Joshua Grace
[2014] FWCA 2735
•11 JUNE 2014
[2014] FWCA 2735 |
FAIR WORK COMMISSION |
DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 16 - Application to terminate collective agreement-based transitional instrument
Joshua Grace
(AG2013/10665)
Robert Shanahan
(AG2013/10667)
Kaine Price
(AG2013/10668)
Scott Niel
(AG2013/10669)
COVERALL SECURITY EMPLOYEE COLLECTIVE AGREEMENT 2008
Tasmania | |
COMMISSIONER GREGORY | MELBOURNE, 11 JUNE 2014 |
Application for termination of the Coverall Security Employee Collective Agreement 2008 - section 226 of the Fair Work Act - whether not contrary to the public interest to terminate the enterprise agreement - whether appropriate to terminate the enterprise agreement in all the circumstances - Fair Work Commission not satisfied it is appropriate to terminate the enterprise agreement in all the circumstances - application dismissed.
Introduction
[1] Four employees of Coverall Security Pty Ltd (Coverall Security), Mr Joshua Grace, Mr Robert Shanahan, Mr Scott Neil and Mr Kaine Price(the Employees)havefiled separate applications under Item 16, Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the TPCA Act) seekingto terminate the Coverall Security Employee Collective Agreement 2008 (the Agreement). The Agreement is a collective agreement-based transitional instrument which has passed its nominal expiry date.
[2] Item 16, Schedule 3 of the TPCA Act states that Subdivision D of Division 7 of Part 2-4 of the Fair Work Act 2009 (the FW Act) applies to applications to terminate collective agreement-based transitional instruments that have passed their nominal expiry date.
[3] Section 226 of the FW Act states:
“226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”
[4] Ms Audrey Mills from the firm of Dobson Mitchell and Allport was granted leave to appear on behalf of Coverall Security under s.596(2)(a) and (b) of the FW Act. The Applicants were represented by Mr Peter Tullgren of United Voice.
The issues to be determined
[5] The Applicants have made an application under s.225 of the FW Act to terminate the Agreement. The Commission must terminate the Agreement if the conditions in s.226 of the FW Act are met, namely:
i. if the Commission is satisfied that it is not contrary to the public interest to terminate the Agreement; and,
ii. if the Commission considers that it is appropriate to terminate the Agreement taking into account all the circumstances including those set out in s.226(b)(i) and (ii) of the FW Act.
The evidence and submissions
[1] The Applicants submitted that they are engaged as casual employees employed to provide security services by means of night-time patrols at various locations in Hobart. Their terms and conditions of employment are subject to the Agreement. The nominal expiry date of the Agreement was 8 April 2013.
[2] The Applicants submitted the terms in the Agreement would not pass the “better off overall” test in regard to the work they perform when compared with the terms and conditions contained in the Security Services Industry Award 2010 (the Award).
[3] The Applicants also submitted they have a “legitimate interest” 1 in pursuing this application that can only be effectively dealt with by terminating the Agreement, given they are worse off under it than they would be if the terms and conditions of their employment were regulated by the Award.
[4] The Applicants made reference to various decisions of the Commission in support of their submissions. They first referred to Re Tahmoor Coal Pty Ltd 2 (Tahmoor Coal) in which Lawler VP provided a detailed review of the historical context of the Commission’s previous powers to terminate agreements, as well as the provisions contained in the current legislative framework. The Applicants referred, in particular, to the following extract from the decision:3
“It seems to me that under the scheme of the FW Act, generally speaking, it will not be appropriate to terminate an agreement that has passed its nominal expiry date if bargaining for a replacement agreement is ongoing such that there remains a reasonable prospect that bargaining (in conjunction with protected industrial action and or employer response action) will result in a new agreement. This will be so even where the bargaining has become protracted because a party is advancing claims for changes that are particularly unpalatable to the other party. While every case will turn on its own circumstances, the precedence assigned to achieving productivity benefits through bargaining, evident in the objects of the FW Act, suggests that it will generally be inappropriate for FWA to interfere in the bargaining process so as to substantially alter the status quo in relation to the balance of bargaining between the parties so as to deliver to one of the bargaining parties effectively all that it seeks from the bargaining.”
