Jolly & Ruchi Investments Pty Ltd as trustee for Jolly & Ruchi Income Trust

[2013] FWC 1158

[2013] FWC 1158

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318—Transfer of instrument

Jolly & Ruchi Investments Pty Ltd as trustee for Jolly & Ruchi Income Trust
(AG2013/4893)

COMMISSIONER CRIBB MELBOURNE, 19 FEBRUARY 2013

Application for an order relating to instruments covering new employer and transferring employees in agreements.

[1] Jolly & Ruchi Investments Pty Ltd as trustee for Jolly & Ruchi Income Trust (the Applicant, new employer) has lodged an application under section 318(1) of the Fair Work Act 2009 (the Act) for orders relating to an instrument covering a new employer (the Applicant) and the transferring employees.

[2] The Applicant submitted that, on 6 March 2013, there will be a transfer of business from ABACAB Pty Ltd (the old employer) to the Applicant (the new employer). Within three months of their termination, 13 employees of the old employer will be employed by the new employer. It was stated that the work that the transferring employees will perform for the Applicant (new employer) is the same or substantially the same as the work that they performed for the old employer. Further, there will be a connection between the old employer and the new employer in that the business assets owned by the old employer, will be transferred to the Applicant (new employer) effective 6 March 2013. In addition, from 6 March 2013, the new employer (the Applicant) will carry on the business previously carried on by the old employer. Accordingly, pursuant to section 311(1) of the Act, there is a transfer of business.

[3] The transferring employees are covered by the ABACAB Pty Ltd Workplace Agreement 1 being a collective agreement under the Workplace Relations Act 1996 and approved by the Office of Employment Advocate. It commenced on 30 June 2006. Section 313(1) of the Act provides that a transferable instrument that covered the old employer and the transferring employees immediately before the termination of the employment will cover the new employer - which is the Applicant. The operation of these sections means that the Applicant would be covered by the ABACAB Pty Ltd Workplace Agreement in relation to the transferring employees - subject to section 318(1) of the Act.

[4] The Applicant (new employer), under section 318(1), has sought an Order that the enterprise agreement that currently covers its existing employees also cover the transferring employees. This enterprise agreement is the IPCA (VIC) Enterprise Agreement 2012. 2

Relevant legislation

[5] Section 313 of the Act provides:

“313 Transferring employees and new employer covered by transferable instrument

(1) If a transferable instrument covered the old employer and a transferring employee immediately before the termination of the transferring employee’s employment with the old employer, then:

(a) the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time (the transfer time) the transferring employee becomes employed by the new employer; and

....

(3) This section has effect subject to any FWA order under subsection 318(1).”

[6] Section 318 of the Act provides:

“318 Orders relating to instruments covering new employer and transferring employees

Orders that FWA may make

(1) FWA 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) FWA 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 FWA must take into account

(3) In deciding whether to make the order, FWA 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.”

Considerations

[7] The Applicant’s representative, at the request of the Commission, filed additional material and submissions in support of the application including a general comparison of the entitlements under the two instruments. The material is considered below in relation to each of the matters in section 318(3).

Section 318 (3)(a)(i): the views of the new employer

[8] The Applicant, as the new employer seeks that the transferable instrument (the ABACAB Pty Ltd Workplace Agreement) not cover or apply to it. Several reasons were advanced for this including disparities arising within the workplace due to some employees being covered by one industrial agreement and receiving different (better) entitlements whilst other employees in the same workplace are covered by a different industrial agreement with lesser entitlements. As well, the administrative challenges of applying two very different sets of terms and conditions of employment within a small workplace, particularly when the Applicant is not familiar with the transferring instrument, were highlighted.

Section 318 (3)(a)(ii): any disadvantage to the employees

[9] The Applicant provided a copy of the employee acknowledgement forms, completed by the transferring employees, which indicated that they wish to be covered by the IPCA (VIC) Enterprise Agreement 2012. In addition, the comparison of the general entitlements of the two agreements indicates that the transferring employees would be better off, in terms of wages and conditions, under the IPCA (VIC) Enterprise Agreement 2012 rather than remaining under the transferring instrument (the ABACAB Pty Ltd Workplace Agreement).

Section 318(3)(c): the nominal expiry date of the transferable instrument

[10] The nominal expiry date of the ABACAB Pty Ltd Workplace Agreement is 30 June 2011. The nominal expiry date of the IPCA (VIC) Enterprise Agreement 2012 is 23 April 2016.

Section 318(3)(d): any negative impact on the employer’s workplace

[11] As set out above, the Applicant identified potential negative impacts on the workplace if the Order was not issued. It was submitted that, having employees in a small workplace on two different agreements which provide for different entitlements may lead to dissatisfaction amongst employees. This was particularly so given that the transferring employees may be required to undertake similar or the same duties side-by-side with the Applicant’s existing (non-transferring) employees, whilst receiving different (lesser) entitlements.

[12] The Applicant also identified certain operational inefficiencies which would arise from having to administer the terms of an additional Agreement in a small workplace.

Section 318 (3) (e): any significant economic disadvantage to the employer

[13] It was submitted by the Applicant that it would suffer economic disadvantage if it was required to administer two different industrial instruments within a small workplace. Further, it was stated that there would be a negative impact on the productivity of the workplace as a result of transferring and non-transferring employees operating under two different sets of employment conditions. This would be likely to cause workplace tension and unrest.

Section 318(3)(f): business synergy between the transferable instrument and the existing Agreement

[14] The Applicant submitted that there was little business synergy between the ABACAB Pty Ltd Workplace Agreement and the IPCA (VIC) Enterprise Agreement 2012 as they provided for different minimum employment conditions.

Section 318(3)(g): the public interest

[15] There is no evidence that the public interest is agitated in this matter.

Conclusion

[16] Taking into account each of the matters set out in section 318(3) of the Act, I am satisfied that the Order sought should be granted.

[17] A separate Order 3 will be issued. The Order will come into operation in accordance with section 318(4) of the Act.

COMMISSIONER

 1   AC300689

 2   AE893423

 3   PR534247

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<Price code C, PR534248>