IQ Vets Pty Ltd T/A Dayboro Vets Surgery
[2024] FWC 2924
•22 OCTOBER 2024
| [2024] FWC 2924 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
IQ Vets Pty Ltd T/A Dayboro Vets Surgery
(AG2024/3144)
| Educational services | |
| COMMISSIONER HUNT | BRISBANE, 22 OCTOBER 2024 |
Application for an order relating to instruments covering new employer and transferring employees
On 16 August 2024, IQ Vets Pty Ltd trading as Dayboro Vets Surgery (the Applicant) made an application to the Fair Work Commission (the Commission) for an order pursuant to s.318(1)(a) of the Fair Work Act 2009 (the Act) that The University of Queensland Enterprise Agreement 2018 - 2021 (the Agreement) will not cover the Applicant and transferring employees from an old employer.
The Applicant is the new employer of a number of employees previously employed by the University of Queensland and covered by the Agreement. The Applicant also seeks an order pursuant to s.318(1)(b) of the Act that the Award will cover transferring employees. The Applicant would otherwise be covered by the Animal Care and Veterinary Services Award 2020 (the Award) if the Agreement did not apply to transferring employees.
Transfer of business
Section 311 of the Act sets out when a transfer of business occurs:
“311 When does a transfer of business occur
Meanings of transfer of business, old employer, new employer and transferring work
(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:
(a) the employment of an employee of the old employer has terminated;
(b) within 3 months after the termination, the employee becomes employed by the new employer;
(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;
(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).
Meaning of transferring employee
(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.
Transfer of assets from old employer to new employer
(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:
(a) the old employer or an associated entity of the old employer; and
(b) the new employer or an associated entity of the new employer;
the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):
(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and
(d) that relate to, or are used in connection with, the transferring work.
Old employer outsources work to new employer
(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.
New employer ceases to outsource work to old employer
(5) There is a connection between the old employer and the new employer if:
(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and
(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.
New employer is associated entity of old employer
(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.”
Transferrable instrument
Section 312 of the Act details instruments that may transfer:
“312 Instruments that may transfer
Meaning of transferable instrument
(1) Each of the following is a transferable instrument:
(a) an enterprise agreement that has been approved by the FWC;
(b) a workplace determination;
(c) a named employer award.
Meaning of named employer award
(2) Each of the following is a named employer award:
(a) modern award (including a modern enterprise award) that is expressed to cover one or more named employers;
(b) a modern enterprise award that is expressed to cover one or more specified classes of employers (other than a modern enterprise award that is expressed to relate to one or more enterprises as described in paragraph 168A(2)(b)).
Note: Paragraph 168A(2)(b) deals with employers that carry on similar business activities under the same franchise.”
There has been a transfer of business pursuant to s.311 of the Act and the employees are transferring employees The Agreement is an enterprise agreement. The Agreement is therefore a transferrable instrument within the meaning of s.312(1)(a) of the Act.
Relevant legislation
The Applicant seeks for the Commission to make an order under s.318 of the Act, which is set out below:
“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.”
Background
For some time, the University of Queensland owned and managed the veterinary student teaching and training facility, “UQ Vets Dayboro” from the premises located at 125 McKenzie Street, Dayboro QLD 4521.
Up until 2021, veterinary nursing students would train in the clinic for a two-week period. The University of Queensland ceased training university students at this clinic from January 2022, however the business remained open and continued to provide services to the public.
On 27 November 2023, IQ Vets Group Pty Ltd acquired the land, together with chattels, including plant and equipment at the veterinary clinic. From 28 November 2023, IQ Vets Pty Ltd (the Applicant) began trading as a private veterinary surgery practice trading as Dayboro Vet Surgery. IQ Vets Group Pty Ltd is a related entity of the Applicant.
From 28 November 2023, the Applicant employed 12 employees formerly employed by the University of Queensland (the Transferring Employees). Those employees are presently covered by the Agreement (the Transferable Instrument).
If the order is made as sought by the Applicant, the result will be that Transferring Employees will be paid lower hourly rates, a lower rate of superannuation of only 11% instead of 17%, less accrual of long service leave, and lowered entitlements to carers, compassionate, cultural, paid parental and primary caregiver, defence forces and special paid leave.
After the filing of the application, I directed the Applicant to serve a copy of the application, the supporting material and the directions on the Transferring Employees, together with three unions covered by the Agreement. The parties were then directed to provide any views in respect of the application by 30 August 2024.
None of the affected employees provided views. The National Tertiary Education Union, Queensland Division advised that it did not wish to provide any views in respect to the application. The United Workers’ Union advised that it did not oppose the application.
The application has been determined on the basis of written material supplied by the Applicant.
The Applicant has standing to make the application under s.318(2)(a) and the proposed order is an order of the kind contemplated by s.318(1)(a). I turn then to consider the matters listed in s.318(3) to determine whether the proposed order should be made.
Submissions and Conclusions on the Statutory Criteria
The submissions of the Applicant in relation to the statutory criteria set out in s.318(3) are set out below. The Applicant submits that the financial viability of the business is unsustainable if it is required to pay the Transferring Employees, and possibly any new employees, in accordance with the terms of the Agreement.
Subsection 318(3)(a)(i) – views of the new employer, or a person who is likely to be the new employer
The Applicant is the new employer and supports the making of the proposed order. The Applicant submitted that the Transferring Employees recognise the high rates of pay and conditions within the Agreement when compared with the Award, and understand that unless the lower terms and conditions within the Award can be paid, the realistic alternative is termination of employment on account of affordability.
