Kardinia Childcare Inc. t/a Kardinia Childcare & Kindergarten

[2020] FWC 6573

[2020] FWC 6573

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

Kardinia Childcare Inc. t/a Kardinia Childcare & Kindergarten
(AG2020/2130)

DEPUTY PRESIDENT MANSINI MELBOURNE, 17 DECEMBER 2020

Application for an order relating to transfer of an industrial instrument.

[1] This is an application by Kardinia Childcare & Kindergarten (Kardinia) for orders in relation to the transfer of the Golden Plains Council Enterprise Agreement No. 8, 2017 (Council Agreement), in circumstances of a transfer of business, pursuant to s.318 of the Fair Work Act 2009 (Cth) (Act).

[2] The Agreement is an enterprise agreement that applies to the Golden Plains Shire Council (Council) and covers the Australian Municipal, Administrative, Clerical and Services Union (ASU), the Australian Nursing and Midwifery Federation (ANMF) and the Association of Professional Engineers, Scientists and Managers, Australia (APESMA).

[3] The orders sought would have the effect that the Council Agreement would not apply to Kardinia and any transferring employees. The proposed orders would also have the effect that the Children’s Services Award 2010 (Award) would cover and apply to any transferring employees in employment with Kardinia.

[4] The ASU, being an organisation covered by the Council Agreement and entitled to represent the interests of the potentially transferring employees, opposed the application.

[5] For the reasons that follow, I have determined it is appropriate to make the orders sought.

Context

[6] The Council presently operates a long day care service from Bannockburn Children’s Service (BCS) in the Bannockburn Family Services Centre. The Council is located in a regional area of Victoria, situated between Geelong and Ballarat with responsibility for a municipality of 2,705 square kilometres and a population exceeding 20,000. It engages twenty-eight (28) employees to operate the BCS and who are covered by the Council Agreement (the potentially Transferring Employees). Of those, seven are employed casually and the remainder are full time (ten) and part time (eleven).

[7] The Council Agreement, as made, had a nominal expiry date of 1 July 2020, which was recently varied to 1 July 2021. 1 This is the most recent in a series of enterprise agreements negotiated to cover the Council’s local government operations, since 1996. The Council Agreement covers all employees of the Council excluding only the Chief Executive Officer, Senior Officers and employees covered by the Early Education Employees Agreement 2016. Its coverage includes administrative employees, work unit outdoor employees, maternal and child health nurses, child care staff (including those at the BCS, the potentially Transferring Employees) and community development employees. The classifications covered by the Council Agreement are entitled to be represented by the three unions named as covered. Its terms are comprehensive, extending to 198 pages and incorporating the Victorian Local Authorities Award 2001 and the Nurses (ANMF – Victorian Local Government) Award 2015 as attachments.

[8] In late 2019, Council commenced consultation with employees about its proposal to engage an alternative model for the delivery of the BCS services. In January 2020, the Council commenced an expression of interest process for a potential tenant to lease part of the Bannockburn Family Service Centre which included the BCS with the permitted use of a long day childcare service lease. Since April 2020, the Council was in discussions with the potentially Transferring Employees about the proposed transfer of BCS to Kardinia, a childcare service provider that currently operates out of Geelong, Warrnambool and Ballarat. Over this period, the potentially Transferring Employees were provided with a range of information about the proposed change including FAQs, feedback forms and Notices to Staff. On 28 May 2020, the Council conducted a survey of the potentially Transferring Employees on the question of whether they supported this application if made by Kardinia (results detailed below). At the time the application was made, on 22 July 2020, Kardinia was the Council’s preferred provider and commercial negotiations were underway. At the time of the hearing, Kardinia had been successful in obtaining the award of the proposed lease for the provision of the BCS. Kardinia will commence as the new provider from 4 January 2021.

[9] At the time of the hearing, Kardinia had invited ten of the potentially Transferring Employees (being each of those who consented to the Council providing their details to Kardinia) to be interviewed and apply for employment with Kardinia at the BCS and three had made such application. Mr Nathan Boseley, Treasurer of the Committee of Management of Kardinia, gave evidence that Kardinia is invested in the success of the BCS and is “keen” to retain a majority of suitable current BCS employees, if they accept employment, as Kardinia considers this will enable a seamless transition of the childcare services. Mr Boseley also gave evidence of his anticipation that Kardinia will need to supplement any potentially Transferring Employees with its existing workforce. At the hearing, Mr Boseley confirmed that Kardinia is still uncertain as to how many offers of employment will ultimately be made to the potentially Transferring Employees. Kardinia was forthcoming in its submission that the outcome of this application was but one factor which has a bearing on how many offers of employment will be made though no offers had yet been made and this was not proposed to be a condition of any offers of employment. Ms Claire Tehan, People and Culture Manager for the Council, confirmed that the potentially Transferring Employees who choose not to apply, are not offered and/or do not accept employment with Kardinia will be redundant as of 24 December 2020.

