G8 Education Limited
[2018] FWC 5976
•4 october 2018
| [2018] FWC 5976 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
G8 Education Limited
(C2018/673)
| COMMISSIONER BOOTH | BRISBANE, 4 october 2018 |
Variation of redundancy pay for other employment.
G8 Education Limited (G8) applied under s.120 of the Fair Work Act 2009 (the Act) for a determination reducing its liability to pay redundancy to 125 of its former employees following the sale of 17 childcare centres to Paisley Park. The application sought an order that the Commission reduce the liability to 100% of any severance pay and payments owing to affected employees. United Voice represented 42 of these employees and indicated its capacity and willingness to represent the affected group.[1]
G8 is a listed company. Its 2017 Annual Report shows it owned and operated more than 500 centres and employed almost 10,000 employees.[2]
Paisley Park is a private early education provider, founded and managed by Mr Peter Raue (Managing Director) and Ms Katarzyna Wieczorek-Ghisso (General Manager). Its website indicates it operates centres in Queensland, New South Wales, Victoria and South Australia.
G8 was granted permission to appear through its legal representative, Mr Michael Cole, Minter Ellison Solicitors. United Voice was represented by Mr Stephen Bull.
G8’s application was made on the basis that it met the requirements of s.120(1)(b)(i): it obtained other acceptable employment for its former employees. United Voice submits that the application has no merit and the employees affected should be paid redundancy.
The Application
Of the 17 centres sold, one was not affected by this application because none of the former employees were affected. The remaining 16 centres employed 274 employees. Of those, 77 were not otherwise employed and were paid redundancy payments, and 14 were redeployed within G8. Those former and continuing employees are not affected by this application. The remaining 183 accepted offers of employment from Paisley Park. Of those, 58 were not entitled to redundancy because they were casual employees or had not met continuing service requirements. The application therefore affects the redundancy entitlements of 125 former employees of G8 who transferred to Paisley Park’s employment (the affected employees).
It was common ground that the affected employees were entitled under s.119 to redundancy payments because of their termination by G8, a contractual prerequisite of the sale to Paisley Park. It seems accepted by both G8 and United Voice that the amount concerned was in the order of $830,000.[3]
The evidence revealed that the initial offer of sale from G8 would have obliged Paisley Park to employ all employees at each centre sold. Paisley Park indicated that such a requirement was not feasible.
The Applicant’s evidence
Evidence was given for G8 by Ms Kernahan, who is G8’s Employee Relations Manager, and at the time of the sale was Senior Workplace Relations Advisor, and Mr Roberts who at that time of the sale was either the Chief Executive Officer or the General Manager of Business Development but who no longer works for G8. Mr Raue and Ms Wieczorek-Ghisso also gave evidence for G8.
Ms Kernahan was not intimately involved in the sale negotiations. Her statement was limited to matters about the application and the records of the affected employees. She informed the Fair Work Commission (the Commission) that her supervisor and previous Manager of Human Resources (now General Manager), Ms Battersby, had been managing the transfer of employees to Paisley Park and confirmed she remained in G8’s employment and would have been available to give evidence if required.[4] Ms Battersby has signed the letters to the affected staff advising of the proposed sale and the transition process.[5] Ms Kernahan was the only current G8 employee who gave evidence.[6] She told the Commission that the centres were sold as going concerns and that the operation was continuous. She confirmed that there are legislative requirements about staff including ratios, directing the number and mix of staff necessary for continued operation over the sale period.