[5] The Applicants also made reference to Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union 4 (Energy Resources), in particular, to the follow extracts:5
“Section 226(b) is a new requirement for termination of agreements enacted in the FW Act. It has not as yet been subject to any Tribunal consideration. In my view the requirement calls for an overall consideration of the context and all of the relevant circumstances involved and the exercise of an overall judgment based on those circumstances.
As with other broad judgements under the Act there will often be competing considerations which will need to be balanced. The specific matters raised in s 226 will need to be given full consideration. Taking into account the views and circumstances of the parties involves far more than the expression of their views in support or opposition to termination. It should involve a consideration of the reasons for their views and the validity of their concerns.”
[6] In dealing with the particular requirements of s.226 the Applicants also made reference to the Full Bench decision in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 6 (Kellogg Brown) and the Full Bench’s conclusions about consideration of the “public interest” as follows:7
“It should be emphasized that the Commission’s consideration of the public interest for the purpose of s 170MH(3) is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.”
[7] The Applicants further submitted: 8
“Whilst the National Employment Standards (NES) will prevail over any inferior provisions in a pre-FW Act agreement (transitional instrument), a transitional instrument will oust the operation of a modern award for as long as the former continues to apply. Thus in this case, in the absence of an order terminating the operation of the existing agreement, bargaining, if it proceeds, will have to proceed not on the basis of the safety net generally mandated by the FW Act, but on terms which are inferior to those set out in the Award, including the rate of pay for casuals – a 20% loading as opposed to the 25% loading under the Award. Such a situation is contrary to the public interest.
The Award has near complete application to the employees of Coverall. There is no uncertainty about future award coverage in the event of termination of the Agreement.
Nouncertainty would result with respect to the Employees’ entitlements.
It issubmitted if the Agreement is terminated, the underpinning award (the Security Services Industry Award) and the National Employment Standards lead to the conclusion that proper industrial standards will be maintained for the employees subject to the Agreement and that there are no other public interest matters that could lead to the conclusion that termination of the Agreement is contrary to the public interest.
It is contrary to the public interest for a group of casual employees to suffer an actual and on-going financial detriment without any justification by Coverall.”
[8] In terms of the considerations in s.226(b)(ii) the Applicants submitted that termination of the Agreement is appropriate because it will enable them to receive the “more beneficial statutory safety net conditions and pay rates which should form the basis for ongoing negotiations”. 9 They also submitted it would provide “greater stability and consistency in any bargaining process”.10
[9] The Applicants rejected the suggestion by the Respondent there is currently a balanced framework in place, given that some 20 employees at Coverall Security disadvantaged at various times when rostered on the night-shift patrols. The Applicants submitted termination of the Agreement would not have an adverse effect on bargaining and negotiation in regard to the establishment of a new agreement. Finally, the Applicants submitted the objects of the Act are not being met because some employees are now engaged on conditions that are inferior to the Award.
[10] Coverall Security opposes the application. It submitted that terminating the Agreement would be inconsistent with the objects of the Act, and would work against the objects of the Act, given that the parties are currently involved in bargaining for a new enterprise agreement.
[11] Coverall Security also submitted the Applicants “...only put forward the views of three employees and this is not sufficient evidence on which the Commission can make a determination”. 11
[12] Coverall Security stated the majority of its employees would be disadvantaged in terms of their pay and conditions if the Agreement were terminated and, in addition, termination of the Agreement would result in further administrative costs to the business if it were required to rearrange and vary its existing pay rates before a new agreement came into effect.
[13] Mr Charles Cottier is the General Manager of and a Director of Coverall Security. He said one of the four Applicants, Mr Kaine Price, is no longer employed by Coverall Security. He also said Mr Joshua Grace is employed on a full-time basis, rather than being a casual employee. He said Coverall Security pays an amount of $0.58 cents per hour above the Award rate to casual employees, and they are not disadvantaged by way of comparison with the Award. However, in cross-examination Mr Cottier acknowledged there was no additional amount paid when casual employees are engaged to work on public holidays, or on night shifts.
