Kinetic (Melbourne) Pty Ltd

Case •

[2023] FWC 2480

•

27 SEPTEMBER 2023
[2023] FWC 2480

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

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

Kinetic (Melbourne) Pty Ltd

(AG2023/3324)

COMMISSIONER WILSON

MELBOURNE, 27 SEPTEMBER 2023

Application for orders relating to transferrable instruments

  1. Kinetic (Melbourne) Pty Ltd (Kinetic Melbourne) has made an application under s.318 of the Fair Work Act 2009(Cth) (the Act) for an order in relation to transferrable instruments for transferring employees and Kinetic (Melbourne Urban) Pty Ltd (Kinetic Urban) has made an application under s.319 of the Act for an order relating to instruments covering non-transferring employees. These are two related applications dealing with the same circumstances. The circumstances are set out below.

  1. This decision concerns the s.318 application.

  1. Kinetic Melbourne and Kinetic Urban are associated entities within the meaning of s.50AAA of the Corporations Act 2001 (Cth). Both entities are subsidiaries within the Kinetic Group. The Kinetic Group is a global mass transit service operator. It provides public transport, airport, school and charter bus services.[1]

  1. Kinetic Melbourne will be the initial employer of the Transferring Moreland Employees. Kinetic Melbourne has made an application under s.318 of the Act for orders to prevent the MorelandBus Enterprise Agreement 2023[2] from covering it. Kinetic Melbourne is also seeking orders from the Fair Work Commission (the Commission) that the Transferring Moreland Employees will be covered by the Kinetic Melbourne Bus Driver Enterprise Agreement 2022–2025[3] on the commencement of their employment with Kinetic Melbourne. This enterprise agreement currently covers Kinetic Melbourne.

  1. After completion of the sale of business agreement, the Transferring Moreland Employees employment with Kinetic Melbourne will transfer to Kinetic Urban. By virtue of s.313 of the Act, the Kinetic Melbourne Bus Driver Enterprise Agreement 2022–2025 will transfer with the Transferring Moreland Employees to Kinetic Urban if the s.318 orders are made by the Commission. Kinetic Urban has also applied for any new non-transferring employees to also be covered by the Kinetic Melbourne Bus Driver Enterprise Agreement 2022–2025.

BACKGROUND

  1. On 9 August 2023, Kinetic (Melbourne Urban) Pty Ltd entered into a sale of business agreement (Sale Agreement) with Moreland Bus Lines Proprietary Limited (Moreland Bus Lines). The application arises in the context of Kinetic Urban’s purchase from Moreland Bus Lines of certain business assets of Moreland Bus Lines including (but not limited to) buses, key service contracts (including those between Moreland Bus Lines and Public Transport Victoria), confidential information which relates to the Moreland Bus Lines business and other tangible and intangible assets owned or used by Moreland Bus Lines.[4] These assets are collectively referred to as the “Transaction”.

  1. The completion date of the Transaction is expected to be Monday, 2 October 2023.[5]

  1. The Sale Agreement requires Kinetic Urban to make offers of employment to 15 employees engaged as bus drivers who are currently employed by Moreland Bus Lines (Transferring Moreland Employees). These employees are engaged as bus drivers based at the Moreland Bus Lines Brunswick depot to operate services under a contract between Moreland Bus Lines and Public Transport Victoria (PTV). This contract will be acquired by Kinetic Urban as a part of the Transaction.[6] Kinetic Urban has made employment offers to all of the Transferring Moreland Employees. The offers of employment have been made jointly with Kinetic Melbourne.

  1. The Transferring Moreland Employees are currently covered by the MorelandBus Enterprise Agreement 2023. Once the Transaction is completed, the Transferring Moreland Employees will continue to operate their existing bus route pursuant to the PTV Contract which will be purchased by Kinetic Melbourne as part of the Transaction however they will operate out of the Kinetic Group depot in North Fitzroy as the Sale Agreement does not include the Moreland Bus Lines Brunswick depot.[7]

  1. Due to the ownership of the Kinetic Group, the Transaction requires approval under the Foreign Acquisition and Takeovers Act 1975 (Cth).[8] The Treasurer issued a “no objection” notification (FIRB Approval) on 5 July 2023 in relation to:

·Kinetic Melbourne’s acquisition of Moreland Bus Line’s assets – 15 Transferring Moreland Employees; and

·Kinetic Urban’s acquisition of the Metropolitan Bus Services contract (and any ancillary agreement) (PTV Contract) and 10 buses from Moreland Bus Lines.[9]

  1. The FIRB Approval authorises Kinetic Urban, rather than Kinetic Melbourne, to purchase the PTV Contract:[10]

“To ensure compliance with the FIRB Approval, it is necessary for the Transferring Moreland Employees to initially commence employment with Kinetic Melbourne. However, due to the contractual arrangements with PTV, it is necessary for the Transferring Moreland Employees to ultimately be employed by Kinetic Urban when performing work under the PTV Contract, as this is the entity that operates the contract with the State of Victoria.”[11]

  1. The Transferring Moreland Employees must therefore firstly be employed by Kinetic Melbourne and then will subsequently be employed by Kinetic Urban.

  1. Kinetic Urban considers that these arrangements will constitute a transfer of business for the purposes of Part 2-8 of the Act, and that in the absence of an order of the Commission to the contrary, the MorelandBus Enterprise Agreement 2023 will cover Transferring Moreland Employees of Moreland Bus Lines in their employment with Kinetic Urban. Kinetic Urban seeks an order from the Commission that the MorelandBus Enterprise Agreement 2023 not cover Kinetic Urban and the Transferring Moreland Employees and that instead such employees be covered by the enterprise agreement that applies to Kinetic Melbourne’s current bus driver employees that provide public bus services, the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025.

  1. 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 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.”

  1. The Commission may make orders under s.318 if there is, or is likely to be, a transfer of business from an ‘old employer’ to a ‘new employer’ for the purposes of s.311 of the Act. Having considered the information in the application and the Witness Statement of Mr Dennis Waluga, I am satisfied that there is likely to be a transfer of business from Moreland Bus Lines to firstly Kinetic Melbourne and secondly to Kinetic Urban and that the applicant is a person who is likely to be the new employer.

  1. The employment of relevant employees of Moreland Bus Lines will terminate and they will become employees of firstly Kinetic Melbourne and secondly Kinetic Urban (ss.311(1)(a) and (b)), the work to be performed by the Transferring Moreland Employees for Kinetic Melbourne will be the same or substantially the same as the work they have performed for Moreland Bus Lines (s.311(1(c)), and there will be a ‘connection’ between the old employer (Moreland Bus Lines) and the new employer (Kinetic Melbourne and Kinetic Urban) as described in s.311(3), because in accordance with an arrangement between the parties, Kinetic Urban will own some or all of the assets that Moreland Bus Lines owned or had the beneficial use of and that relate to or are used in connection with the transferring work (s 311(1)(d)).

  1. One effect of the order proposed by Kinetic Melbourne would be for the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 to cover the Transferring Moreland Employees when employed by Kinetic Melbourne. The application now before me submits that there will be a further transfer of employment for those employees from Kinetic Melbourne to Kinetic Urban, which will occur one hour after completion of the sale of business agreement and “the Kinetic EA will transfer with them to Kinetic Urban if the section 318 orders are made by the Fair Work Commission by virtue of section 313 of the FW Act”.[12]

CONSIDERATION

  1. It is necessary to consider s.318(3), which states that, in deciding whether to make an order under s.318(1), the Commission must take into account certain matters that are set out in ss.318(3)(a) to (g) which I now do.

The views of the new employer – s.318(3)(a)(i)

  1. Kinetic Melbourne’s view is that the application should be granted. It submits that it does not wish to have the MorelandBus Enterprise Agreement 2023 apply to the Transferring Moreland Employees, who will be employed to perform the same work as its other employees (with the only difference being the routes that they operate services on are pursuant to the PTV Contract).[13]

  1. The company submitted that it wants to apply standardised conditions of employment to existing and transferring employees in order to ensure consistency, to avoid employee dissatisfaction from inconsistent conditions of employment between existing and transferring employees, to promote a single and harmonious workplace culture, and avoid unnecessary administrative costs and challenges. In particular, it wants to avoid disparities in working conditions which might cause unfairness to transferring employees who undertake the same work as other Kinetic Melbourne employees, and to avoid the burden of administering two sets of conditions for the same work. I find these factors weigh in favour of granting the application.