Mr Roberts deposed that the original bargaining position of G8 was that all employees be offered ongoing employment. The objective, he said, were for both compliance with statutory obligations and for continuity of service. The 100% employment clause was, he said, a ‘deal breaker’ for Paisley Park, detailed in an email from G8’s broker that also reported that Mr Raue of Paisley Park told the broker “he will need the majority of the staff”.[7]
G8 modified its position to the clause above, including that G8 would offer some employees redeployment opportunities and that those not redeployed or engaged by Paisley Park would be offered redundancy. Mr Roberts’ evidence was that while Paisley Park was not required to take G8 employees, a majority of them would be offered employment, based on his otherwise undocumented discussions with Mr Raue.[8] He had directed G8 employees to ‘encourage and procure’ Paisley Park to make offers to employees.[9] In his written evidence it was expressed as a direction to G8 employees “to use all available means, and take all possible steps; to encourage and procure Paisley Park to make offers of employment to as many of the employees as would be possible.”[10]
Mr Raue from Paisley Park provided a comprehensive statement which included the history of negotiations from the perspective of the purchaser. Such a perspective may be relevant in deciding whether an employer obtained employment for an employee.[11]
· early 2016 Paisley Park began negotiations with G8 to purchase multiple childcare and education centres throughout Australia;
· at the time of the negotiations G8 submits it employed about 250 employees;
· G8’s initial bargaining position in relation to these employees was to include a term that all employees would be offered employment on terms no less favourable than under which the employee was employed at G8 and a recognition of prior service with G8;
· Paisley Park took a view that the centres were overstaffed;
· the statement deposed that it was important to G8 that as many offers of employment be made by Paisley Park to employees so that:-
a. legal requirements around carer/child ratios would continue to be satisfied; and
b. a smooth transition for parents and children at the centres could be
achieved.[12]
· a draft agreement included a term reflecting G8’s initial bargaining position;
· he considered this term to be a deal breaker and Paisley Park considered the centres to be overstaffed;
· email correspondence between a Mr Doug Lilly (the broker used by G8) at the time resolved the issue in the following terms:-
… there was one aspect of the deal that from his side was deal breaking and would force him to walk away and that is the requirement that he takes on all of the staff. He said that obviously he will need the majority of the staff but he said he is not going to agree under any circumstances to taking on 100% of them.[13]
· he and Ms Wieczorek-Ghisso visited the centres for the purposes of “conducting an inspection of the centres and meeting the employees” (emphasis added) he submits:
oif Paisley Park had not been permitted by G8 to meet with the staff the negotiations would not have progressed with the centre acquisitions.
othat G8 and its representatives assisted by facilitating centre visits.
omany of the centre visits occurred without employee knowledge.
Ms Wieczorek-Ghisso’s evidence was that Paisley Park had a different operating model from G8’s. It considered it could run the centres effectively and more commercially with fewer employees than G8 employed at the centres. Originally 20 centres under consideration. Only 17 were finally purchased.
After lengthy negotiation it was agreed that Paisley Park would not be required to employ all G8 employees. The offer of employment clause in the sale agreements, one for each centre, provided as follows:[14]
At least three weeks before the expected Completion Date, but not before satisfaction or waiver of the condition in clause 2.1(c)[15], the Purchaser may, in its absolute discretion, make an offer of employment to each of the Employees. The offer must be:
(a) in a form which offers to each Employee terms and conditions of employment that are similar to those under which that Employee is employed by the Vendor on the Completion Date;
(b) conditional on Completion occurring; and
(c) expressed to take effect on the Completion Date. (Emphasis added)
The sale agreements also provided for:
· termination of employment of transferring employees from G8’s employment on the completion date;
· payments to Paisley Park of entitlements of transferring employees;
· recognition by Paisley Park of prior service;
· assumption by Paisley Park of leave entitlements of transferring employees;
· assumption by G8 of liability for entitlements of non-transferring employees;
· indemnities of both parties about employee entitlements;
· transfer of employee records; and
· superannuation entitlements.
Ms Wieczorek-Ghisso’s evidence was that, despite the absolute discretion in Paisley Park, a majority of the employees would be offered employment with Paisley Park on similar terms and conditions of employment. Her evidence was that the ‘vast bulk’ of transferring employees below Director were offered casual employment subject to a 3 month probation period, subject to a geographical restraint of trade, in some cases honouring accrued sick leave.[16]
She affirmed that there was no obligation between G8 and Paisley Park, a ‘trusted partner’, to take employees.[17]
Respondent’s and United Voice’s Evidence
Evidence for United Voice was provided by Ms Coulahan, a Lead Organiser in the early childhood education team of United Voice in the South Australian Branch. In addition, sworn statements were provided by Ms Hosking, Ms Punton, and Ms Taylor who were individual respondents and were former employees of G8, and who obtained employment with Paisley Park.
Former G8 employees, Ms Whittle and Ms Shepherd emailed the Commission. Their emails were admitted into evidence but they were not required for cross-examination.
