KarPay Pty Ltd
[2023] FWCFB 240
•6 DECEMBER 2023
| [2023] FWCFB 240 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional instruments
KarPay Pty Ltd
(AG2023/4021)
KARELLAS INVESTMENTS PTY LTD EMPLOYEE COLLECTIVE AGREEMENT 2007
| DEPUTY PRESIDENT WRIGHT | SYDNEY, 6 DECEMBER 2023 |
Application to extend the default period for Karellas Investments Pty Ltd Employee Collective Agreement. Not reasonable to extend the default period in the circumstances – application dismissed.
KarPay Pty Ltd (KarPay) has applied, pursuant to item 20A(4) of Sch 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (Cth) (Transitional Act), to extend the default period for the Karellas Investments Pty Ltd Employee Collective Agreement 2007 (Agreement). The Agreement was made under Part 8 of the Workplace Relations Act 1996 in April 2007. It was lodged with the Office of Employment Advocate on 1 May 2007 and operated from that date. It is an agreement-based transitional instrument to which item 20A applies.
The application seeks to extend the default period of the Agreements until 1 July 2024.
The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) to provide for the automatic termination of all remaining transitional instruments. Pursuant to items 20A(1) and (2) of Schedule 3 to the Transitional Act, the Agreement will terminate on 6 December 2023 (the end of the default period) unless it is extended by the Commission. The main features of item 20A of Schedule 3 to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd.[1]
Relevantly, when an application is made under subitem (4) of item 20A of Sch 3 to the Transitional Act, the Commission is required to extend the default period under either subitem (6)(a) if satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so, or under subitem 6(b) where it is satisfied that it is reasonable in the circumstances to do so.
KarPay does not contend that any of subitems (7), (8) or (9) apply to the present circumstances. The Applicant has not commenced bargaining towards a replacement agreement, and it is not suggested that the employees will be better off if the agreement continues to apply. Rather, the application is made on the basis that it is reasonable in the circumstances to extend the default period under subitem 6(b).
In Suncoast Scaffold Pty Ltd the Full Bench described the ‘reasonable’ criterion in item 20A(6)(b) of Sch 3 to the Transitional Act in this way:
[17] Subitem (6)(b) of item 20A constitutes an independent pathway to the grant of an extension. The ‘reasonable’ criterion in the subitem should, in our view, be applied in accordance with the ordinary meaning of the word – that is, ‘agreeable to reason or sound judgment’. Reasonableness must be assessed by reference to the ‘circumstances’ of the case, that is, the relevant matters and conditions accompanying the case. Again, a broad evaluative judgment is required to be made.
In Qualipac Farms Unit Trust T/A Qualipacs Farms P/L[2] (Qualipac Farms) the Full Bench considered the purpose of the provisions for the extension of the default period to be relevant to the broad evaluative judgment that is required under subitem 6(b). Reference was made to the following extract from the explanatory memorandum:
Provision would be made for the FWC to (upon application) extend the default period to ensure the automatic sunsetting of zombie agreements does not operate harshly, including by leaving employees worse off.
Full Benches of the Commission have also said a number of times that the purpose of the sunsetting arrangements introduced by the SJBP Act[3] is that zombie agreements are to be replaced by contemporary instruments made under the Fair Work Act 2009 (FW Act).
Background
KarPay owns and operates six IGA branded supermarkets in Sydney and a seventh in the Blue Mountains. At the time the Agreement was made in 2007, the business was owned by Karellas Investments Pty Ltd. The business transferred to KarPay on 30 June 2018. All of the employees were thereafter engaged by KarPay. Pursuant to item 8 of Schedule 11 of the Transitional Act the Agreement became a transferable instrument for the purposes of Part 2-8 of the FW Act and so covered KarPay from the time of the transfer. When the Agreement terminates, unless it is replaced by another agreement, the General Retail Industry Award 2020 (the Award) will apply.
