MacKillop Family Services Ltd T/A MacKillop Family Services
[2024] FWC 2435
•9 SEPTEMBER 2024
| [2024] FWC 2435 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
MacKillop Family Services Ltd T/A MacKillop Family Services
(AG2024/2711)
| Social, community, home care and disability services | |
| DEPUTY PRESIDENT ROBERTS | SYDNEY, 9 SEPTEMBER 2024 |
MacKillop Family Services Ltd (Applicant, or MacKillop) has applied for an order under s.318(1) of the Fair Work Act 2009 (Cth) (Act). The application arises from an agreement to transfer the management and assets of the Waranara School in Marrickville, New South Wales from Good Shepherd Australia New Zealand (GSANZ) to the Applicant. The transfer is proposed to take final effect by no later than 14 October 2024. One consequence of the transfer is that the Applicant will begin to employ eight educational support staff currently employed by GSANZ (Transferring Employees) whose employment is presently covered by the Good Shepherd Australia New Zealand Collective Agreement 2016 (GSANZ Agreement).
The effect of the order sought by the Applicant is to displace the operation of s.313(1) of the Act such that the Transferring Employees would no longer, upon transfer of their employment to the Applicant, be covered by the GSANZ Agreement but would instead be covered by the Educational Services (Schools) General Staff Award 2020 (Education Award).
The circumstances giving rise to the application are set out in detail in the grounds in support of application as follows:
Good Shepherd Australia New Zealand
(i)GSANZ is Australia’s oldest charity. It provides assistance to families, youth and women through a diverse range of services, including family violence support services, family counselling, parent support, financial services such as no interest loans, youth homelessness services and youth education – relevantly including the Waranara School.
(ii)The Waranara School is a special assistance school for years 9-12 that enables students who have disengaged from mainstream schooling to continue their education through personalised teaching and learning support, specialised wellbeing support and access to specialist adolescent and family counsellors on-site.
(iii)GSANZ currently employs eight educational support staff at the school, whose employment is covered by the GSANZ Agreement. The GSANZ Agreement passed its nominal expiry date on 30 June 2019. The GSANZ Agreement does not cover the teachers or allied health workers (such as counsellors) employed at the school. Their employment is governed by the relevant awards.
MacKillop Family Services
(iv)The Applicant is a charitable organisation which provides assistance and services to children, young people and families who have experienced distress, disadvantage and abuse. It is a leading provider of integrated services to children, young people and families working across New South Wales, Australian Capital Territory, Victoria and Western Australia.
(v)MacKillop currently operates a number of special assistance schools in Victoria and is looking to expand its education programs into New South Wales.
Transfer of the Waranara School
(vi)GSANZ and MacKillop entered into a Deed of Transfer on 2 February 2024, the effect of which is that the management and the assets of the Waranara School will transition from GSANZ to MacKillop.
(vii)It is intended that MacKillop will employ all of the Transferring Employees and will generally take over operations of the Waranara School.
(viii)As a result, it is intended that the Transferring Employees will cease to be employed by GSANZ and will instead be employed by MacKillop, performing the same or substantially the same work. Pursuant to the terms of the Deed of Transfer, MacKillop will, among other things, have the beneficial use and/or ownership of some or all of the assets (tangible/intangible) that GSANZ currently owns or has the beneficial use of and that relate to or are used in connection with the “transferring work”.
(ix)Relevantly, offers of employment from MacKillop, on terms and conditions which are no less favourable overall compared to existing terms and conditions and with full recognition of continuous service will be made to all Transferring Employees. MacKillop will also ensure that no-one receives a reduction in their overall take-home pay, as a result of this process.
(x)The offers will be effective on and from 14 October 2024.
(xi)When the Transferring Employees commence employment with MacKillop, a transfer of business in accordance with section 311(1) of the Act will occur (by virtue of the matters outlined at paragraphs (vi) to (x) above).
(xii)The GSANZ Agreement is a transferable instrument by operation of section 312(1)(a) of the Act. Section 313 of the Act provides that a transferable instrument that covered the old employer (i.e. GSANZ) and the transferring employees immediately before the termination of the employment, will cover the new employer (being MacKillop). The operation of these sections means that MacKillop will be covered by the GSANZ Agreement in relation to the Transferring Employees, subject to any order of the Commission made pursuant to section 318 of the Act. Whilst the Transferring Employees will be covered by the GSANZ Agreement, any new non-transferring employees that MacKillop may seek to employ in the future at the Waranara School will not be covered by the GSANZ Agreement and instead, will be covered by the Education Award.
(xiii)MacKillop seeks an order pursuant to section 318(1)(a) of the Act, to displace the operation of section 313(1) of the Act. The effect of such an order is that MacKillop and the Transferring Employees would instead be covered by the Education Award (as would any non-transferring employees that MacKillop may employ in the future). The intention is for this transfer of business (and employees) to take effect on and from 14 October 2024.