The evidence of Ms Coulahan, who was not required for cross-examination, was that:
· United Voice Organisers had been contacted requesting assistance from members concerning redundancy payments;
· all members had been placed on a casual contract pending final sale of the centres;
· during the finalisation of the sale, United Voice members were notified by G8’s Human Resources Management both verbally and in writing that they would not be eligible for redundancy payments;
· 12 members requested termination payments including redundancy on the basis that the employment Paisley Park offered was not on similar terms and conditions;
· G8 responded maintaining no redundancy amounts were owed to members. A copy of the letter to the South Australian Branch Secretary, and signed by Ms Jane Dunstan Acting Human Resources Manager for G8 stated as follows:-
“We contend that G8 obtained acceptable employment for the employees. It is not disputed that the employees accepted that employment when it was offered to them.
Accordingly, we maintain that no redundancy amounts are owed by G8 Education to the former employees. Whilst we do not consider it necessary to do so, G8 Education will make an application under section 120 of the Fair Work Act to finalise this matter should the union continue to press for redundancy entitlements for the former employees.”
Ms Hosking, a Child Care Educational Leader worked for G8 since 2009. She deposes that she had an interview with Ms Wieczorek-Ghisso from Paisley Park and submits that “it was very clear what was taking place was a job interview by Paisley Park which were selecting staff that it wanted to maintain after the sale had gone through.”
She deposed that “the interview process with Paisley Park was competitive and many did not get jobs after the sale with the incoming owner.” She was informed by G8 she would be made redundant and that her employment would end. Subsequently she has since been offered a casual job at Paisley Park.
Ms Punton, who is an Early Childhood Educator, was employed by G8 as a permanent part-time employee. Her experience in terms of meeting with Ms Wieczorek-Ghisso was similar to that of Ms Hosking’s. She describes the interview as follows; enquiries were made from Ms Wieczorek-Ghisso about her intentions for the future; Ms Wieczorek-Ghisso asked her what the Centre Director was like. Ms Punton observed Ms Wieczorek-Ghisso taking notes of her responses to these questions.
Ms Punton was offered employment as a casual and required to serve a 3 month probationary period.
Ms Taylor who was on annual leave in January 2017 and did not attend an interview with Ms Wieczorek-Ghisso. She deposes that she was made aware by her colleagues that Paisley Park had been provided with her personal details by G8 and that Paisley Park had been notified of staff wishing to gain employment and remain at the service after the changeover.
Ms Taylor worked for G8 in a permanent position working 37.5 hours per week and is now employed by Paisley Park in casual position with reduced hours. She indicated she was dissatisfied with the change to casual and significantly reduced hours.
Legislation
Section 120 allows an employer to make application to the Commission to reduce redundancy payable. It provides as follows.
120 Variation of redundancy pay for other employment or incapacity to pay
(1) This section applies if:
(a)an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(b)the employer:
(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.
(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.
(3)The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.
The entitlement in s.119 arises (in this case) because G8 terminated employment of staff at its initiative to facilitate the sale of the 16 centres (and therefore it no longer required those employees to do the job). The amount of redundancy is calculated based on an employee’s continuous service stated in s.119(2).
G8’s application was made on the basis that it met the requirements of s.120(1)(b)(i): it obtained other acceptable employment for its former employees.[18]
Analysis
Did G8 obtain other acceptable employment?
The application can only succeed if G8 demonstrates that it obtained other acceptable employment for the 125 affected employees (the other 149 employees having either already paid redundancies or otherwise not affected by this application).
There was considerable discussion at the hearing and in written submissions about the nature of the requirement in s.120(1)(a)(i) including whether the obtaining is severable from the acceptability of the other employment, and what constitutes obtaining.
For reasons discussed below, it is unnecessary to consider the acceptability of employment because I have concluded G8 did not ‘obtain’ employment for the purposes of the section.
Meaning of ‘obtain’
A history of redundancy provisions and relevant appellate court cases are usefully summarised by Mortimer J in Milardovic v Vemco Services Pty Ltd (Administrators Appointed)[19] and need not be set out here.