The views of the employees who would be affected by the order - s 318(3)(a)(ii)

  1. The employees who will be affected by the orders will be the Transferring Moreland Employees and any new non-transferring employees. There are currently no new employees employed by Kinetic Melbourne or Kinetic Urban.

  1. Mr Waluga in his Witness Statement says that he was involved in consultation and discussion with the Transferring Moreland Employees about the impact of the Transaction on their employment.

  1. It is his evidence that Kinetic Melbourne conducted three meetings with the Transferring Moreland Employees to discuss the Transaction and the proposed offers of employment. The third meeting also involved an Organiser from the Transport Workers Union (TWU) and at the meeting employees were provided information about the applications under ss.318 and 319. On 23 August 2023, Kinetic’s Workplace Relations Manager notified Mr Imran Malik of the TWU of Kinetic Urban’s intention to lodge an application to the Commission alongside Kinetic Melbourne, to ensure that the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 applied to all new employees and Transferring Moreland Employees. 

  1. On 13 September 2023, Kinetic sent a consultation pack for the Transferring Moreland Employees to the TWU enclosing documents relating to the proposed transfer of employment. The following day, Kinetic sent a consultation pack and copies of the offers to the Transferring Moreland Employees. Kinetic Melbourne invited the Transferring Moreland Employees to provide feedback or raise any issues associated with the proposed transfer of their employment and the s.318 application with the Commission.[14]

  1. On 19 September 2023, Kinetic sent a copy of the s.318 application in draft form to the TWU. The following day a draft copy of Mr Waluga’s Witness Statement was also provided.

  1. The Transport Workers Union (TWU) has been given an opportunity to provide submissions and has in response to the invitation advised the Commission that “the TWU do not have any objections” to the application.[15]

  1. Based on the material before me, it is my view the Transferring Moreland Employees have been afforded a reasonable opportunity to express their views about the applications. None have expressed any concern about the application. I infer that those employees who are members of the TWU support the application.

Whether any employees would be disadvantaged by the order - s 318(3)(b)

  1. Section 318(3)(b) requires the Commission to consider whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment. Mr Waluga in his Witness Statement said the Transferring Moreland Employees will not be disadvantaged by the orders sought and that if the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 applies to the Transferring Moreland Employees they will be entitled to higher rates of pay than those currently paid by Moreland Bus Lines under the MorelandBus Enterprise Agreement 2023.[16]

  1. Each of the Transferring Moreland Employees are classified as Grade 5 Regular Service Drivers and employed on a full-time basis. Kinetic submitted a document comparing wages under the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 and the Passenger Vehicle Transportation Award 2020 (the Award) demonstrating the Transferring Moreland Employees are better off under the Agreement than under the Award. The Applicant also compared rates of pay between the MorelandBus Enterprise Agreement 2023and the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 which also established no disadvantage would occur if the proposed order is granted.

  1. I consider that employees will not be disadvantaged by the proposed orders in relation to their terms and conditions of employment. The consideration in s.318(3)(b) weighs in favour of granting the application.

The nominal expiry date of enterprise agreements - s 318(3)(c)

  1. The nominal expiry dates of the MorelandBus Enterprise Agreement 2023 and the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 are both 30 June 2025. This is a neutral consideration.

Whether negative impact on productivity etc - s 318(3)(d)

  1. The Commission must consider whether the transferrable instrument would have a negative impact on the productivity of the new employer’s workplace. It is submitted that having employees performing the same work under different conditions could negatively impact the productivity of the business, particularly in relation to its payroll and human resource departments and creating additional complexity in rostering. The Applicant further submits that it could impact on Kinetic Urban’s ability to attract and retain new staff.[17] I accept that this could have a negative impact on productivity and this criterion weighs in favour of granting the application.