The Applicant’s position is that unless the order is made, the veterinary business will be financially unviable. If the order is not made, the Applicant’s position is that it will have to cease trading.
On the Applicant’s calculations, using only rates of pay within the Agreement and superannuation at the rate of 17%, the cost in excess of the Award is approximately $198,000 per annum, and close to $1 million over a five-year period.
The above figure does not take into account generous leave provisions within the Agreement such as:
(a) additional carers leave of 5 days per annum (cl. 50.9);
(b) additional 1 day of compassionate leave (cl. 50.10);
(c) cultural leave of 5 days per annum (cl. 50.16);
(d) paid parental leave of 26 weeks and primary caregiver leave of 14 weeks (cl. 50.17);
(e)increased Long Service leave accrual rate of 1.3 weeks per completed year of service (cl. 50.13);
(f) Defence Forces leave Salary Supplementation 4-5 weeks per financial year. (cl. 50.11); and
(g) special Paid leave (cl. 50.14) (at discretion of university).
Subsection 318(3)(a)(ii) – views of the employees who would be affected by the order
None of the affected employees provided views in respect of the application, despite being invited to do so by the Commission. I am satisfied that the Applicant complied with my direction to invite, in writing, the affected employees to provide views.
Subsection 318(3)(b) – whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment
The Applicant acknowledged that there are a number of differences in the terms and conditions of employment under the Agreement compared with the Award. Evidently, if the difference is approximately $198,000 per annum in wages and superannuation alone, across only 12 employees, employees will be disadvantaged by the making of the order.
Employees will also be disadvantaged by the loss of significantly greater leave entitlements.
Subsection 318(3)(c) – if the order relates to an enterprise agreement—the nominal expiry date of the agreement
The nominal expiry date of the Agreement is 30 June 2021.
Subsection 318(3)(d) – whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace
The Applicant submitted that the administration of the Agreement is more complicated than that of the Award.
Subsection 318(3)(e) – whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer
The Applicant submitted that if the order is not made, it will not be financially viable to keep the veterinary practice operating in its current form.
I note that the transfer occurred some time ago and the effects of the high wages and superannuation would have been known to the Applicant at the time of acquisition of the veterinary practice.
Subsection 318(3)(f) – the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer
There is no other workplace instrument that already covers the Applicant.
Subsection 318(3)(g) – the public interest
The Applicant submitted that a small private business cannot possibly be held to the standards of an employer such as the University of Queensland, a Government-owned tertiary education institution. It submitted that a public interest consideration is the support of small business employers, particularly in regional areas.
Consideration
Deputy President Roberts said the following in the decision of Australian Catholic University Limited t/a Australian Catholic University [2024] FWC 2828:
“[29] Applications of this kind involve an assessment of the desirability of departing from the default position provided for by Part 2-8 of the Act that the instrument follows the employees where there is a transfer of business. The objects of Part 2-8 dictate that there must be a balance struck between the protection of employees’ conditions of employment and the interests employers have in running their enterprises efficiently. Section 318 recognises the need for flexibility in some transfer of business scenarios provided an appropriate balance is achieved…”
The Applicant would have known of the high cost of the application of the Agreement when it was conducting its due diligence when determining whether to acquire the assets. It is surprising it did not make an application at that point, or much earlier than it has.
There is no doubt that if an order is made, employees will be significantly worse off in respect of wages received, superannuation paid into their superannuation accounts, and leave no greater than that contained within the Award or pursuant to the National Employment Standards.
Curiously, however, despite being invited to provide any views in respect of the application, none of the affected employees have taken up that opportunity. I can only reasonably conclude that the affected employees would prefer to continue to be employed in what is a somewhat rural area, providing an extremely valuable service to the community for no less than the Award, as opposed to the veterinary clinic potentially closing down and jobs being lost.
I have been present in s.240 negotiations where a very strong, militant union, on behalf of its members, and in the presence of delegates, agreed to a very significant pay reduction in order to keep an industrial business in operation without loss of jobs. In some circumstances, and with substantial maturity and practicability, it is often the best decision to be made for all concerned.
The section 318(3) considerations weigh up not only the disadvantage to the employees, but also the economic disadvantage to the employer. The public interest submissions of the Applicant could also be weighed against any rush by the Commission to reduce the rates and conditions of existing employees which would squarely fall foul of the public interest.
Section 318(3) considerations do not require the Commission to take into account the views of any unions covered by the Agreement. I do, however, note that the two unions who took up the invitation of the Commission to provide any views do not oppose the application.
While I regret the disadvantage that will be caused to employees by a substantial and immediate reduction in their entitlements, I consider it is appropriate to exercise my discretion to make the order sought on account of the potential closure of the business if the order is not made. I consider it is in the best interests of the community to provide all opportunity for a new business to operate where that business is a rural veterinary clinic, providing important services. I am satisfied that the Applicant cannot sustain the very generous conditions contained in the Agreement in the short to medium term, and that continued employment of the affected employees at no less than the Award rates and conditions is appropriate.
Section 318(4) limits the time by which any order under s.318 can come into operation. As the employees have already become employed by the Applicant, the order accompanying this decision will take effect from the date of the decision consistent with the requirements of s.318(4). The employees will thereafter be covered by the Award.
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