIDENT MASSON | MELBOURNE, 11 APRIL 2023 |
Application for orders relating to instruments covering new employer and transferring employees.
An application has been made pursuant to s 318 of the Fair Work Act 2009 (the Act) by Estia Investments Pty Ltd T/A Estia Health (Estia Health) seeking an order from the Fair Work Commission (the Commission) that the SITKA HR PTY LTD, ANMF and HSU Enterprise Agreement 2022 (the Sitka Agreement)[1] not cover Estia Health and employees whose employment transfers from Sitka HR Pty Ltd (Sitka) to Estia Health (Transferring Employees) and instead that any such employees be covered by the Estia Health Victoria Enterprise Agreement 2021 (the Estia Health Agreement)[2].
Directions were issued by the Commission on the 7 March 2023 allowing for submissions and materials to be filed in relation to the application by: Estia Health, any Transferring Employees, the Australian Nursing and Midwifery Federation (ANMF) and the Health Services Union (HSU).
In accordance with the directions issued, Estia Health filed its material including an affidavit of Nicholas Gold who is the Head of Industrial Relations and Employee Relations at Estia Health. No submissions or materials were received from any of the Transferring Employees. The ANMF advised on 30 March 2023 that its concerns regarding continuity of employment of Transferring Employees had been addressed and that it did not object to the application by Estia Health
Background and evidence
Mr Gold provided the following relevant information in his affidavit[3].
Estia Health owns and operates approximately 72 aged care homes across Australia which accommodates over 8,000 residents and employs approximately 8,000 staff. Estia Health and its employees in Victoria are covered by the Estia Health Agreement which commenced operation on 28 April 2022 and has a nominal expiry date of 30 November 2024. The ANMF and HSU are covered by the Estia Health Agreement pursuant to s 201(2) of the Act.
On 20 February 2023 Estia Health entered into contingent arrangements (the Transaction);
(a)with LTP Ballarat Property Pty Ltd (ACN 169 210 048) (LTP) to purchase the land and buildings comprising a 120-bed aged care facility located at 112-114 Whitehorse Road, Mount Clear, Victoria 3350 (Facility Site), being the site at which OC Health Pty Ltd (ACN 052 047 579) (OC Health) conducts business; and
(b)with OC Health to purchase 100% of the issued share capital in OC Health Ballarat (ACN 169 209 732) (OC Health Ballarat) as approved provider of the residential aged care services provided at and from the Facility Site (Facility Business).[4]
Relevantly, OC Health holds 100% of the shares in OC Health Ballarat in its capacity of trustee of the Drysdale Aged Care Trust and OC Health Group Holdings currently holds 100% of shares in LTP, the owner of the Facility Site. OC Health currently conducts the Facility Business. Sitka employs and supplies to OC Health Ballarat all staff who work in the Facility Business and who are presently covered by the Sitka Agreement which has a nominal expiry date of 31 May 2025[5].
Elaine O’Connor is the sole director and secretary with control over the operations, resources or affairs of the relevant group of companies including OC Health, OC Health Ballarat, OC Health Group, LTP and Sitka which are associated entities[6].
Estia Health has made a total of 148 offers of employment to Sitka employees, which represents all employees currently working at the Facility Site covered by the Sitka Agreement. The offers of employment, which have been accepted by 100 Sitka employees, are not conditional on the outcome of the present application[7].
Under the terms of the above-referred offers of employment, employment of those Sitka employees that accept employment offers, will commence immediately following completion of the Transaction which under the terms of the agreement relating to the sale of shares in OC Health Ballarat (Share Sale Agreement) will occur on the later of;
(a)1 May 2023;
(b)the first day of the calendar month following Orders from the Commission allowing the transfer of employees of the Facility Business on to the Estia Health Agreement (or if the Commission declines to make the Orders sought, on a date to be agreed between the parties); and
(c)the first day of the calendar month following satisfaction or waiver of all conditions precedent under the Share Sale Agreement.[8]
Mr Gold in his witness statement provided a detailed comparison of the terms and conditions that would apply to the Transferring Employees under the Estia Health Agreement versus the Sitka Agreement[9]. The comparison revealed that while there were a range of benefits that were comparable between the two agreements, the Estia Health Agreement also included a range of terms and conditions that were more beneficial than the Sitka Agreement. According to Mr Gold, the analysis revealed that all wage rates and most allowances in the Estia Health Agreement were superior to those in the Sitka Agreement. Further, an analysis of the clauses in the respective agreements identified that 18 of the clauses were the same or substantially the same, there was no material difference between a further 27 clauses and 20 clauses in the Estia Health Agreement were superior. Only six clauses in the Sitka Agreement were identified as being superior to the Estia Health Agreement.
The following entitlements under the Estia Health Agreement were identified as more beneficial.