[14] Mr Cottier also said that 89% of Coverall Security’s workforce are rostered to work on day shifts between Monday and Friday and are paid above the Award rate when performing this work. He also stated that termination of the Agreement would interfere with the balance of the negotiations for a new enterprise agreement and provided this additional explanation in cross-examination: 12
“Well, what I mean by that there is that I wish to get a new collective agreement through for my employees. If we were forced to go back onto the award, then it would create a lot of ambiguity with regard to my staff. It would create a lot of confusion with regard to my staff. We're currently trying to bargain for a new enterprise agreement in which we've struck a few hurdles along the way, which you're probably well aware of, but it's just going to create some unfair and some unjust grief on behalf of myself and my admin staff, and also our employees. My employees are paramount here.”
[15] In response to a question during cross-examination about how the majority of employees would be disadvantaged under the Award if the Agreement were terminated, Mr Cottier stated:
“The majority of our staff are daytime staff, so if we were to go into the award - if were forced to go back onto the award, the majority of my daytime staff would be disadvantaged because they would be paid a lesser rate underneath the award. There is only going to be a certain number of our staff that would gain by going back onto the award with regard to penalty rates. Now, if I may, I'd like to say that my particular business - all our contractual rates and everything are based on a flat fee and for us to go back onto the - us to be forced to go back onto the award would cause undue pressure and stress on us, because I'd have to pay penalty rates and my business is not geared up with regard to my cost structure and my quoting process with regard to penalty rates.” 13
[16] Mr Cottier also said in response to a question from the Commission that it would be more advantageous for an employee rostered to work on the night shift if they were paid in accordance with the Award rates rather than those currently provided for in the Agreement. He also acknowledged the requirement to pay penalty rates at certain times would be a particular issue for Coverall Security if it were required to pay its employees under the terms of the Award. He said there were only four employees rostered to work on the night shift at any one time, but up to 20 employees rotate through these shifts.
[17] Coverall Security also submitted the decisions in Tahmoor Coal and Energy Resources are relevant to the determination of the matter in terms of what is to be taken into account in considering the “public interest”. It submitted those decisions confirm that it involves something beyond the interests of the immediate parties, and should not be viewed as requiring, for example, a “fairer platform” to be established as the Applicants contended. 14
[18] In terms of whether termination would be appropriate in all the circumstances Coverall Security submitted there is a requirement to consider what would be the impact on all of the employees, and not just the Applicants, and that the majority of employees at Coverall Security would be disadvantaged if the Agreement were terminated. In its submission the views of a small minority should not be determinative. Instead, the interests of the majority should prevail, and the ongoing enterprise agreement negotiations should be allowed to continue without the ground rules being changed midstream.
Consideration
[19] Both parties made reference in their submissions to the decision of Lawler VP in Tahmoor Coal and the detailed review he provided in that decision of the legislation that is relevant to the determination of this matter, both in its historical context and as now contained in the FW Act. Lawler VP also made reference in his decision to the Full Bench decision in Kellogg Brown in terms of it providing guidance on how the “public interest” is to be assessed. It concerned an application to terminate an agreement. He referred particularly to the conclusions in paragraph 23 of the Full Bench’s decision: 15
“The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.”
[20] Lawler VP indicated that the public interest involves something distinct from the interests of the parties, although they may be similarly affected. He also concluded termination of an agreement may be in the public interest, or it might contradict the public interest, or could be neutral in terms of any public interest considerations.
[21] He noted that the present legislation was the first time the power to terminate an agreement had been subject to the additional preconditions in s.226(a) and (b), and both involve a degree of subjective judgement. He concluded: 16
“‘Appropriateness’ is a broad discretionary standard. Reasonable minds may differ, indeed, differ sharply, on what is appropriate in any given set of circumstances. The power to terminate an agreement turns on what is effectively an exercise of a broad discretion.”