Procedural context

[10] In support of this application, Kardinia filed two affidavits of Mr Boseley and submissions. On behalf of the Council, the Commission received an affidavit of Ms Tehan, an affidavit of Ms Lisa Jane Letic (Director Community Services of the Council) and submissions.

[11] The ASU opposed the application. In support of its opposition, the ASU filed a statement of Ms Paula Kearney (current BCS employee and potentially Transferring Employee), an amended statement of Ms Kearney and submissions. The other unions covered by the Council Agreement were afforded the opportunity but did not participate in any of the Commission proceedings following an initial mention and did not express a view.

[12] Ten of the potentially Transferring Employees directly communicated their views to my chambers.

[13] Notwithstanding the parties’ request that the matter be determined on the papers, I considered a hearing was necessary. The hearing was convened on 7 December 2020. Kardinia sought permission to be represented by a lawyer which was not opposed and was granted pursuant to s.596 of the Act. The Council and the ASU represented themselves. The other unions covered by the Agreement did not appear.

[14] At the hearing, two initial jurisdictional objections were confirmed as no longer pressed but the ASU continued to oppose the application. The respective evidence and submissions were accepted and there was no request to cross-examine the witnesses.

Statutory framework

[15] Section 318(1) of the Act provides that the Commission may, on application by a person or organisation identified in s.318(2), 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.”

[16] The power to make orders under s.318 is premised on the Commission being satisfied that there has been, or that there is likely to be, a transfer of business for the purpose of s.311 of the Act. In this context, the word “likely” carries its ordinary meaning in that it is more probable than not, or it is expected to happen. 2

[17] At the time of the hearing it was no longer contentious, and I am satisfied, that there is likely to be a transfer of business from the Council to Kardinia for the following reasons. First, the employment of the twenty-eight employees of the Council will be terminated on 24 December 2020 (s.311(1)(a)). 3 Second, Kardinia will commence running the operation and will require suitably qualified employees within three months, on and from 4 January 2021. Kardinia considers a majority of the twenty-eight potentially Transferring Employees is necessary for a seamless transition, and has made efforts to seek their interest, but just three of whom have applied for employment with Kardinia. I consider on the evidence it is probable and indeed likely that the interested applicants will become employed with Kardinia within three months (s.311(1)(b)). Third, having regard to the information in the application, the work to be performed by the potentially Transferring Employees for Kardinia is the same or substantially the same as the work they performed for the Council (s.311(1)(c)). Finally, there is a “connection” between Kardinia and the Council as described in s.311(4), because the Council (“old employer”) has outsourced the work to Kardinia (“new employer”).

[18] Next, I am required to consider s.318(3) which provides that, in deciding whether to make an order under s.318(1), the Commission must take into account certain matters.

The views of the new employer and affected employees – s.318(3)(a)

[19] The Commission must take into account the views of the new employer and the employees who would be affected by the order.

[20] The view of Kardinia, as the new employer, is that the application should be granted. It contends that granting the application will enable transferring employees to be integrated into Kardinia’s existing business and workforce more effectively, in summary because:

a) This will enable a more streamlined transfer of the child care services from the Council to Kardinia, said to be of great benefit to the children and families who rely on the services;

b) It will avoid burdensome administration and human resources management associated with continuing to apply the Council Agreement to the transferring employees at Kardinia, for example the implementation of separate employee management and payroll systems for transferring employees and Kardinia’s existing employees;

c) The proposed orders give effect to Kardinia’s desire to ensure that its child care employees are covered by a common set of terms and conditions which is contends will reduce the propensity for workplace tension and conflict that might otherwise ensue; and

d) Kardinia is a not-for-profit small business operator with limited resources to fund additional human resources and administrative support that would be required to oversee and manage the Council Agreement and it would be unreasonable to impose on Kardinia an enterprise agreement that was intended to apply to an employer in the Council’s position (with reference to its legacy conditions, negotiated over many years with unions, its substantial size and sophistication).

[21] Kardinia sought to rely on the survey conducted by the Council which established that, of the twenty-eight potentially Transferring Employees, nine opposed the application, five approved of the application and fourteen (that is, eight permanent and six casual employees) did not provide a response.