The application is made on the basis that KarPay needs time to put into full operation new payroll software that is capable of properly and efficiently administering the recording and management of employee entitlements under the Award. KarPay explains that the software packages it used to apply the Agreement terms and conditions is outdated and becoming obsolete as they no longer operate efficiently with more modern operating systems, browsers and IT infrastructure used in the business. KarPay explains that around early June 2023 it began investigating possible software programs to replace the existing programs. New software was identified, acquired, and installed by 30 October 2023. KarPay seeks an extension of the default period so that the software can be programmed, data can be transferred, employee details can be entered, cost centres for each supermarket can be configured, administrative staff can be trained to operate the new system, the software can be tested, and errors can be rectified before “going live”.
KarPay provided two witness statements. The first was from Andrew Karellas, one of its directors. The other was from Yolanda Gerges, a director of the software contracting firm that has been engaged to configure and implement the new software. Ms Geres states that her firm was engaged on 8 November 2023. Her firm has experience in configuring payroll software for employers covered by the Award. Ms Gerges states that she understands KarPay intends to implement the new software once it is satisfied that it has been properly installed and employees are fully familiar with its operation. Ms Gerges indicates that this will takes 3 to 4 months. Ms Geres states that the project has been split into two phases. From 6 December 2023 a number of elements will be in place to allow KarPay to use the new software. Ms Geres says that steps taken to permit this to happen, including fast track training of staff to operate the system, has occurred quickly and not been ideal. The second phase will involve refining and testing the software and providing further training. Ms Geres says this process will be completed in early April 2024 allowing for her firms’ shut down period from 22 December 2023 to 15 January 2024.
Mr Karellas says that while Ms Geres’ firm has been working on the new software since 8 November 2023 it is yet to be formally engaged and will not be engaged until the software is up and running and KarPay is satisfied that it does the job. He says the software is currently in the BETA stage and so is not finalised.
KarPay provided details of its workforce. It employs 459 shop assistants and 51 managers. The managerial staff are employed on salaries. The shop assistants are employed under the Agreement. There are 195 casual employees and 263 part time employees. The rest are full time.
The managerial staff are paid salaries that are well above the Award. The shop assistants are paid a flat rate 4% above the Award. This arrangement does not arise because of the operation of the Agreement. The Agreement rates were set at the minimum rates in the Australian Fair Pay and Condition Standard which have long been obsolete. Consequently, the rates of pay in the Agreement are below the Award. In those circumstances item 13, Sch 9 of the Transitional Act operates such that the base rates of pay in the Agreement are deemed to be the same as the Award.
No penalty is paid under the Agreement for work after 6.00 pm Monday to Friday. The Award penalty at that time is 25%. No penalty is paid under the Agreement on Saturday. The Award penalty is 25%. On Sundays the Agreement provides for a penalty of 50% which is the same as the Award. On Public Holidays a lower penalty of 100% is paid compared to the Award penalty of 125%.
Under the Agreement the casual loading is 20% compared to the Award of 25%. The Agreement rates for casuals are all lower than the Award. However, KarPay pays the Award penalty rate for ordinary hours. Even taking this into account, the penalty rates paid to casuals for Monday to Friday after 6.00 pm, Saturdays and Public Holidays are still less than the Award rates.
KarPay’s analysis of its payment arrangements is that for hours worked from Monday – Friday and Sunday employees are better off on the current arrangements. For work performed after 6.00 pm Monday to Friday, on Saturdays and public holidays employees are worse off on those arrangements. This analysis is done on the basis that employees are paid as described above. That is, the rates in the Agreement are not applied, rather employees are paid 4% above the Award and casuals are paid the Award penalty of 25% for ordinary time but penalty rates are below the Award.
KarPay provided the rosters for each employee at each of its stores for the week starting 6 November 2023. Starting times were as early as 6.00 am and finishing times as late as 11.00 pm. Work is performed 7 days per week. KarPay also analysed its current payment arrangements compared to the Award for worked performed in the week commencing 11 June 2023. That analysis concluded that of the 1,334 shifts worked in that week, payments on 711 shifts would have been higher if the Award applied.
