Lady Gowrie Tasmania Incorporated

[2016] FWC 7686

[2016] FWC 7686

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318—Transfer of instrument

Lady Gowrie Tasmania Incorporated
(AG2016/6259)

Tasmania
COMMISSIONER LEE	MELBOURNE, 24 OCTOBER 2016

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

[1] An application has been made by Lady Gowrie Tasmania Incorporated (the Applicant) to the Fair Work Commission (the Commission) for an order pursuant to section 318 of the Fair Work Act 2009 (the Act).

[2] The application seeks an order that the Sorell Council Enterprise Agreement 2015 1 will not cover the Applicant and the employees who were employed by Sorell Council at the Malunna Child Care Centre and Sorell Outside School Hours Care Program (‘transferring employees’) immediately prior to the date of completion. The Lady Gowrie Tasmania Enterprise Agreement 20152 will cover the Transferring Employees previously employed by Sorell Council at the Malunna Child Care Centre and Sorell Outside School Hours Care Program from the date of completion.

[3] The application consisted of a Form F40 - Application for orders in relation to transfer of business and a witness statement of Ms Roslyn Cornish, Chief Executive Office of the Applicant.

Legislation

“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.”

Background

[4] Sorell Council operates the Malunna Child Care Centre and the Sorell Outside School Hours Care Program (collectively, the ‘Child Care Services’) within the Sorell municipality in Tasmania.

[5] The Sorell Council Enterprise Agreement 2015 covers employees of the Child Care Service and has a nominal expiry date of 30 June 2018.

[6] The Applicant operates 15 long day care services child care centres throughout Tasmania with approximately 3000 children accessing education and care programs state-wide.

[7] The Applicant is also a Registered Training Organisation providing training and professional development opportunities to early childhood educators.

[8] The Lady Gowrie Tasmania Enterprise Agreement 2015 applies to employees of the Applicant and has a nominal expiry date of 19 December 2018.

[9] Sorell Council and Lady Gowrie Tasmania have agreed that the Child Care Service will be transferred to Lady Gowrie Tasmania according to the terms of a Sale Agreement agreed between the parties.

Transferrable instrument

[10] Section 311 of the Act sets out when a transfer of business occurs. On the evidence before me, it is likely that there will be a transfer of business within the meaning of section 311(1) of the Act.

[11] Section 312 of the Act details instruments that may transfer:

“312 Instruments that may transfer

Meaning of transferable instrument

(1) Each of the following is a transferable instrument:

(a) an enterprise agreement that has been approved by the FWC;

(b) a workplace determination;

(c) a named employer award.

Meaning of named employer award

(2) Each of the following is a named employer award:

(a) a modern award (including a modern enterprise award) that is expressed to cover one or more named employers;

(b) a modern enterprise award that is expressed to cover one or more specified classes of employers (other than a modern enterprise award that is expressed to relate to one or more enterprises as described in paragraph 168A(2)(b)).

Note: Paragraph 168A(2)(b) deals with employers that carry on similar business activities under the same franchise.”

[12] The Sorell Council Enterprise Agreement 2015 was approved by the Fair Work Commission on 13 August 2015 and pursuant to section 312(1) of the Act is a transferrable instrument.

Who may apply for an order

[13] The application has been made by the new employer (the Applicant). The requirements of section 318(2) have been met.

Matters the Fair Work Commission must take into account (s.318(3))

Section 318(3)(a) - the views of the new employer and the employees who would be affected by the order

[14] The new employer is the Applicant for this order and it supports the making of the order.

[15] The witness statement of Ms Roslyn Cornish, Chief Executive Office of the Applicant supplied in this matter provides that Ms Cornish attended meetings and discussed the transfer of business and this application with the transferring employees. A ballot vote was held and 14 out of 15 transferring employees voted in favour of the Lady Gowrie Tasmania Enterprise Agreement 2015 covering their employment.

[16] On 19 October 2016 I wrote to the Applicant directing that a letter from me be distributed to all transferring employees who will be affected by the Order sought, to enable me to obtain further information on the views of employees. The letter outlined the terms of the order sought, confirmed that if the order is made the transferring employees will be covered by the Lady Gowrie Tasmania Enterprise Agreement 2015 which may have an effect on their terms and conditions of employment. The letter provided that views were to be provided to my chambers by 12:00pm Monday 24 October 2016.