[22] In relation to the considerations contained in s.226(b)(ii) he suggested some form of cost/benefit analysis was appropriate in stating: 17
“In relation to the matter specified in s 226(b)(ii), the apparent legislative intent is that both beneficial and detrimental effects on the employees, employer and union of termination as against no termination should be considered and that if the comparison of those effects suggests that one of them is disproportionately worse of when the benefits and detriments are balance, this is factor in favour of a conclusion that termination will be inappropriate. Of course, there is a problem of comparison here because it will often be inherently problematic to compare different species of benefit and detriment.”
[23] He also concluded that the objects of the Act are of particular relevance and a “material factor” in considering whether termination is appropriate. 18 In this context he referred to the objects set out in s.3, but also to the specific objects in s.171 in that part of the Act that also includes s.226. In making reference to those objects he concluded that collective bargaining in good faith is the central way in which the framework established by the Act is intended to be facilitated.19 He also noted the objects in s.171(b) are relevant in terms of their emphasis on good faith bargaining and agreement making. Accordingly, termination of an agreement should only be considered in the context of whether it will “enhance or reduce the prospects of the parties concluding a new agreement through bargaining”.20
[24] Lawler VP also made reference to the decision of Watson VP in Energy Resources and referred, in particular, to paragraphs 24 to 32 from that decision, including the following extract from paragraph 26: 21
“The prevailing legislative provisions have provided for the continuation of agreements after their nominal expiry date subject to an ability to make application to terminate the Agreement. Different tests have applied, some more limited than the current provisions and some less restricted. It is clear that enterprise agreements are intended to apply for a limited period and either be renegotiated, renewed, varied, replaced, terminated or left unaltered depending on negotiations between the parties and the operation of the legislative provisions.”
[25] In that matter Watson VP terminated the agreement in question in circumstances where it was more than 10 years beyond its nominal expiry date, and only had continuing application to three employees who represented less than one percent of the total workforce.
[26] Lawler VP indicated in response to the decision in Energy Resources: 22
“I respectfully agree with his Honour that it is not intended by the legislation that agreements should remain in place indefinitely and that it is unreasonable to lock an expired agreement in place indefinitely. On the other hand, this does not mean that a party to an agreement has a prima facie right to have the agreement terminated merely because the agreement has passed its nominal expiry date.”
[27] Lawler VP concluded: 23
“It seems to me that under the scheme of the FW Act, generally speaking, it will not be appropriate to terminate an agreement that has passed its nominal expiry date if bargaining for a replacement agreement is ongoing such that there remains a reasonable prospect that bargaining (in conjunction with protected industrial action and or employer response action) will result in a new agreement. This will be so even where the bargaining has become protracted because a party is advancing claims for changes that are particularly unpalatable to the other party. While every case will turn on its own circumstances, the precedence assigned to achieving productivity benefits through bargaining, evident in the objects of the FW Act, suggests that it will generally be inappropriate for FWA to interfere in the bargaining process so as to substantially alter the status quo in relation to the balance of bargaining between the parties so as to deliver to one of the bargaining parties effectively all that it seeks from the bargaining.”
[28] In finally determining the matter before him Lawler VP decided not to terminate the agreement noting, in particular, the ongoing bargaining processes taking place. However, he also suggested this should not be taken to mean the agreement should necessarily be left on foot indefinitely, or even for an extended further period.
[29] The Agreement which covers the employees who have made this application is now more than 12 months past its nominal expiry date. It is also not in dispute that the three employee Applicants who continue to be employed by Coverall Security receive a rate of pay under the Agreement when performing work on the night shift that is less than what the Award provides for. It is also understood other employees who also take turns at rotating through the night shift patrols are at a similar disadvantage compared to the Award when engaged on these rosters.
[30] However, the majority of employees at Coverall Security work on the day shift and there is no issue between the parties that when working that shift they are paid an amount that is in excess of what the Award would otherwise provide.
[31] It is also understood that a process of bargaining and negotiation for a new agreement is taking place, although the evidence and submissions indicate those negotiations have not been as active or progressed as far as the submissions by Coverall Security indicated.