The proposed order is in the following terms:
The Good Shepherd Australia New Zealand Collective Agreement 2016 will not cover the Applicant and any “transferring employees” as defined by Part 2-8 of the Fair Work Act 2009 (Cth) (FW Act), being employees currently employed by Good Shepherd Australia New Zealand (ABN 61 354 551 576) at the Waranara School (but who are proposed to be employed by the Applicant) (Order).
After the filing of the application, I directed the Applicant to serve a copy of the application, the supporting material and the directions themselves, on the following:
(a) The other parties to the transferable instrument (i.e. the GSANZ Agreement);
(b) The transferring employees (as defined in the application);
(c) Any employee organisation that ordinarily represents the industrial interests of the transferring employees;
(d) The Australian Municipal, Administrative, Clerical and Services Union (being an organisation covered by the GSANZ Agreement).
The parties referred to above were then directed to file and serve any material in response to the application by 7 August 2024. Nothing was received from any of these parties by the specified date. The matter has been determined on the basis of written material supplied by the Applicant.
Legislation
Section 317 and 318 of the Act are in the following terms:
317 FWC may make orders in relation to a transfer of business
This Division provides for the FWC to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.
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.
Section 311 sets out the circumstances in which a transfer of business occurs. It is unnecessary to set the section out in full. The uncontested submission establishes that there are transferring employees (as defined in s.311(2)) in relation to a transfer of business (as defined in s.311(1)) which has occurred or is likely to occur[1]. The Applicant has standing to make the application under s.318(2)(a) and the proposed order is an order of the kind contemplated by s.318(1)(a). I turn then to consider the matters listed in s.318(3) to determine whether the proposed order should be made.
Submissions and Conclusions on the Statutory Criteria
The Applicant made the following submissions in relation to the statutory criteria set out in s.318(3).
Subsection 318(3)(a)(i) – views of the new employer, or a person who is likely to be the new employer
The Applicant is the proposed new employer and supports the making of the proposed order. The Applicant submits that the proposed order will:
a. give effect to its desire to ensure that all of its educational support staff are covered by a common set of terms and conditions of employment, and minimise any actual or perceived inequity that would result from inconsistent terms and conditions of employment applying to employees who perform the same or similar roles;
b. ensure that the Transferring Employees can access the more appropriate and beneficial conditions available under the Education Award, with concurrent protection via the assurances provided by MacKillop (and contractually) that:
(i)their terms and conditions of employment will be no less favourable on an overall basis compared to their existing terms and conditions of employment with GSANZ; and
(ii)they will not receive a reduction in their overall take home pay as a result of the order being made;
c. remove inefficiencies and the administrative and human resources burden associated with applying the terms of two different industrial instruments including additional administrative, human resources and payroll costs associated with maintaining two sets of conditions (from a rostering and payroll perspective) for employees performing the same sort of work side-by-side (and the accompanying and unnecessary industrial dislocation). It will also allow better integration across the business generally (and promote industrial harmony). This is an important consideration for a not-for-profit organisation like MacKillop who is obliged to spend its funds responsibly and in ways that help it achieve its charitable purposes; and
d. help to minimise potential discontent in the workplace, such as those associated with having the Transferring Employees and any non-transferring employees undertaking the same sort of work side-by-side and receiving different entitlements.
Subsection 318(3)(a)(ii) – views of the employees who would be affected by the order
The Applicant submitted that the employees favoured the making of the proposed order. They relied on the results of an anonymous survey conducted amongst the eight transferring employees in May 2024 in which seven of the eight employees voted to approve the making of the order. The Applicant said this result followed on from a process of consultation with those employees which included an in-person information session and presentation, an opportunity to ask questions about the effect of the proposed order and a written explanation provided to employees setting out the process, the rationale for the application, the commitments of the Applicant to the transferring employees and the key differences between the terms and conditions of the GSANZ Agreement and the Education Award. The Applicant said that as a result of the steps taken, it was apparent that the employees’ views in support of the proposed order as expressed in the survey results could be regarded as informed views.
The new employer is the Applicant for the proposed order. They favour the making of the order for the reasons given, each of which can be readily accepted as embodying the legitimate interests of the Applicant. I also accept that there has been an expression of majority support for the application by the employees affected by the order through the anonymous survey and that this should be taken into account in the determination of the application. The employees were given a further opportunity to express any views about the application when they were served with the application and supporting material. None of the employees chose to express any other views to the Commission about the making of the proposed order. I consider that the views of the new employer and the affected employees that have been provided favour the making of the order.
Subsection 318(3)(b) – whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment
MacKillop acknowledged that in some instances, employees may be disadvantaged by the proposed order. However, it was put that any such disadvantages must be weighed against both the advantages that will be conferred by the Education Award and MacKillop’s various assurances, including that no Transferring Employees will receive a reduction in their overall take home pay as a result of the proposed order being made and the benefits that will be offered to employees via contract (such as paid parental leave and superannuation) and via MacKillop’s existing policies (such as study leave, compassionate leave and salary packaging). These matters were said to mitigate the impact of those changes and to weigh in favour of granting the order sought.