(i)base wage rates and various allowances;
(ii)leading hand allowances for non-nursing staff;
(iii)meal allowance entitlements when working overtime;
(iv)on-call allowance for nursing staff when required during meal breaks;
(v)medication allowance for staff assisting registered nurses with medication administration;
(vi)minimum engagement period of four hours for part-time staff;
(vii)higher penalty rates for work on a weekend and public holiday;
(viii)an extra hour for afternoon penalty rates;
(ix)meal break to be provided after five hours rather than 5.5 hours;
(x)10 days’ leave for ceremonial purposes for Aboriginal and Torres Strait Islander staff; and
(xi)A reconciliation mechanism to ensure staff received greater than Award remuneration.
The Sitka Agreement entitlements identified as more beneficial when compared to the Estia Health Agreement include;
(i)pay point level progression of enrolled and registered nurses on their anniversary date;
(ii)payment of outstanding wages within 24 hours of termination;
(iii)payment for an employee’s police check by the employer where required whereas the Estia Health Agreement provides for payment after 5 years’ service;
(iv)greater notice period for registered nurses who have less than 3 years’ service;
(v)more generous higher duties provision; and
(vi)higher overtime penalties for overtime worked by registered nurses after the first two hours of overtime worked on a weekday, weekends or public holidays.[10]
In relation to the overtime penalty issue identified above at [13](vi), Estia Health has undertaken to maintain that higher overtime penalty entitlement in respect of full-time and part-time registered nurses who were employed by Sitka to work at the Facility Site and who transfer to Estia Health[11].
Mr Gold highlighted the matters currently before the Commission in AM2020/99, AM2021/36 and AM2021/65 being the applications to vary modern awards to increase the minimum wage rates of aged care sector employees. He states that the 21 February 2023 decision of the Commission to increase rates of pay by 15% for direct care workers in aged care, will on implementation on 20 June 2023 have the effect of aligning the rates of pay between the Estia Health Agreement and the Sitka Agreement for affected classifications. He notes that the majority of the Estia Health Agreement rates will be unaffected[12].
Mr Gold also states that the higher wage rates in the Estia Health Agreement would, if Estia Health continued to pay Transferring Employees in accordance with the lower rates of pay in the Sitka Agreement, be likely to negatively impact the morale of Transferring Employees, would potentially undermine Estia Health’s culture and lead to dissatisfaction and disharmony within the workforce. That is because Transferring Employees would be likely to perceive they were being treated less favourably than other Estia Health employees. Achievement of an integrated workforce is also important to Estia Health as it is consistent with its ‘family code’ organisational values[13].
It was also stated by Mr Gold that Estia Health’s payroll team does not currently have the capacity to implement the Sitka Agreement pay and conditions in its payroll system. To overcome that issue, Estia Health would incur initial and ongoing costs to manage the differences, which would include hiring an additional staff member to run the payroll for employees working at the Facility Site[14].
Mr Gold also stated that while the Estia Health Agreement and Sitka Agreement have alignment in the types of employees they cover and their classifications, there is not a “complete synergy” between the two agreements. In fact, there are a number of provisions which differ including wage rates, allowances and other terms and conditions. He further states that business synergy would be achieved by having all Estia Health’s employees in each state on the same or substantially the same terms and conditions, as is stated to be the case for all Estia Health’s current employees across Australia[15].
Statutory Provisions
Section 318 of the Act sets out the circumstances in which an order may be made by the Commission in respect of a new employer and Transferring Employees:
318 Orders relating to instruments covering new employer and transferring employees
“Orders that the FWC may make
(1) The FWC may make the following orders:
(a) an order that a transferable instrument that would, or would be likely to, cover the new employer and a transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee;
(b)an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.
Who may apply for an order
(2) The FWC may make the order only on application by any of the following:
(a) the new employer or a person who is likely to be the new employer;
(b) a transferring employee, or an employee who is likely to be a transferring employee;
(c) if the application relates to an enterprise agreement—an employee organisation that is, or is likely to be, covered by the agreement;
(d) if the application relates to a named employer award—an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (b).
Matters that the FWC must take into account
(3)In deciding whether to make the order, the FWC must take into account the following:
(a) the views of:
(i) the new employer or a person who is likely to be the new employer; and
(ii) the employees who would be affected by the order;
(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;
(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement;
(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;
(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;
(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;
(g) the public interest.
Restriction on when order may come into operation
(4) The order must not come into operation in relation to a particular transferring employee before the later of the following:
(a) the time when the transferring employee becomes employed by the new employer;
(b) the day on which the order is made.”
Consideration
Before turning to consider the order sought by Estia Health it is necessary to establish that the Sitka Agreement is a transferrable instrument and would cover Estia Health and the Transferring Employees, subject to any order of the Commission.
Transferable Instrument
I am satisfied that the Sitka Agreement is a transferrable instrument pursuant to s 312(1)(a) of the Act. I am further satisfied that.