[22] Ms Kearney gave evidence and a further ten of the potentially Transferring Employees directly addressed the Commission to express their respective views that the application should not be granted (the Opposing Employees). The views of these Opposing Employees are, in summary:

a) Most of the eleven believe it is unfair to expect experienced early education or child care workers to work for Kardinia under lesser conditions and lower income but perform the same duties, in the same building, with the same families as with the Council and also adapt to changes in management, practice, policy and procedure;

b) Most of the eleven are disappointed in the Council’s decision to outsource the work on lesser conditions and held an expectation that Council would honour the terms of the enterprise agreement until its conclusion;

c) Many of the eleven consider the industry is underpaid, the profession is undervalued and the Award is effectively inadequate;

d) Three of the eleven consider it is it not viable to live on the Award conditions; and

e) One considers it an injustice to staff, families and communities to lose staff through the transition.

[23] In addition, of the eleven Opposing Employees:

a) Six informed the Commission that they will not accept an offer of employment with Kardinia and intend to take a redundancy and pursue a new career path or move to another industry altogether; and

b) One acknowledged that, initially, employment of some form seemed preferable to none at all but, on further consideration, formed the view that the Award conditions are not fair and reasonable.

[24] Kardinia submitted that those who did not respond to the survey ought to be taken not to oppose the application. Whereas, of the eleven Opposing Employees, some mentioned a short time in which to respond and one informed the Commission that they did not respond out of concern that this would impact future employment prospects.

[25] Plainly Kardinia supports the orders sought by it pursuant to s.318.

[26] The potentially Transferring Employees are divided in their views. On the evidence before the Commission, five of the potentially Transferring Employees support the application and eleven oppose the orders sought. Of the eleven that communicated their opposition directly to the Commission, more than half have confirmed their personal decisions not to accept a role with Kardinia on any terms. In the circumstances of this case, I do not accept Kardinia’s submission that the absence of a response to the survey, or a direct communication to the Commission pursuant to the invitation to provide views, should be taken to constitute employee support of the orders sought or assists the Commission in terms of assessing the relevant employees’ views.

[27] In circumstances where the new employer supports and the affected employees are divided in their views, I consider this weighs neither in favour or against granting the application and is a neutral factor.

Whether any employee will be disadvantaged by the order in relation to their terms and conditions of employment – s.318(3)(b)

[28] The Commission must consider whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment. Kardinia accepts that the potentially Transferring Employees would be disadvantaged by the granting of the application in some respects but asks the Commission to find that there would be no disadvantage when assessed on an “overall” basis.

[29] Kardinia tabled an analysis of the differences between the Council Agreement and the Award, the accuracy of which was not challenged by the ASU. The Council Agreement contains a number of conditions that are more favourable to employees than the Award including higher hourly rates of pay; more favourable redundancy provisions; personal/carer’s, compassionate, parental and family violence leave; allowances; training and study assistance and union activities. The Award includes some more favourable conditions including casual work on weekends; casual overtime rates; more favourable job search entitlement; higher junior rates of pay. Kardinia declined to provide undertakings to the Commission regarding the economic disadvantages were the Commission to make the orders sought.

[30] Further, Kardinia contended that the Commission’s assessment of disadvantage requires consideration to be given to the benefit each transferring employee would obtain from remaining in employment particularly given the prevailing economic conditions and the regional community in which the BCS operates. Whilst I accept that the task involves an “overall” comparison, this relates to a comparison between the terms and conditions of employment with the old employer as against those that would apply with the new employer. 4 In my view, the availability of employment is not a relevant consideration in this regard.

[31] On the evidence I consider that the potentially Transferring Employees will be disadvantaged in relation to their terms and conditions of employment if the application is granted, as the terms and conditions of the Award are less favourable than that of the Council Agreement. This weighs against granting the orders sought.

The nominal expiry date of the agreement – s.318(3)(c)

[32] If the application under s.318 relates to an enterprise agreement, the Commission must consider the nominal expiry date of the agreement.

[33] At the time this application was made, the Council Agreement had already expired and it was recently and subsequently varied such that it nominally expires on 21 July 2021.

[34] In those unique circumstances, I consider this to be a neutral factor.

Negative impact on productivity – s.318(3)(d)

[35] The Act requires the Commission to consider whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace.

[36] Kardinia submitted that, if the application were not granted, and the Council Agreement were to continue to apply to transferring employees’ employment with Kardinia on an ongoing basis, Kardinia would then need to set up and administer the Council Agreement via separate payroll and human resources systems, at considerable and disproportionate cost and inconvenience. I accept Kardinia’s submission in relation to this matter.