The information provided makes it clear that the employees will not be better off if the Agreement continues to apply than if the modern Award applies.
KarPay has not commenced bargaining for a replacement agreement. In its application KarPay stated that upon the ‘sunsetting’ of the Agreement it is considering, from an operational and financial perspective, whether to either:
a. employ all employees to whom the Agreement applies under an enterprise
agreement;
b. employ all such employees under the Award; or
c. depending on classifications, employ some such employees under an enterprise
agreement and others under the Award.
KarPay says that deciding what option to take requires considerable calculations to be made and thought to be applied. It claims that as each supermarket has 10 cost centres (grocery, dairy/freezer, delicatessen, bakery, produce, meat, checkout, instore administration, instore managers, store online) and over 100 individual rosters, the calculations required to cover all scenarios presented by each individual roster are considerable and its decision will be guided by what is best financially and operationally for the business.
Consideration
KarPay seeks an extension until 1 July 2024 on the basis that it is reasonable in the circumstances to do so. As the Full Bench in Suncoast Scaffold Pty Ltd said, reasonableness must be assessed against the relevant matters and conditions in each case. A broad evaluative judgment is required. As the Full Bench in Qualipac Farms said, the purpose of the provisions requiring the extension of the default period are relevant to that judgment. That purpose is to ensure the automatic sunsetting of zombie agreements does not operate harshly including by leaving employees worse off and to have those agreements replaced by contemporary instruments. The Full Bench in ISS Health Services Pty Ltd[4], when considering the appropriateness of extending a zombie agreement where bargaining was occurring, took into account whether the extension was sought merely on the basis of convenience.
Here KarPay seeks an extension on the basis that it would like time to fully implement payroll software to assist it in applying the Award terms and conditions to its employees. It asks for an extension to 1 July 2024, when the evidence suggests that the new software will be fully implemented by early April 2024. Further, the evidence suggests that the software was installed on 8 November 2023 and initial training has commenced in its operation.
The application does not accord with the purpose of item 20A of Sch 3 to the Transitional Act. KarPay makes the application knowing that the extension will result in most employees being worse off than they would be under the relevant modern award. The employees are low paid employees many of whom are currently being paid less than they would be paid under the minimum terms and conditions provided for by the Award. Many of the employees are casual employees. The application is made in circumstances where KarPay is not proposing to do anything more than consider entering into a modern enterprise agreement to replace the zombie agreement.
The application is essentially a request to extend the zombie agreement to meet the administrative convenience of KarPay. The provisions of the SJBP Act providing for the automatic sunsetting of zombie agreements commenced operation in December 2022. The Act did not terminate the agreements immediately. It provided a 12-month grace period up to 6 December 2023. KarPay has had 12 months to make arrangements to replace its payroll software. It gives no explanation as to why it waited 7 months before initiating steps to do so. It appears from the evidence that the software it has chosen was installed in early November 2023 and that some training has occurred. The evidence is that there needs to be further refinements and training so that the software operates to KarPay’s expectations. The evidence does not suggest that the software is not able to be used now, albeit in an imperfect fashion. The evidence does not go to whether there were other software solutions that could be used to assist in applying the terms and conditions in the Award.
KarPay’s administrative convenience argument must be weighed against the impact on employees of the extension. The employees will be worse off if the extension is granted. The employees should not have to continue to endure the substandard conditions contained in the Agreement simply to allow KarPay to implement new payroll software that it should have introduced before the default date in the legislation. An extension in these circumstances would be harsh on employees.
We are not satisfied that it is reasonable to extend the default period for the Agreement.
The application is dismissed.
DEPUTY PRESIDENT
[1] [2023] FWCFB 105 at [3] to [18].
[2] [2023] FWCFB 212 at [14]
[3] See for example Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified Agreement 2004-2007 [2023] FWCFB 137at [32]
[4] [2023] FWCFB 122 at [4].
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