Langs Building Supplies Pty Ltd T/A Langs Building Supplies
[2023] FWCFB 260
•19 DECEMBER 2023
| [2023] FWCFB 260 [Note: A copy of the zombie agreement to which this decision relates (AE878790) is available on our website.] |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3A, Item 26A(4) - Application to extend default period for Division 2B State employment agreements
Langs Building Supplies Pty Ltd T/A Langs Building Supplies
(AG2023/3687)
| LANGS BUILDING SUPPLIES AND STAFF – ENTERPRISE AGREEMENT 2009 | |
| BUILDING, METAL AND CIVIL CONSTRUCTION INDUSTRIES DEPUTY PRESIDENT WRIGHT | SYDNEY, 19 DECEMBER 2023 |
Application to extend the default period for the Langs Building Supplies and Staff – Enterprise Agreement 2009
Langs Building Supplies Pty Ltd T/A Langs Building Supplies (Langs) has applied, pursuant to item 26A(4) of Sch 3A to the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (Cth) (TransitionalAct), to extend the default period for the Langs Building Supplies and Staff – Enterprise Agreement 2009 (Agreement).
The application is made under Sch 3A of the Transitional Act. Sch 3A applies to former State employment Agreements. Commission records from the time of approval of the Agreement, however, show that the Agreement is not a former State employment agreement. It was made under the Fair Work Act 2009 (FWAct) on 11 December 2009 and later approved by Fair Work Australia[1]. Schedule 7 of the Transitional Act applies to this agreement, which deals with agreements made between 1 July 2009 and 1 January 2010, the bridging period between the repeal of the Workplace Relations Act 1996 and the commencement of Parts 2-2, 2-3, and 2-6 of the FW Act.
Item 30 of Sch 7 to the Transitional Act provides for the automatic sunsetting of agreements made during the bridging period on 6 December 2023, unless extended by the Commission. We will take the application for extension to be an application under subitem 30(4) of Sch 7 of the Transitional Act. The relevant provisions are the same for applications for extension under both Sch 3A and Sch 7. They are also relevantly the same for applications under item 20A of Sch 3. The main features of item 20A of Sch 3 to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd (‘Suncoast’).[2]
When an application is made under subitem (4) of item 30 of Sch 7, the Commission is required under subitem (6)(a) to extend the default period if satisfied that subitem (7) or (8) applies, and it is otherwise appropriate in the circumstances to do so. Put briefly, subitem (7) applies if, at the time of the application, the applicant is bargaining for a replacement agreement. Subitem (8) applies if it is likely the employees covered by the Agreement would be better off overall if the Agreement continued to apply, according to the better off overall test (BOOT). The Commission may also extend the default period under subitem (6)(b) if satisfied that it is reasonable in the circumstances to do so.
Langs has not commenced bargaining for a replacement agreement. It anticipates that it will commence bargaining in early 2024. Subitem (7) does not apply. Langs’ application is made on the basis that the employees would be better off overall if the Agreement continues to apply. The relevant provision, subitem (8), reads:
(8) This subitem applies if it is likely that,as at the time the application is made, the award covered employees for the agreement under subitem (9), viewed as a group, would be better off overall if the agreement applied to the employees than if the relevant modern award or awards referred to in that subitem applied to the employees.
Subitem (9) provides that the award covered employees for an enterprise agreement made during the bridging period are the employees who are covered by the agreement and at the time the application was made are covered by one or more modern awards.
Consideration – BOOT
Langs is a medium sized family-owned company that commenced operations in 1976. It supplies material and services to the building industry. It currently employs approximately 350 employees.
The Commission’s Agreements Team conducted an analysis for the purposes of the BOOT. The analysis noted:
(a)The Agreement covers non-salaried full time, salaried full time, part time, utility employees, casual, relief/short term employees and cadets engaged in the classification levels at clause 5.1 and clause 5.2 of the Agreement.
(b)The employees would otherwise be covered by the Clerks—Private Sector Award 2020, General Retail Industry Award 2020, Manufacturing and Associated Industries and Occupations Award 2020, Commercial Sales Award 2020, Timber Industry Award 2020, Joinery and Building Trades Award 2020 and the Road Transport and Distribution Award 2020. The Agreement may also cover employees who would otherwise be covered by the Cleaning Services Award 2020 and the Security Services Industry Award 2020.
(c)The Agreement does not contain any rates of pay for the classification levels. Clause 5.8 of the Agreement provides a single minimum indicative wage which is based on the Federal Minimum wage as at October 2009.
(d)Clause 5.8.1 further provides that Langs will determine the minimum salary at which employees are positioned having regard to the employees’ skills and abilities, the nature of the work and the general market. The rates so determined cannot be below the relevant award.
(e)While clause 5.11 of the Agreement provides for 3 increases to the rates of pay which would still be less than the relevant awards, it does provide that for the life of the Agreement, no award-based employee will receive an hourly rate of pay that is less than that set by the relevant parent award.