[32] The Applicants, in summary, seek to have the Agreement terminated for two main reasons. Firstly, they submit it is not appropriate for an agreement to have provisions in place which provide for entitlements less than those provided for in the underlying award. This concern can be understood, particularly if those employees are not in receipt of other offsetting entitlements under the Agreement. In making this submission the Applicants point to the objects of the FW Act that make reference to there being an appropriate safety net of minimum entitlements in place. The Applicants’ second reason for wanting to have the Agreement terminated is that reverting to coverage by the Award would establish a clear basis for the enterprise agreement negotiations, and would establish the benchmark any new agreement would be assessed against.
[33] Coverall Security submitted in response that any change to the existing arrangements in the workplace would be disruptive and confusing at this point, and would upset the existing balance in the negotiating process for a new enterprise agreement. It also submitted the objects of the Act place principal emphasis on employment arrangements being determined through processes of bargaining and negotiation in individual workplaces. It submitted terminating an existing agreement would be contrary to this intention and potentially work against the process of putting in place a new agreement.
[34] Section 226 of the Act first requires consideration of whether it would be contrary to the public interest to terminate the agreement. The decision in Kellogg Brown indicates this requires attention be directed to the likely foreseeable consequences of that outcome. It also suggests this involves consideration of matters that might affect the public as a whole. These interests presumably include matters such as employment levels, the level of inflation, maintenance of proper industrial standards across the workforce, even levels of business confidence or the viability of a particular industry sector.
[35] I am satisfied, firstly, that it would not be contrary to the public interest to terminate the Agreement. In short, I am satisfied that if the Agreement were terminated the public interest would not be impacted in any way. Coverall Security is a relatively small employer with a limited number of employees. This is not intended in any way as a criticism of the business or its employees. However, there is nothing to suggest the way in which its employment arrangements are structured, or what instrument applies to regulate those arrangements, is going to have any impact on broader considerations such as the industry in which it operates, or the local economy it is a part of. While the outcome of these proceedings might be of some significance to the business and its employees I cannot conceive of any wider public interest considerations that would be similarly impacted.
[36] The Commission is required to consider whether it is appropriate to terminate the Agreement taking into account all the circumstances including those specified in s.226(b)(i) and (ii) of the FW Act. Section 226(b)(i) requires that the views of the employees, the employer, and any employee organisation covered by the Agreement be considered. The views of the Applicants in this matter are clear, as are the views of Coverall Security in response. However, I have not had the benefit of obtaining the views of the overwhelming majority of employees employed by Coverall Security. I draw no conclusions from this about what their views might be. Those employees could have sought to be involved in the proceedings. The fact that they have not done so could be due to inadvertence or deliberate choice. The Applicants indicated in response this was not a matter they had any control or responsibility over and their concerns remained about the particular disadvantage they incur while the Agreement remains in place. Regardless of these considerations the lack of understanding about the views of the overwhelming majority of employees concerning whether the Agreement should be terminated works against a decision to bring to an end an agreement that currently regulates the employment conditions of those employees.
[37] Section 226(b)(ii) requires consideration of the circumstances of the employees, the employer and any relevant organisations, including the likely effect termination will have on each of them. Again, these considerations are difficult to draw firm conclusions about. Lawler VP in Tahmoor Coal suggested they require consideration of the potential beneficial and detrimental effects for each of the agreement being terminated and reversion back to coverage by the award. The evidence clearly indicates award coverage would provide benefit to those employees working on the night shift patrols, as it would entitle them to the night shift penalty rates provided for in the Award. However, the evidence also indicates the majority of employees are employed on day shift and under the Agreement receive an hourly rate of pay higher than that provided for by the Award. It is unclear whether they would remain on these rates if the Agreement were terminated, or whether the employer would seek to revert to payment based on the minimum award rates of pay. There may well be issues to do with the employees’ contractual entitlements which are relevant in this context. Certainly any new employees taken on by the business in these circumstances would only be entitled, as a minimum requirement, to the rates of pay under the Award.
