Kent Projects Pty Ltd
[2022] FWC 3193
•2 DECEMBER 2022
| [2022] FWC 3193 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
Kent Projects Pty Ltd
(AG2022/4468)
| Building, metal and civil construction industries | |
| COMMISSIONER SCHNEIDER | PERTH, 2 DECEMBER 2022 |
Application for orders in relation to a transfer of business under s. 318
Kent Projects Pty Ltd (the Applicant) has applied to the Fair Work Commission (the Commission) under section 318 of the Fair Work Act 2009 (Cth) (the Act) for an Order in relation to a transfer of business.
Background
The transferrable instrument in this matter is the SNCL Agreement 2018 (the SNCL Agreement or the Transferrable Instrument).[1] The application also concerns the KPPL Agreement 2022 (the KPPL Agreement).[2]
Kent Corporate Holdings Limited acquired SNC-Lavalin’s oil and gas division in July 2021. SNC-Lavalin’s oil and gas division included Kentz Pty Ltd and SNC-Lavalin Pty Ltd. In August 2021, Kentz Pty Ltd became the Applicant and SNC-Lavalin Pty Ltd became Kent Energy Solutions Pty Ltd.
In October 2022, the Applicant sought to transfer employees then employed by Kent Energy Solutions Pty Ltd to employment with the Applicant (the Transferring Employees). The Applicant states that the work undertaken by the Transferring Employees at Kent Energy Solutions Pty Ltd was contracted through the Applicant, causing administrative burden. The Applicant submits that the Transferring Employees are employed to perform the same, or substantially the same, work as they did with Kent Energy Solutions Pty Ltd. The Transferring Employees were covered by the SNCL Agreement in their employment with Kent Energy Solutions Pty Ltd.
The Transferring Employees ceased employment with Kent Energy Solutions Pty Ltd on 23 October 2022 and commenced employment with the Applicant the following day.
In accordance with section 313 of the Act, the SNCL Agreement covers the Transferring Employees in their employment with the Applicant.
The Applicant states that its new non-transferring employees are covered by the KPPL Agreement. The Applicant submits that both groups of employees preform the same work.
The Applicant seeks the following orders:
The SNCL Agreement 2018 [2019] FWCA 1806 (AE502385) (SNCL Agreement) does not cover the Applicant and any employees of the Applicant formerly employed by Kent Energy Solutions Pty Ltd;
and
The KPPL Agreement 2022 [2022] FWCA 2657 (AE516923) (KPPL Agreement) will cover the employees of the Applicant formerly employed by Kent Energy Solutions Pty Ltd.
The Applicant has provided an undertaking to accompany the order that confirms it will adopt more favourable terms of the SNCL Agreement for the Transferring Employees.
Legislation
Section 318 of the Act provides:
“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.”
Consideration
Preliminary matters
The Applicant submits that the Transferring Employees ceased employment with the previous employer and commenced employment with the Applicant within three months, as required by the Act. The Applicant has provided the contracts provided to the Transferring Employees in support of this.
The Applicant submits that the Transferring Employees preform the same or substantially the same work as they did in their former employment, the Transferring Employees have all retained the same classification of employment in the transfer.
The Applicant submits that Kent Energy Solution Pty Ltd and the Applicant are associated entities for the purposes of section 50AAA of the Corporations Act 2001 (Cth) and as such satisfy the requisite connection between the old employer and the new employer under the Act.
I am satisfied that the Applicant is entitled to make this application as the new employer; the Transferring Employees will perform the same or substantially the same work for the Applicant; and there is a transfer of business within the meaning of section 311 of the Act.
The effect of the Order sought by the Applicant would be that the Transferring Instrument would not cover the Applicant or any of the Transferring Employees. Section 318 of the Act provides that the Commission has discretion to make the Order and in determining whether to make the order, I must consider each of the matters in section 318(3) of the Act. I will now turn to consider these matters.
The views of the new employer
The Applicant, being the new employer, is clearly supportive of the application. The Applicant believes that granting the order will assist in:
· Improving business efficiency and productivity of the Applicant.
· Enabling the Transferring Employees to be fully integrated into the employee management systems currently operating in the Applicant's business.
· Avoiding the administrative costs involved in managing and ensuring compliance with multiple industrial instruments in relation to the same work.
· Removing any disincentive to the Applicant offering, or continuing, employment of the Transferring Employees.
