Mackenzie Mckay
[2023] FWCA 31
•4 JANUARY 2023
| [2023] FWCA 31 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date
Mackenzie Mckay
(AG2022/4198)
BALLARAT SCHNITZELS PTY LTD ENTERPRISE AGREEMENT 2015
| Restaurants | |
| COMMISSIONER YILMAZ | MELBOURNE, 4 JANUARY 2023 |
Application for termination of the Ballarat Schnitzels Pty Ltd Enterprise Agreement 2015
An application to the Fair Work Commission (Commission) to terminate the Ballarat Schnitzels Pty Ltd Enterprise Agreement 2015 (the Agreement), pursuant to s.225 of the Fair Work Act 2009 (the Act) was made by Mackenzie McKay (the Applicant). The Agreement expired on 9 March 2020.
In July 2022, J&K Group Victoria Pty Ltd (the Respondent) purchased the business trading as Schnitz Ballarat and the Ballarat Schnitzels Pty Ltd Enterprise Agreement 2015, the industrial instrument, transferred to the business of the current owner.[1] Schnitz Ballarat is a large regional format store seating up to 200 patrons and is a franchise of the Schnitz national network of restaurants.
The Agreement was approved covering the restaurant on 3 March 2016 to operate from 10 March 2016. At the time of the application for approval of the Agreement, the relevant industrial instrument identified was the Restaurant Industry Award 2010 for the purposes of the Better Off Overall Test.
Mackenzie Mackay, an employee covered by the Agreement gave notice of representation by the Shop, Distributive and Allied Employees’ Association (SDA). The application to terminate the Agreement contends that the terms and conditions have fallen below the minimum conditions of the Restaurant Industry Award 2020 (the Modern Award) in particular, rates of pay have not kept up with the buy-out of rates of pay to compensate for allowances, annual leave loading and penalty rates under the Modern Award. The Applicant contends that employees covered by the Agreement are disadvantaged when compared to the terms and conditions of the Modern Award.
The application to terminate the Agreement pursuant to s. 225 of the Act was made on 5 October 2022. On allocation of the matter, I wrote to the Respondent seeking their views in relation to the application to terminate the Agreement by Mackenzie Mackay. The Respondent informed chambers, the Applicant and the SDA of its objection to terminate the Agreement. Enclosed with the correspondence was information relating to the change of ownership of the business and the application of updated pay rates which, it is contended, compensate for loadings and penalty rates applicable under the Modern Award.
Directions were issued to the parties requiring that:
The Respondent inform its employees of the Application to terminate the Agreement;
Employees were to be made aware that they may provide submissions of their views to the Commission;
The Respondent obtain independent advice in relation to the Application and the practical impact on payroll and other relevant matters should the Application be granted;
On obtaining advice, the Respondent inform the Commission, the Applicant and SDA whether it maintained an objection to the termination of the Agreement;
Dates for submissions were issued should the Application not be objected to;
Further dates for submission were issue if an objection was maintained;
Additionally if there continued to be disagreement about the relevant award, further dates were issued to provide submissions on the coverage of the Restaurant Award 2020 or alternatively the Fast Food Award 2020 for the purpose of comparison of terms and conditions and possible transition.
Directions were amended and the parties were given a further opportunity to consider the impact of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 which amended s.226 of the Act from 7 December 2022. The amendments to the Act had a bearing on the Application as the Application had not yet been determined as of 7 December 2022.
Submissions from the Applicant, Respondent and individual employees have been considered.
The Legislation
Section 225 of the Act provides:
Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
The amended s.226 of the Act relevantly provides:
Terminating an enterprise agreement after its nominal expiry date
(1)If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a)the FWC is satisfied that the continued operation of the agreement would be unfair for the employees covered by the agreement; or
(b)the FWC is satisfied that the agreement does not, and is not likely to, cover any employees; or
(c)all of the following apply:
(i)the FWC is satisfied that the continued operation of the enterprise agreement would pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the agreement;
(ii)the FWC is satisfied that the termination of the enterprise agreement would be likely to reduce the potential of terminations of employment covered by subsection (2) for the employees covered by the agreement;
(iii)if the agreement contains terms providing entitlements relating to the termination of employees’ employment—each employer covered by the agreement has given the FWC a guarantee of termination entitlements in relation to the termination of the agreement.
(1A)However, the FWC must terminate the enterprise agreement under subsection (1) only if the FWC is satisfied that it is appropriate in all the circumstances to do so.
(2)This subsection covers a termination of the employment of an employee:
(a)at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b)because of the insolvency or bankruptcy of the employer.