[38] However, it is clear from the Act that I am also required to have regard to all relevant circumstances and not just those referred to in s.226(b)(i) and (ii). The decisions referred to also make clear that the objects of the Act, in particular, are a significant consideration in this regard. This issue was again dealt with by Lawler VP in Tahmoor Coal in the extracts already referred to. He emphasised the importance placed on collective bargaining in good faith as “the central way” in which the framework established by the Act is to be facilitated. He concluded that, as a consequence, it will generally be “inappropriate” for the Commission to interfere in a bargaining process by acting to terminate an existing enterprise agreement, albeit one that has passed its nominal expiry date.
[39] In the present matter the evidence indicates bargaining for a new agreement has commenced, although it is also clear progress is not as well advanced as Coverall Security purported to make out. Presumably there has been further progress since the date of the hearing. However, it is also significant that the FW Act provides for a variety of other mechanisms to progress bargaining and negotiation in circumstances where one party is frustrated by delays in the process and what has been achieved. For example, an application can be made for bargaining orders. An application can also be made for a protected action ballot as a precursor to taking protected industrial action. There are other options available as well, including Commission involvement in facilitating meetings between negotiating parties.
[40] The scheme of the FW Act intends that these mechanisms are to be the principal means of enabling workplace agreements to be established and replaced over time, and should be given priority when one party seeks to enter into and progress negotiations regarding an existing agreement that has passed its nominal expiry date.
[41] As a consequence and with regard to the decision in Tahmoor Coal I am not satisfied in all the circumstances that it is appropriate to terminate the Agreement. The processes of bargaining and negotiation should instead be allowed to continue with the mutual intention of establishing a new agreement. I also note the existing agreement is just over 12 months past its nominal expiry date. While this is a relatively long time it is certainly not uncommon for an agreement to still have coverage and be in existence. It is also a distinctly different situation from that dealt with by Watson VP in Energy Resources when he terminated an Agreement still in existence more than 10 years after its nominal expiry date.
[42] However, consistent with the decision of Lawler VP in Tahmoor Coal this does not mean that the present circumstances cannot be revisited. The Applicants’ concerns about being covered by an agreement that provides inferior conditions to the Award can be understood and, clearly, the objects of the FW Act also make reference to an appropriate safety net of minimum terms and conditions of employment being in place. If it transpires, for example, that in three months’ time there is evidence that the bargaining process is not proceeding in good faith, and other avenues have been exhausted in response to that situation, this might well give cause for a fresh application to terminate the Agreement being made and for the prevailing circumstances to be again reviewed in the context of that application.
[43] However, that is for the future. As indicated, I have had regard to the requirements of s.226 that must govern this application, and all of the circumstances I consider relevant to the determination of this matter. Based on those considerations I am not satisfied it is appropriate at this time to terminate the Agreement. The applications are dismissed.
COMMISSIONER
Appearances:
Mr Peter Tullgren of United Voice appeared for the Applicants.
Ms Audrey Mills of Dobson Mitchell and Allport appeared for the Respondent.
Hearing details:
2014.
Hobart:
17 March.
1 Applicants’ Written Submissions, at para 25.
2 (2010) 204 IR 243; [2010] FWA 6468.
3 Ibid, at para 55.
4 [2010] FWA 2434.
5 Ibid, at paras 15-16.
6 (2005) 139 IR 34; PR955357.
7 Ibid, at para 27.
8 Applicants’ Written Submissions, at paras 34-39.
9 Ibid, at para 40.
10 Ibid.
11 Respondent’s Written Submissions, at para 12.
12 Transcript, at para 55.
13 Transcript, at para 65.
14 Respondent’s Written Submissions, at para 98.
15 Kellogg Brown, above vi, at para 23.
16 Tahmoor Coal, above ii, at para 32.
17 Ibid, at para 45.
18 Ibid, at para 46.
19 Ibid, at para 49.
20 Ibid, at para 50.
21 Energy Resources, above iv, at para 26.
22 Tahmoor Coal, above ii, at para 54.
23 Ibid, at para 55.
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