Whether significant economic disadvantage - s 318(3)(e)

  1. Section 318(3)(e) requires the Commission to consider whether the new employer would incur ‘significant economic disadvantage’ as a result of the transferrable instrument covering the new employer. Mr Waluga in his Witness Statement says that Kinetic Melbourne and Kinetic Urban will need to commit time and resources into ensuring compliance with the MorelandBus Enterprise Agreement 2023 and the Award if the application is not granted. Further he says there will be ongoing costs associated with these instruments including:

“(a) training the managers, human resources and the payroll team in relation to the operation and rostering limitations of the instruments;

(b) building the MorelandBus EA into TIMS – including by dedicating resources to ensuring this is tested and developed correctly (with input from Moreland) (as outlined above in paragraphs 47 to 48);

(c) the costs associated with inadvertent errors that could arise in the systems during the testing and development periods – including increased labour costs due to confusion about the operation of the two instruments side-by-side; 

(d) difficulties in rostering employees where there are unforeseen absences (due to different rostering and pay rate arrangements); and

(e) increased hiring and onboarding costs if Kinetic Urban has difficulty maintaining New Employees in circumstances where the employees are paid in accordance with the Award (rather than entitled to above-award rates of pay under an enterprise agreement).”[18] 

  1. It is submitted that Kinetic Melbourne would likely incur around $43,000 in costs for a new payroll system and that business resources would be diverted away from usual duties to implement the new system.[19]

  1. I accept that the increased costs could have a significant economic disadvantage as a result of the transferrable instrument covering it. Accordingly, this weighs towards granting the application.

Whether there is business synergy between instruments etc - s 318(3)(f)

  1. The Commission must consider ‘the degree of business synergy’ between the transferrable instrument and any existing workplace instrument of the new employer. It is submitted there is limited business synergy between the MorelandBus Enterprise Agreement 2023 and the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 with the terms between the two instruments being different particularly in relation to rates of pay, split shifts, base rate and allowance increases, passive time allowances and shift allowances. Further it submits that there is limited business synergy between the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025 and the Award.[20]

  1. This is a factor that weighs towards granting the application.

The public interest - s 318(3)(g)

  1. I am not satisfied this matter engages the public interest and no part of the material provided by the Applicant suggests that the proposed orders have effect beyond the circumstances first of the small number of Transferring Moreland Employees and then an unknown number of new non-transferring employees, but presumably also numerically small. It is therefore a neutral consideration.

CONCLUSION

  1. Having taken into account the matters in s.318(3), I consider that it is appropriate for the Commission to exercise its discretion under s.318(1) to make the orders that are sought.

  1. I order under s.318(1)(a) that the MorelandBus Enterprise Agreement 2023 will not cover Kinetic Melbourne or Kinetic Urban or any of the transferring employees of Moreland Bus Lines and that such employees will be covered by the Kinetic Melbourne Bus Driver Enterprise Agreement 2022-2025. An order will be issued separately in PR766590.


COMMISSIONER

Determined on the papers


[1] Witness Statement of Dennis Waluga, 20 September 2023, [9].

[2] AE521104.

[3] AE516799.

[4] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [3] and Witness Statement of Dennis Waluga, 20 September 2023, [16].

[5] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [4] and Witness Statement of Dennis Waluga, 20 September 2023, [17].

[6] Witness Statement of Dennis Waluga, 20 September 2023, [18].

[7] Witness Statement of Dennis Waluga, 20 September 2023, [21].

[8] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [6].

[9] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [7] and Witness Statement of Dennis Waluga, 20 September 2023, [24].

[10] Witness Statement of Dennis Waluga, 20 September 2023, [25].

[11] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [8].

[12] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [10].

[13] Witness Statement of Dennis Waluga, 20 September 2023, [40].

[14] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [25].

[15] Email from Imran Malik, TWU Organiser, 25 September 2023.

[16] Witness Statement of Dennis Waluga, 20 September 2023, [65].

[17] Witness Statement of Dennis Waluga, 20 September 2023, [71] – [92].

[18] Witness Statement of Dennis Waluga, 20 September 2023, [95].

[19] Kinetic (Melbourne) Pty Ltd Form F40 Application for orders in relation to a transfer of business, 20 September 2023, item 2.3, [35].

[20] Witness Statement of Dennis Waluga, 20 September 2023, [96] – [97].

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<PR766589>

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