· Aligning both the employing and contracting entity, simplifying administration and operational management, including project delivery and aligning work health and safety functions and approaches.
· Removing any connection between the Applicant and SNC-Lavalin, due to the fraud and corruption allegations connected to the former entity and associated damage to its brand.
The Applicant has provided a statement of evidence from Mr Nicholas McDougall, HR Manager of the Applicant. Mr McDougall echoes the above reasons and provides further background on the transfer and reasons for the Applicant’s application.
The views the employees who would be affected by the order and whether they would be disadvantaged by the order
The Applicant has submitted the contracts that were provided to the Transferring Employees. The contracts notify the Transferring Employees of both instruments and of the Applicant’s intention to seek this order. The contracts explain the effect of the potential change and highlight that the Applicant has undertaken to grandfather more favourable terms of the Transferring Instrument for the employment of the Transferring Employees.
All the Transferring Employees accepted the contracts. In accepting the contracts, the Transferring Employees were notified that they would therefore support and approve this application for an order.
The Applicant submits that it undertook a consultation process, with the Transferring Employees, during which it explained this very application and the orders sought.
Mr McDougall’s statement supports the above submissions and details the steps taken in the consultation with the Transferring Employees.
The Applicant submits that the Transferring Employees will not be disadvantaged by the orders and has provided the following undertaking to ensure this:
“The Commission notes that the Applicant undertakes to 'grandfather' the following more beneficial terms and conditions of the SNCL Agreement in respect of transferring Kent Energy Solutions Pty Ltd employees who accept employment with the Applicant and become subject to the KPPL Agreement by virtue of this section 318 order, to ensure such employees who are presently entitled to the following more beneficial terms and conditions of the SNCL Agreement will not receive fess pay in any payment period than if they had continued to be renumerated strictly by reference to the SNCL Agreement, until such time as the employment ceases (for whatever reason) or the KPPL Agreement is terminated or replaced, whichever occurs first:
1. Clause 7 - Classifications and Hour Rates of Pay
2. Clause 9 - Additional Payments
3. Clause 24 - Redundancy and Severance (if applicable)
4. Clause 28 - Meal Breaks and Rest Periods
5. Clause 32 - Income Protection"
I am satisfied that the transferring employees would not be disadvantaged if the proposed order is made.
The nominal expiry date of the agreement
The nominal expiry of the SNCL Agreement is 19 March 2023. The expiry date of the KPPL Agreement is in 2026. The Applicant notes that the longer term of the KPPL Agreement would mean the Transferring Employees will benefit from the more favourable terms of the Agreement and the undertaking for a significantly longer period of time than if they remained under the Transferring Instrument.
Whether the transferable instrument would have a negative impact on the productivity of the
new employer’s workplace
The Applicant submits that the order will have a positive impact on its productivity and that the continuation of the current arrangement will have a negative impact on its productivity.
The Applicant notes the administrative burden and payroll issues arising from the application of two separate instruments for a group of employees preforming the same work.
I accept these submissions and that these matters weigh in favour of making the proposed order.
Whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer
The Applicant submits that it would incur significant economic disadvantage as a result of the SNCL Agreement covering it and the Transferring Employees, as the Applicant would be required to implement and maintain an additional payroll and employee management systems. The Applicant once again highlights the desire to distance itself from SNC-Lavalin due to the fraud and corruption issues related to that entity.
I accept that if the proposed order is not made, there is potential for the Applicant to suffer economic disadvantage from the administrative burden and potential damage by association to SNC-Lavalin.
The degree of business synergy between the transferable instrument and any workplace instrument that covers the new employer
The Applicant states that there is a lack of synergy between the two Agreements. The Applicant seeks to synergise the business, including the broader corporate group, to distance itself from the fraud and corruption associated with SNC-Lavalin. The Applicant is therefore seeking to remove association with the SNC-Lavalin brand, including by ceasing to use the SNCL Agreement.
The public interest
The Applicant submits that it is not contrary to the public interest for the Order to be granted.
I am satisfied granting the Order will not be contrary to the public interest and see this consideration as neutral.
Conclusion
In consideration of all the circumstances, and importantly noting the undertaking provided by the Applicant, I am satisfied that the order sought should be made. The Order has been issued concurrently.[3]
COMMISSIONER
Determined on the papers.
[1] [2019] FWCA 1806; [AE502385].
[2] [2022] FWCA 2657; [AE516923].
[3] [PR748562].
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