(i)the employment of the Transferring Employees with Sitka will terminate on the execution of the Transaction (s. 311(1)(a));
(ii)within 3 months of termination of employment, the Transferring Employees will be employed by Estia Health (s. 311(1)(b));
(iii)the work of the Transferring Employees to be performed for Estia Health is substantially the same or similar to the work performed by the Transferring Employees for Sitka (s. 311(1)(c)); and
(iv)there is a connection between Estia Health and Sitka within the meaning of s 311(3) of the Act.
As a consequence of the above I am satisfied that the Sitka Agreement will cover Estia Health and Transferring Employees, subject to any order the Commission may make. It is also the case that Estia Health, the new employer, has made the application, thus satisfying the requirements of s. 318(2) of the Act.
Having been satisfied as to the necessary jurisdictional requirements of ss. 311 and 312 being present, I will now turn to each of the matters that I am required to consider under s. 318(3).
The views of the new employer and Transferring Employees
Estia Health seeks that the Sitka Agreement does not operate in its business in respect of Transferring Employees and that the Estia Health Agreement covers the Transferring Employees. No Transferring Employees provided their views in relation to the application while the ANMF advised that it did not oppose the application. These factors weigh in favour of the granting of the order sought by Estia Health.
Whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment
Having reviewed the comparison of key terms and conditions in the Estia Health Agreement versus the Sitka Agreement, I am satisfied in the circumstances that Transferring Employees will not be disadvantaged by the order sought in relation to their terms and conditions of employment. In fact, they will be entitled to terms and conditions of employment under the Estia Health Agreement that are on balance more favourable than the terms and conditions of employment under the Sitka Agreement. In forming this view, I have taken into account the undertaking provided by Estia Health in relation to overtime penalty rates which I have referred to above at [14]. The absence of any demonstrable disadvantage weighs in favour of the granting of the order sought.
If the order relates to an enterprise agreement—the nominal expiry date of the agreement
The nominal expiry date of the Sitka Agreement is 31 May 2025, whereas the nominal expiry date of the Estia Health Agreement which would cover the Transferring Employees, is 30 November 2024. If the order sought were granted than Transferring Employees will be covered by the Estia Health Agreement and will be able to participate in bargaining for a replacement agreement on the Estia Health Agreement reaching its nominal expiry date. This factor does not weigh against the application for the order sought. It is therefore a neutral consideration.
Whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace
The transferable instrument would, on Mr Gold’s evidence, require Estia Health to maintain terms and conditions of employment in respect of Transferring Employees performing similar duties and functions to the balance of Estia Health workforce who are employed under the terms of the Estia Health Agreement. This according to Mr Gold is likely to manifest negatively in terms of the morale of Transferring Employees as they would be receiving inferior rates and conditions compared to other Estia Health employees in Victoria.
I am satisfied that not making the s.318 order holds the potential to create workforce disharmony, damage the morale of Transferring Employees and negatively impact the workplace culture that Estia Health has sought to establish and maintain. This weighs in favour of granting the order sought.
Whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer
Estia Health submits that it would, if the s.318 order is not granted in the terms sought, suffer some economic disadvantage and specifically payroll administrative difficulties arising from the requirement to maintain and comply with the Sitka Agreement for a relatively small number of employees compared to the balance of their workforce employed under the Estia Health Agreement. I agree. This weighs in favour of granting the order sought.
The degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer
The Estia Health Agreement already covers Estia Health and its employees in Victoria engaged in similar roles to those withing the scope of the Sitka Agreement. The terms of the Estia Health Agreement are on balance more favourable than the Sitka Agreement. The differences between the two agreements would in my view be problematic if both agreements applied to the same class of employees. To that extent, I am satisfied there is a lack of synergy between the transferable instrument and the Estia Health Agreement which covers Estia Health and its employees. This weighs in favour of the order sought by Estia Health.
The public interest
I am satisfied that it is not contrary to the public interest to grant the order sought by Estia Health. This weighs in favour of granting the order sought.
Conclusion
Having considered the application and supporting material and taking into account each of the requirements in s. 318(3) of the Act, I am satisfied that the order sought should be granted.
An Order (PR760986) will be separately issued with this Decision and will take effect on 11 April 2023.
DEPUTY PRESIDENT
[1] AE519049
[2] AE515760
[3] Witness Statement of Nicholas Gold, dated 24 March 2023
[4] Ibid at [5]
[5] Ibid at [6]
[6] Ibid at [8]-[9]
[7] Ibid at [10]-[14]
[8] Ibid at [15]
[9] Ibid, Annexure NG-20 – Wage rates and allowances comparison, Annexure NG-21 –Agreement clause comparison
[10] Witness Statement of Nicholas Gold, dated 24 March 2023 at [31]
[11] Ibid at [31](vi)(B)
[12] Ibid at [32]-[34]
[13] Ibid at [37]-[38]
[14] Ibid at [39]-[41]
[15] Ibid [42]-[43]
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