[17] Once this course of action was followed, I directed the Applicant to provide a statutory declaration containing advice as to how and when the notice was distributed to employees, and a statutory declaration was provided on 21 October 2016.

[18] My chambers has not received any emails or any phone calls from any employee of the Applicant expressing any view about the application.

Section 318(3)(b) - whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment

[19] The Applicant provided with its application documentation a classification and wage comparison table that demonstrates classification and wage rates that will apply to transferring employees.

[20] The Applicant submits that most transferring employees are better off under the terms of the Lady Gowrie Tasmania Enterprise Agreement 2015 and a small number are worse off. The Applicant submits that this is primarily due to the impact of a higher superannuation rate provided by the Sorell Council Enterprise Agreement 2015 to permanent employees however, offsetting this impact permanently employed transferring employees will be able to salary sacrifice a significant portion of their wages. The Applicant submits that this is a significant benefit that more than offsets any reduction in wage rate or superannuation rate. The superannuation rate provided for casual employees is the same under both agreements.

[21] The Applicant is registered with the Australian Charities and Not-for-profits Commission as a Public Benevolent Institution (‘PBI’). The Lady Gowrie Tasmania Enterprise Agreement 2015 provides employees with access to salary sacrifice options, as referred to above. As a PBI, the Applicant is able to offer full-time and part-time employees the opportunity to salary sacrifice their earnings up to a maximum of $15,886 per annum. The Applicant submits that other tax effective benefits are also available to employees as a consequence of the Applicant’s PBI status and that the ability to salary sacrifice earnings is a significant financial benefit to transferring employees that is not available under the Sorell Council Enterprise Agreement 2015.

[22] The Applicant also submits that transferring employees will receive a benefit in terms of wage increases if the order is granted because:

• Transferring employees have received a 2.5% increase in wages from 1 July 2016 in accordance with the Sorell Council Enterprise Agreement 2015;



• If the order is granted, transferring employees will receive a further 2% increase in wages from 19 December 2016; and



• The final wage increase payable to the transferring employees under the Sorell Council Enterprise Agreement 2015 is due from the first full pay period on or after 1 July 2017 whereas the final wage increase payable under the Lady Gowrie Tasmania Enterprise Agreement 2015 is due from 19 December 2017. While there is a delay of approximately 6 months in terms of the final payment, the transferring employees will receive an additional increase of 1.5% over the period under the Lady Gowrie Tasmania Enterprise Agreement 2015 compared to the Sorell Council Enterprise Agreement 2015.

[23] The Applicant also submits that Sorell Council currently employs nine child care employees on a casual basis and that the Applicant will provide the majority of these employees with the security of permanent full-time or part-time employment, based on comparable hours of work to those currently worked by each employee. The Applicant submits that this represents a significant advantage to transferring employees and will provide them with access to additional benefits such as secure employment, salary sacrifice opportunities and paid leave entitlements.

[24] On 19 October 2016 my chambers wrote to the Applicant outlining that it appeared from the application documentation provided that 5 out of 15 employees are not better off overall under the Lady Gowrie Tasmania Enterprise Agreement 2015. The correspondence directed the Applicant to confirm if this was correct and requested further information in support of the Applicant’s proposition that the ability to salary sacrifice offsets any reduction in wage rate or superannuation wage.

[25] On 21 October 2016 a response was provided on behalf of the Applicant which confirmed that three employees had left their employment are therefore no longer transferring employees. The response also outlined that three employees will be provided with an all-purpose allowance to address the reduction in total hourly pay and that all other transferring employees are better off overall should the order be granted. This response also provided details regarding employees engaged as casual employees who will receive offers of permanent part-time employment and further information in relation to the salary sacrifice arrangement available to employees.

[26] Having considered all of the material before me, I am satisfied that the transferring employees will not be disadvantaged by an order in relation to their terms and conditions of employment.

Section 318(3)(c) - if the order relates to an enterprise agreement—the nominal expiry date of the agreement

[27] The Sorell Council Enterprise Agreement 2015 has a nominal expiry date of 30 June 2018 and the Lady Gowrie Tasmania Enterprise Agreement 2015 has a nominal expiry date of 19 December 2018. This is a neutral consideration.

Section 318(d) - whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace

[28] The Applicant submits that if the order is not granted this will have a negative impact on productivity because the Lady Gowrie Tasmania Enterprise Agreement 2015 has been negotiated to reflect the specific terms and conditions relevant to a dedicated child care environment where management of cost is critical.