Referring to a Full Bench decision in Re Clothing Trades Award 1982(1)[20], the Full Court of the Federal Court said in FBIS International Protective Services (Aust) Pty Ltd v Maritime Union of Australia:
[20]With respect to the Full Bench’s reliance on the Shorter Oxford, the present might be one of those rare occasions on which it is useful to refer to the corresponding full entry in the Oxford English Dictionary itself. Relevantly, that reads:
To come into the possession or enjoyment of (something) by one’s own effort, or by request; to procure or gain, as the result of purpose and effort; hence, generally, to acquire, get.
We would not regard the references to “effort”, and to “purpose and effort” in this meaning as implying the existence of some kind, much less a strong kind, of “moving force” in bringing about the new state of possession referred to. They imply, rather, that the possession must be the result of the conscious, intended, acts of the person concerned, as distinct from, for example, coming into possession of something by gift or inheritance. Moreover, we cannot perceive any reason why what is described as the “general” connotation of the word – “to acquire, get” – should not be regarded as a perfect fit for the purposes sought to be achieved by the relevant provision in the standard award clause before this provision became the subject of legislation.[21]
The effect has been recognised by a Full Bench of this Commission, noting:
The employer “obtains” other acceptable employment when it acquires or gets the employment by its conscious, intended acts.[22]
In Australian Commercial Catering Pty Ltd v Fair Work Commission[23] the Full Court of the Federal Court noted (in considering the timeliness of the offer of other employment):
“… s 120(1)(b)(i) is not concerned with the reasonableness of the employer’s conduct. It is concerned with the acceptability of the employment” at [56].
The Court also clearly indicated at [63] that the employment to be considered for the question of its acceptability is the employment obtained by the employer for the employee, not employment otherwise obtained.
G8 argued that it obtained employment by facilitating Paisley Park’s access to meet employees, by informing Paisley Park of its views on individual employees and their suitability for ongoing employment, and by instructing its employees to be frank in their discussions with the purchaser.
The evidence of this was provided by a former Manager, Mr Roberts, and the two witnesses for the purchaser.
The contrary position, put by United Voice, was that what was said to be obtaining was in fact an aspiration.[24] It says the evidence shows that Paisley Park was engaged in a process of selecting employees. This was, it says, a competitive process, albeit one that was “unsophisticated and cheap”,[25] and not fair or dignified.
Of note is that G8’s evidence was very limited. Mr Cole admitted that there was no further evidence given the passage of time and poor recollection by relevant employees. The Commission must therefore assess whether G8 has discharged its evidentiary burden based on the material before it, in the knowledge that no other evidence might be given or at least that no other witnesses, such as Ms Battersby were called.[26]
Ms Kernahan did assist the Commission on matters reflecting the historical staff record but was unable to assist with detail about the negotiations and transition process: it was Ms Battersby who had discharged the relevant role at the time and not Ms Kernahan.
It is clear from the evidence that Paisley Park explicitly was not obliged by contract to offer employment on existing conditions to all staff. On the contrary, Paisley Park reserved to itself an absolute discretion as to who it offered employment to and who it did not. G8 assisted Paisley Park by way of access to the centres, the employees and instructions to facilitate offers of employment, but offers of employment were made by Paisley Park independently of G8 who were ultimately told who was offered employment by way of a highlighted spreadsheet.
The evidence of Mr Raue and Ms Wieczorek-Ghisso was that it required fewer staff than currently employed and it selected from among those based on assessment of suitability.
As to when there is a selection process between employees, FBIS cites with approval in Allman v Teletech[27] where it was held: that where employees compete for positions tends to a conclusion of encouragement and facilitation rather than doing everything to ensure a result that brings about employment for the employee.
His Honour Justice Marshall stated:
“Counsel for Teletech submitted that his client brought the employee applicants and Telstra together and that Teletech’s conduct was one of the factors that brought about the employment. So much cannot be denied that that does not mean that Teletech was able to arrange the employment. Teletech facilitated its staff applying for jobs with Telstra in circumstances where they competed on their merits with existing Telstra employees and fellow Teletech employees for the available positions The encouragement and facilitation of a process is not the same as doing everything possible to ensure a result. Arranging alternative employment means bringing about that employment should the employee choose to accept it.”[28] (emphasis added).