(f)Information from Langs indicates that the majority of employees covered by the Agreement are Utility Employees (192 of the 317 employees), which appear to be a type of flexible part time employment who are paid an additional loading of 5.05% in addition to their ordinary hourly rate. This is essentially a loaded rate which is in lieu of part time safeguards provided for in the awards as well as the hours of work, roster, nominal rest days, meal breaks, rest pauses and overtime provisions in the Agreement.
(g)It appears from Clause 4.3 of the Agreement that the only guarantee a Utility Employee is entitled to is a minimum engagement of 3 hours to a maximum of 12 hours per occasion.
(h)The Agreement does not pass the BOOT, and the utility employees would appear to be the class of employee who are worse-off having regard to the loaded rate that does not compensate for the reductions applicable to these employees.
(i)The Agreement is also deficient in terms dealing with termination of employment, redundancy, overtime, annual leave, personal leave, and public holidays.
A copy of this analysis was provided to Langs for comment. It responded by providing details of wage rates for each of its employees and stated that after the initial 3 years provided for in the Agreement it has continued to increase wages yearly by a minimum of 2.5% or the CPI, whichever is greater. As a consequence of these arrangements, all staff are currently at least 6.4% higher than the relevant minimum award rate. Langs further responded that allowances that are paid to employees are indexed with either 2.5% or CPI each year and that no employee will be paid less than the minimum rate in the applicable award.
We take from Langs’ response that it believes the employees are better off due to the arrangements that it applies that are in excess of the requirements of the Agreement. The relevant comparison for the purpose of the BOOT however is a comparison between the rates required to be paid under the Agreement and the rates payable under the relevant awards. We note that clause 5.8.1 requires the rates in the Agreement never fall below the relevant award rate. That provision indicates that the employees are not better off under the Agreement as they are only guaranteed award rates. This alone leads to a conclusion that the BOOT test in subitem 30(8) is not met.
As to other matters raised by the analysis, Langs offered a number of undertakings that would apply should the default period be extended. The text of the undertakings is set out at Schedule A to this decision.
The Full Bench in 233 Victoria Square Hotel Pty Ltd T/A Hilton Adelaide[3] made it clear that deficiencies in the BOOT associated with applications to extend the default period for zombie agreements cannot be remedied by undertakings. The Full Bench pointed out that the Transitional Act does not contain a provision equivalent to s.190 of the FW Act, which permits the Commission to accept undertakings from an employer to addresses concerns that the BOOT has not been met. Consequently, we cannot take into account the undertakings offered by Langs for the purposes of subitem (8). The fact that Langs sees the undertakings as necessary suggests that it accepts that the BOOT is not met.
As the BOOT is not met, subitem (8) does not apply to the application and the default period cannot be extended under subitem 30(6)(a) of Sch 7.
Consideration – Reasonable
The Commission must extend the default period pursuant to subitem 6(b), if it satisfied that it is reasonable in the circumstances to do so. This involves the application of a broad evaluative judgement.
Full Bench decisions have considered when it will be reasonable in the circumstances to extend the default period. In Suncoast,[4] the Full Bench said:
[17] 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 Peter Frick,[5] the Full Bench considered that the default position of the statute to automatically terminate transitional instruments suggests a policy preference for employees covered by zombie agreements to be regulated by contemporary instruments made under the FW Act.[6]
In Qualipac,[7] the Full Bench rejected an application for an extension of the default period in circumstances where an applicant wanted to continue to rely on inferior terms and conditions in a zombie agreement for business reasons, noting the need to ensure that the integrity of the safety net provided for by the Act and modern awards is not undermined by very old agreements that may no longer meet contemporary standards.
In Kalfresh Management Services Pty Ltd,[8] the Full Bench expressed a view that where an agreement contains inferior and outdated terms and conditions, this weighs strongly against a conclusion that it is reasonable in the circumstances to extend a default period.[9]
In this matter, the Agreement was made in 2009. Clause 5.8.1 of the Agreement guarantees rates of pay are not to be less than the rates payable under the modern awards. A number of the terms of the Agreement are outdated. They do not reflect the minimum standards of a contemporary industrial instrument. It would be consistent with the purpose of the provisions concerning the sunsetting of zombie agreements to dismiss the application and allow the Agreement to sunset.
We note however that the applicant pays in excess of the Agreement, and so in excess of award rates. Should the default period be extended it undertakes to apply the Agreement in a manner which addresses other, less beneficial terms identified in the Commission’s BOOT analysis. It will do so while negotiating a replacement agreement. While the undertaking is not relevant to the BOOT, we can, and do, take it into account for the purpose of determining whether it is reasonable in the circumstances to extend the default period. The undertakings are said to be made under s.190 of the FW Act, which does not apply here, however Langs submits that if the Agreement is extended, they will apply. We accept that Langs will apply those better conditions.