[37] Kardinia’s productivity would be negatively impacted if the application were not granted, because of the administrative, technological and human resources burden it would impose on Kardinia which could affect the productivity of its workplace. Productivity is, in essence, a measure comprised of the quantity of outputs relative to the quantity of inputs. If the order is not granted, additional inputs will be required to bring about essentially the same output, namely parallel payroll and human resources systems to administer differing terms and conditions within one workforce. This weighs in favour of granting the orders.

Whether the new employer will incur significant economic disadvantage – s.318(3)(e)

[38] Kardinia submits that it would incur economic disadvantage if the orders were not granted. It does not contend there would be a significant economic disadvantage in relation to the entire business and I understand it to follow that the contention is significant economic disadvantage, relative to the small number of potentially Transferring Employees and the BCS lease.

[39] I consider this factor to weigh only slightly in favour of granting the application in this case.

The degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer. – s.318(3)(f)

[40] The Commission is required to consider the degree of business synergy between the transferrable instrument and any workplace instrument that already covers the new employer.

[41] Kardinia contends that there is little if any business synergy between the Council Agreement and the Award which covers its existing workforce. Kardinia therefore submits that its business synergy would be significantly, and unnecessarily, impacted by the imposition of the Council Agreement, which was made in a local government context and is so broad in its scope and application that a large number of terms are not specifically relevant to the work of the transferring employees.

[42] The ASU contends that the problems the size of the Council Agreement will cause have been overstated by Kardinia. Though the Council Agreement is indeed large and has a wide scope, only the parts that apply to the transferring employees in their capacity as childcare workers need to be adopted by Kardinia. The ASU submits the impact on “business synergy” is not significant.

[43] I consider that there is limited business synergy between the two instruments and that this consideration weighs in favour of the proposed orders being made.

Public interest – s.318(3)(g)

[44] Section 318(3)(g) requires the Commission to consider “the public interest”. It does not specify whether this consideration is concerned with the question of whether the application is in the public interest, or instead not contrary to the public interest.

[45] Kardinia sought to rely on the matters set out above in support of the criteria at s.318, in addition to the “maintenance of employment” for the potentially Transferring Employees which it contended would be supported by the orders if made and would be in the public interest.

[46] The ASU rejected Kardinia’s contentions, contended that the Council’s need for the outsourcing was due to two sources of local competition and therefore families in the local area would not be without childcare. It also pointed to clause 6.4 of the Council Agreement as relevant to the public interest. That clause provides that the Council will not enter into any contracts where the wages to be paid by the transferee are no less favourable other than by order of the Commission. Whilst I make no finding as to whether the Council has complied with it, it is apparent that the parties to the Council Agreement have expressly contemplated an application of this nature which the Act permits in any event. I do not regard this of itself as a relevant consideration in this regard.

[47] In my view, the present application is compatible with the public interest. However, I do not consider that the public interest carries any weight in this matter and that it is therefore a neutral consideration.

Conclusion

[48] Taking into account all of the statutory considerations in s.318(3), I have decided to grant the application. Whilst the balance is relatively fine, Kardinia has presented a persuasive rationale for the granting of the orders. For the above reasons, the competing views of the employer and the divided views of the employees weigh neutrally. There would be an adverse productivity impact if the orders were not made. There is limited business synergy between the two instruments. The economic disadvantage to Kardinia weighs slightly in favour of, and the disadvantage to employees in terms of their terms and conditions of employment weighs against, the making of the orders. In all the circumstances I consider that it is appropriate to make the orders sought.

[49] An order giving effect to this decision will be issued separately in PR725565.

DEPUTY PRESIDENT

Appearances:

Mr G Twomey for the Applicant.
Ms D Predic of the Australian Municipal, Administrative, Clerical and Services Union.
Ms C Tehan of Golden Plains Shite Council.

Hearing details:

2020.
Melbourne (by video).
7 December.

Printed by authority of the Commonwealth Government Printer

<PR725214>

 1   [2020] FWCA 5323 (Masson DP, 6 October 2020).

 2   TWU v Viva Energy[2019] FWCFB 6212 per the majority, at [27].

 3   That is, subject to any potentially Transferring Employee securing redeployment within the Council, which was not submitted as a possibility at the time of the hearing and of which there is no evidence before the Commission.

 4   Australian Laboratory Services Pty Ltd [2015] FWC 7916.