In this matter a selection process was between fellow employees. Sometimes there were interviews but sometimes (as in the case of Ms Taylor) no interview occurred. But in each case an assessment was made. The basis of the assessment was made based on personal visits to the centres, meeting some of the staff and on hearing reports of performance, interest and suitability both personally and from other employees. That was consistent with evidence from former G8 employees for United Voice.
It follows necessarily that it was not the conscious effort of G8, even if it was its (subjective) purpose, that each employee would, but for its efforts ‘obtain’ other employment. On the contrary, and on the evidence, G8’s efforts were directed more to hope than effort, to a business objective rather than action designed to obtain employment.
This is reinforced by the evidence for G8: both vendor and purchaser were, naturally, concerned about business success – the transfer from G8 to Paisley Park on the one hand and the viability of each centre (including appropriate size and suitability of staff complement) on the other.
The employment offer process was completely out of G8’s hands – Paisley Park had absolute discretion – and G8, no matter its encouragement, facilitation, openness or recommendation, was unable to ‘obtain’ employment for employees. It was an observer, awaiting Paisley Park’s decisions based on a process of competitive selection. G8 may have been an active observer; it was not an ‘obtainer’.
For these reasons, G8 has not shown on the evidence that it obtained employment for the affected employees, whether ‘other acceptable employment’ or otherwise.
As the applicant has not obtained employment for the affected employees, the application to the Commission to vary redundancy pay owing to affected employees is dismissed.
Timing of this application
The application made by G8 was made over 12 months from the sale of G8’s 16 centres to Paisley Park. By way of explaining the time taken to file this application, G8’s Mr Roberts indicated that that the company acted on original advice which “may have been inappropriate.”[29]
In these circumstances, an employer is required to make an application under s.120 (2). However, s.120 provides no time limit to lodge the application. In this matter, G8 lodged its application a significantly long time after potential redundancy was payable.
An amendment to the legislation to provide a time limit for filing an application would ensure that that any disputes over the payment or otherwise of redundancies were dealt with in a timely manner.
COMMISSIONER
Appearances:
Mr Michael Cole from Minter Ellison, for G8 Education Limited.
Mr Stephen Bull for United Voice.
Hearing details:
2018.
Brisbane:
August 28, 29.
<PR700779>
[1] United Voice is a federally registered employee organisation wih relevant coverage in the childcare area.
[2] Transcript dated 28 August 2018 at PN343.
[4] Transcript dated 28 August 2018 at PN96 and following; PN146; PN272.
[5] Statement of Mr Roberts at paragraph 24, Annexure JR-2.
[6] Transcript date 28 August 2018 at PN160; PN235.
[7] Statement of Mr Roberts at paragraph 15, Annexure JR-1.
[8] Statement of Mr Roberts at paragraph 18; Transcript dated 28 August 2018 at PN396 and following.
[9] Transcript dated 28 August 2018 at PN401-PN402.
[10] Statement of Mr Roberts at paragraph 17.
[11] Colola Pty Ltd as Trustee for the Brigss Family Trust t/aGarden City Mechanical and Service Centre v Williams[2016] FWC 290 at [25].
[12] Statement of Peter Raue at paragraph 12.
[13] Annexure PR-1 to Statement of Peter Raue.
[14] Example from clause 11.2 of the Business Sale Agreement.
[15] About the ‘due diligence period’.
[16] Transcript dated 28 August 2018 at PN1019 and following.
[17] Transcript dated 28 August 2018 at PN1076.
[18] s.120(1)(b)(ii) was not in issue.
[19] [2016] FCA 19
[20] J4414; (1990) 140 IR 123
[21] [2015] FCAFC 90
[22] Australian Commercial Catering Pty Ltd v Powell & Togia[2016] FWCFB 5467 at [37].
[23] [2015] FCAFC 189 at [51]
[24] United Voice’s Outline of Submissions 21 August 2018 at paragraph 35.
[25] United Voice’s Outline of Submissions 21 August 2018 at paragraph 44.
[26] As to which United Voice invited an inference that such other witnesses had nothing to add.
[27] 178 IR 415
[28] 178 IR 415 at paragraph 18.
[29] Transcript dated 28 August 2018 at PN644.
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