(3)In deciding whether to terminate the agreement, the FWC must consider the views of the following covered by the agreement:
(a)the employees (unless there are no employees covered by the agreement);
(b)each employer;
(c)each employee organisation (if any).
Note:The President may be required to direct a Full Bench to perform a function or exercise a power in relation to the matter if any of the employers, employees, or employee organisations, covered by the agreement oppose the termination (see subsection 615A(3)).
(4)In deciding whether to terminate the agreement (the existing agreement), the FWC must have regard to:
(a)whether the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees as the existing agreement; and
(b)whether bargaining for the proposed enterprise agreement is occurring; and
(c)whether the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.
(5)In deciding whether to terminate the agreement, the FWC may also have regard to any other relevant matter.
Section 227 of the Act provides that a termination of an Agreement comes into operation from the day specified in the decision to terminate the Agreement.
The Submissions
The Applicant submits that the former s.226(a) of the Act established a test in which the Commission must terminate the Agreement where it is satisfied that it is not contrary to the public interest to do so. Section 226 of the Act was amended and the reference to the public interest test in s.226(a) has been removed. However, I observe that s.226 relevantly requires consideration of unfairness to employees covered by the Agreement if the Agreement was to continue operation,[2] that the Commission must terminate the Agreement only if it is satisfied that it is appropriate in all the circumstances to do so,[3] and the Commission may also have regard to any other relevant matter.[4] While there is an absence of the public interest test, consideration is required of unfairness to employees and other circumstances and considerations in the matter.
In this matter the SDA supports the termination of the Agreement and provided an analysis of the terms and conditions of the Agreement against relevant awards and contends that the terms are well below the minimum terms of the relevant award. It is submitted that the analysis supports termination of the Agreement. The SDA further submits that a longer period after the expiry of an agreement is a stronger case for termination of the agreement.[5]
In relation to the relevant award, the SDA noted that the Restaurant Industry Award 2010 was considered when the Agreement was approved but referred to other agreements covering Schnitz franchise operations which relied on the Fast Food Industry Award 2020. It submits that the coverage clause of the Fast Food Industry is most relevant rather than the Restaurant Industry Award.
The Respondent submits that it took ownership of the operation in July 2022, and offered ongoing employment to all employees, of which almost 80% were employed weekly as full-time or part-time. Of those employees working weekdays approximately 50% are over the age of 40 years and have school aged children. The rates of pay do not disadvantage those employees because they do not earn weekend penalty rates. It contends that should it be required to apply the terms of the modern award those employees would be disadvantaged compared to those employees that have the benefit of earning penalty rates on weekends. The Respondent provided updated rates of pay that apply to employees covered by the Agreement.
The Respondent contends that the coverage clause of the Fast-Food Industry Award 2020 is not relevant taking into consideration that the majority of business is dine in, with take-away and delivery forming a small portion of overall sales. In addition, it contends that the dine-in experience is not served in takeaway packaging, but rather prepared primarily to be consumed on the premises on ceramic plates and with cutlery. The format of the operation is designed to seat up to 200 patrons on site. It further contends it is not located in a food court, shopping centre or retail complex. It further adds that the establishment has a function room that caters for a maximum of 70 people. The Respondent distinguished itself from the metropolitan Schnitz sites that are designed primarily as a fast-food establishment.
Submissions from employees were very brief, expressing either support or concern for the termination of the Agreement.
On 14 December 2022, the parties participated in a conference to discuss the impact of the amendment to s.226 of the Act. The Respondent maintained that the relevant modern award was the Restaurant Industry Award 2020 and proposed that if it were to withdraw its objection to terminate the Agreement it sought a termination date of 25 December 2022, to allow for employees to be briefed on its position, allow for transition in the payroll system to the Restaurant Industry Award 2020 in accordance with its pay cycle and convey to employees the impact on their terms and conditions. It undertook to provide to the Commission a statutory declaration and confidential sales data in support of its contention that the Fast Food Industry Award 2020 was not relevant. The SDA indicated that it would consider making further submissions on receipt of the statutory declaration. The parties were put on notice that should the parties remain in dispute concerning the termination of the Agreement, that the matter would be referred to the President for consideration before a Full Bench.
Consideration
The Respondent provided a statutory declaration addressing the proposal to terminate the Agreement from 25 December 2022 and provided evidence of store sales which demonstrate that the operation primarily provides meals for dine in as opposed to takeaway or delivery which may be characteristic of fast food service. I am satisfied by the evidence that the operation is primarily a restaurant as defined by the coverage clause of the Restaurant Industry Award 2020.