[29] The Applicant submits that as child care is a highly regulated industry sector and granting of the requested order will have a positive impact on productivity because:

• The costs associated with running and maintaining child care centres are significant. The cost impact of significant levels of regulation is also a factor. Parents are charged significant fees as a consequence of the costs associated with operating a child care centre and governments provide subsidies to offset some, but not all, of these costs. All in all, the industry is very cost sensitive and improvements in productivity and efficiency are critical to the Applicant’s ability to minimise cost increases to parents;



• Employees are required to hold particular qualifications in order to work with children. The Applicant delivers a range of qualifications through its Registered Training arm to support high quality outcomes for learners and to support them on their professional career pathway. The number of qualified staff within the business has a direct relationship to improved child/carer ratios and therefore a direct relationship to efficiency and cost reduction; and



• The Lady Gowrie Tasmania Enterprise Agreement 2015 classification structure has direct links to the attainment of qualifications by employees. There is a direct association between minimising cost, providing structured qualification training and rewarding the attainment of qualifications through the classification structure. The structure embedded within the Applicant’s business through its Registered Training Organisation and the Lady Gowrie Tasmania Enterprise Agreement 2015 is a ‘closed loop’ focussed on improving employee qualifications and reducing/limiting cost increases.

[30] The Applicant further submits that the Lady Gowrie Tasmania Enterprise Agreement 2015 has been negotiated to reflect known costs within the Applicant’s business. The Sorell Council Enterprise Agreement 2015 reflects the terms and conditions relevant to a local government council organisation, of which child care educators are only a small part of the overall employee cohort.

[31] Lastly, the inconsistency between the two agreements will impact upon Applicant’s ability to improve the efficiency and cost effectiveness of the centre through the economies of scale available at other centres and through rostering efficiencies.

Section 318 (e) - whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;

[32] It is unclear whether a refusal to grant the requested order will lead to significant economic disadvantage, however Lady Gowrie will suffer economic disadvantage if the order is not granted because:

• The cost of re-programming the payroll system to accommodate the Sorell Council Enterprise Agreement 2015 terms for approximately 2 years will be a significant initial cost that is ultimately unable to be recovered;



• The differences between the two enterprise agreements has a significant chance of leading to confusion and misunderstanding in respect to the correct application of the Sorell Council Enterprise Agreement 2015 terms; and



• The differences in rostering and other arrangements has the capacity to impact on future service level changes. For example, the span of hours in the Sorell Council Enterprise Agreement 2015 will impact upon the opening and closing hours of the child care services which in turn impacts on the decisions of parents regarding utilisation of the centre. In short, if a parent needs earlier opening hours from their nearest child care centre and cannot access this, they are likely to go to another centre that does open at the earlier hours, resulting in lost business.

Section 318 (f) - the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;

[33] The Applicant submits that the Sorell Council Enterprise Agreement 2015 has been negotiated in a local government environment where only a small number of employees are engaged as child carers. The Lady Gowrie Tasmania Enterprise Agreement 2015 has been negotiated in a dedicated child care environment with a focus on delivering and supporting quality child care outcomes for children and their parents.

[34] The Applicant further submits that a number of aspects of the Sorell Council Enterprise Agreement 2015, as it relates to the transferring employees, are similar to those of the Lady Gowrie Tasmania Enterprise Agreement 2015. However, a number of other areas are different. For example, the operation of classification structures and some hours of work arrangements. The Lady Gowrie Tasmania Enterprise Agreement 2015 has been negotiated to promote efficiency and effectiveness within the Applicant’s business and to promote a consistent focus on services to clients across all centres. The Applicant submits that it is its aim and desire to have the child care services integrate fully into the Applicant’s business as quickly and as completely as possible. In this regard coverage of the Lady Gowrie Tasmania Enterprise Agreement 2015 for all centres is regarded as highly important.

Section 318 (g) the public interest

[35] The Applicant submits that it is in the public interest to make the order.

Conclusion

[36] Having considered the matters above, it is apparent that most matters weigh towards the granting of the application sought, while some are a neutral consideration. Taking into account each of the matters set out in section 318(3) of the Act, I am satisfied that the order as sought should be granted.

[37] An Order [PR586813] will be issued concurrently with this decision.

COMMISSIONER

 1   AE415205

 2   AE418428

Printed by authority of the Commonwealth Government Printer

<Price code C, AE415205  PR586812>