Langs also indicates that it will negotiate a replacement agreement. It will commence negotiations in early 2024. We note that the employees are covered by a number of awards. Should the Agreement sunset Langs will be required to revert to those awards while bargaining occurs. Langs suggests the negotiation process is not expected to be complex.
These matters suggest that Langs understands the need to update to a modern industrial instrument that reflects contemporary standards. We note further the complexity associated with transitioning from the Agreement to a number of various awards and then to a replacement agreement. That process may well distract from and extend the task of negotiating a replacement agreement.
On balance we are persuaded that the default period for the Agreement should be extended. Langs asks for a 2-year extension. As the Full Bench observed in Suncoast[10], the Commission has a discretion as to the length of the extension, subject to the limitation that the extension cannot be more than four years. The nature of the discretion is such that we are not bound to grant the period of extension sought in the application.
In determining the length of the extension, we are mindful that the reason the extension is sought is to permit a replacement agreement to be finalised. Langs will commence negotiating for the replacement agreement in early 2024 and says the process should not take long. On that basis we consider an extension of 5 months from the default date in the Transitional Act is reasonable.
An order extending the default period for the Agreement to 6 May 2024 will be published separately.
The Agreement is published, in accordance with subitem (9A)(c), as an Annexure to this decision.
DEPUTY PRESIDENT
Schedule A
EMPLOYER UNDERTAKING
Fair Work Act 2009
Langs Building Supplies Pty Ltd
Extension of Langs Building Supplies and Staff Enterprise Agreement 2009
AG2023/3687
I, David Wuiske, Chief Executive Officer of Langs Building Supplies Pty Ltd of 66 Eastern Service Road, Staplyton, QLD 4207 (The Employer) am authorised to make the following undertakings pursuant to Section 190 of the Fair Work Act 2009 ("the"Act") in relation to the Application for the extension of Langs Building Supplies and Staff Enterprise Agreement 2009 (AG 2023/3687 lodged with the Fair Work Commission.
General
The Agreement will be read and interpreted in conjunction with the relevant Award as may be applicable. Where there is an inconsistency between this Agreement and the relevant Award, and the Award provides a greater benefit, the Award. provision will apply to the extent of the inconsistency.
Wages
At all times employees covered by Agreement received the relevant Award minimum wage rate or exceeded the minimum rate.
Clause 5.8.1 provides that Langs will determine the minimum salary at which employees are positioned having regard to the employee's skills and abilities, the nature of the work and the general market but will not be less than the minimum rate of the relevant Award.
Salaried Employees
At all times salaried employees covered by Agreement received the relevant Award minimum wage rate or exceeded the minimum rate.
Termination
(a) Clause 4.8 Probation
The provisions of this Clause will be replaced by the NES provisions.
(b) Clause 4.11.2(e)
This clause will not be applied in regard to utility workers.
(c)Clause 4.11.3
The provisions of this Clause will be replaced by the NES provisions.
Redundancy
a) Clause 4.12.4(c)
The provisions of this Clause will be replaced by the NES provisions.
b) Clause 4.12.6(b)
This clause will not be applied in regard to utility workers.
Article I. 6. Shift Provisions
Any shift worked will be subject to the shift provisions of any relevant Award.
Overtime and Voluntary additional hours (a) Clause 6.1.4 -Voluntary additional hours
This Clause will not be applied.
(b) Clause 6.6 - Overtime
The provision in this regarding overtime to be applied as follows:
"Payment for overtime shall be made at the rate of time and a half for the first 2 hours and double time thereafter. For calculating overtime, each day stands alone."
Annual Leave
(a) Clause 7.1.4 -Termination payout
The provisions of this Clause will be replaced by the NES provisions.
(b) Clause 7.1.7-Direction to take leave
The relevant Award conditions regarding taking excessive leave shall apply.
Personal Leave
(a) Clause 7.2.1(b) Accrual
Accrual of personal leave shall be as per the NES provisions.
(b) Clause 7.2.1(e)
This clause will not be applied.
(c)Clause 7.2.2
This clause will not be applied.
Clause 7.6.2 Public Holidays
The provisions of the NES will apply.
Clause 11.2 Deductions
The provisions of this Clause will not be applied but replaced by the provisions of s324 of the Act.
SIGNED
David Wuiske
Chief Executive Officer
Langs Building Supplies Pty Ltd
Dated 10 November 2023
[1] [2010] FWAA 4860
[2] [2023] FWCFB 105 at [3] to [18]
[3] [2023] [2023] FWCFB 163 at [32] – [38]
[4] [2023] FWCFB 105.
[5] [2023] FWCFB 137
[6] Ibid, [32].
[7] [2023] FWCFB 212
[8] Kallium Management Services Pty Ltd as Trustee for The Kalium Labour Trust T/A Kalfresh Pty Ltd [2023] FWCFB 217
[9] Ibid, [14].
[10] [2023] FWCFB 2084
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