The Fast Food Industry Award 2020 defines the fast food industry in clause 4.2 as:
4.2 In this award fast food industry means the industry of taking orders for, preparing and selling (by direct provision to the customer and/or by delivery to the customer’s address):
(a) meals, snacks and/or beverages, which are sold to the public primarily to be consumed away from the point of sale;
(b) take away foods and beverages packaged, sold or served in such a manner as to allow their being taken from the point of sale to be consumed elsewhere should the customer so decide; and/or
(c) food and/or beverages in food courts and/or in shopping centres and/or in retail complexes, excluding coffee shops, cafes, bars and restaurants providing primarily a sit-down service inside the catering establishment.
The Respondent does not prepare or sell food and beverages primarily to the public to be consumed away from the point of sale, nor are dine-in meals packaged, sold or served in a manner that allows for consumption elsewhere, as is often observed in food courts or like establishments. Rather the evidence of presentation of plated food leads me to conclude that the Respondent’s primary undertaking is dine in and not fast food. Relevantly, the coverage clause of the Restaurant Industry Award 2020 is as follows:
4.2 In this award restaurant industry means restaurants, reception centres, night clubs, cafés or roadhouses and includes catering by a restaurant business and a tea room operated in, or in connection with, a restaurant business but does not include a restaurant operated in, or in connection with, premises owned or operated by an employer covered by any of the following awards:
(a) Hospitality Industry (General) Award 2020; or
(b) Registered and Licensed Clubs Award 2020; or
(c) Fast Food Industry Award 2010.
Admittedly, not a fine dining restaurant, the Respondent’s business operates in a manner somewhat akin to the business in some cafes or roadhouses. While a portion of sales are takeaway or delivery, they make up a small percentage overall and are not sufficient to warrant a departure from the Restaurant Industry Award 2020. Most businesses including finer dining restaurants have evolved to include delivery or takeaway meals without disengaging from the business of restaurants.
The submissions from employees were largely a single sentence and provided little to detract from the submissions of the Applicant in respect to the disadvantage to employees covered by the Agreement. One employee expressed concern that termination of the Agreement may result in a drop in wages of $4.00 and another expressed concern of the underpayment for working split shifts and on weekends. On assessment of the submissions, I am not satisfied that of any objections to the termination of the Agreement requires the matter to be referred to the President.
I note that the Respondent undertook to obtain advice on how to manage contracted rates of pay with individual employees at above award minimum rates. In response to concerns that disparity of rates dependent on weekday rostering as opposed to weekend work would affect the positive culture in place, while relevant as a human resource issue, the concern is nevertheless to be balanced against the object of a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders.[6]
The comparison of the rates under the Agreement with the Restaurant Industry Award 2020 shows that employees are better off under the Award except marginally during shift times during the week as can be seen from the following:
In addition to the difference in rates of pay and penalties, the Agreement provides less beneficial terms in respect to meal allowances, split shift allowances, penalty rates, junior rates, breaks, overtime and annual leave loading. As can be seen from the above table the loaded rates covering penalties and allowances fall short of a Better Off Overall Test against the Restaurant Industry Award 2020.
The SDA did not object to the proposition of termination date of 25 December 2022. No further submissions were made in response to the Respondent’s statutory declaration. On this basis I do consider it appropriate to allow for the termination of the Agreement on a date that coincides with the pay run and allows for communication with affected employees.
I have had regard to the views of employees and the circumstances of the employees and employer, including the effect of the termination of the Agreement on both the employees and employer. For the reason that employees are better off under the Restaurant Industry Award 2020 as opposed to the Agreement, I am satisfied that it would be unfair for employees to remain covered by the expired Agreement. There are no other circumstances or other relevant matters that were raised by either the employees or the Respondent that require further consideration that may weigh against the termination of the Agreement.
For the above reasons and pursuant to s.226 including s.266A of the Act, I am satisfied about the relevant matters contained in s.226 and consider it appropriate to terminate the Ballarat Schnitzels Pty Ltd Enterprise Agreement 2015. The Agreement is terminated from 25 December 2022.
COMMISSIONER
[1] See s.312 and s.313 Fair Work Act 2009.
[2] s.226 (1)(a) Fair Work Act 2009.
[3] Ibid (1A).
[4] Ibid (5).
[5] Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union[2010] FWA 2434.
[6] s.3 (b) Fair Work Act 2009.
Printed by authority of the Commonwealth Government Printer
<AE418099 PR749414>
0