The Applicant referred to the summary of differences which had been provided to staff and the commitments given by them to staff in the offers of employment set out in correspondence of 30 April 2024. These included a commitment from the Applicant to maintain current salaries in accordance with the GSANZ Agreement and to extend paid parental leave entitlements in accordance with that agreement.
The Applicant readily conceded (and conveyed to Transferring Employees in advance of the application) that in some respects the Transferring Employees may be disadvantaged by the order because of less beneficial terms in the Education Award. However, there are more beneficial provisions in the Education Award such as higher allowances and there are other conditions which are substantially similar. There are also beneficial entitlements in the GSANZ Agreement which the Applicant has committed to maintaining. Importantly, the maintenance of salaries at the current GSANZ Agreement rates is covered by this commitment as is the payment of superannuation on paid parental leave and an entitlement to 12 weeks parental leave. The Applicant also clarified that long service leave accruals for Transferring Employees would be according to the GSANZ Agreement until the date of transfer and at the NSW legislated standard thereafter.
The Applicant has taken positive steps to ameliorate some potential disadvantage to Transferring Employees by offering to maintain certain existing provisions from the GSANZ Agreement as term of their employment. This has likely contributed to employee support for the making of the proposed order. It also removes some concerns which might otherwise weigh against the making of the order. In the circumstances I regard the employee disadvantage criterion as a neutral consideration in the overall assessment.
Subsection 318(3)(c)- if the order relates to an enterprise agreement—the nominal expiry date of the agreement;
The Applicant pointed out that the GSANZ Agreement passed its nominal expiry date on 30 June 2019. They submitted that this factor weighs in favour of granting the Order sought, especially noting the various amendments to the Act and the Education Award since that time. The GSANZ Agreement was negotiated eight years ago. This is not a case of the application of a recently negotiated agreement which would otherwise apply as a transferrable instrument being displaced by the operation of an order. I do not consider that there is anything under this heading that weighs against the making of the proposed order.
Subsection 318(3)(d) - whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;
MacKillop submitted that if the GSANZ Agreement were to continue to apply to the Transferring Employees, this could have a negative impact on the productivity of its workplace because new non-transferring employees would be covered by different terms and conditions of employment. They said the negative impacts of this situation include the substantial additional administrative and operational burden which would be involved in applying the two different industrial instruments, including from a rostering and payroll perspective, as well as the need to manage a potential atmosphere of industrial discontent among employees caused by the differences between the two instruments.
The Applicant submitted that if the proposed order was not made (and the GSANZ Agreement continued to apply to the Transferring Employees), a substantial volume of additional inputs would be required to bring about essentially the same output, namely, an effective rostering and payroll system that applies to all Support Staff (see Coles Supermarkets Australia Pty Ltd [2020] FWC 3409 at [20]). MacKillop submitted that this factor weighs in favour of granting the proposed order.
I accept that there would be at least some additional input costs associated with setting up and maintaining a payroll system that accommodates the two industrial instruments, although there will also be differences between the rates and conditions of the Transferring Employees and any new employees employed under the Education Award because of the commitments given by the Applicant to the Transferring Employees. I accept that there is the potential for a negative productivity impact in having employees doing the same work in the same workplace engaged under separate instruments. These factors weigh in favour of the making of the proposed order.
Subsection 318(3)(e)- whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;
MacKillop submitted that it would incur economic disadvantage as a result of the GSANZ Agreement covering it, largely due to the administrative and operational burden brought about by administering the two different industrial instruments. Relevantly, as a not-for-profit charitable organisation, MacKillop aims to keep its administrative costs to a minimum so that it can ensure its resources can be maximised (to the greatest extent possible) to provide critical services to vulnerable members of the community.
The Applicant further submitted that it would be required to devote additional time and resources to set up and monitor compliance with the GSANZ Agreement in circumstances where it will also be required to administer and monitor compliance with the Education Award. MacKillop said it would also face the potential need to divert resources to assist in managing any potential atmosphere of disconnect (and/or industrial dislocation) amongst employees caused by the differences between these two instruments if the order is not granted.
Although I accept that there would be some administrative costs involved for the Applicant if the proposed order is not made, I do not consider that there is sufficient material for me to be positively satisfied that there would be significant economic disadvantage to the new employer. I regard this as a neutral consideration.
Subsection 318(3)(f) - the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;
MacKillop maintained that there is little business synergy between the two industrial instruments. Relevantly, the GSANZ Agreement is underpinned by the Social, Community, Home Care and Disability Services Award 2010 (SCHADS Award). This it was said, is unsurprising given that the GSANZ Agreement has coverage over much of GSANZ’s operations, which are (for the most part) appropriately captured by that award, such as its family violence support and advocacy work, parenting programs and other community services. However, the effect of this is that the conditions and classification structure included in the GSANZ Agreement is largely consistent with the conditions and classification structure which exists under the SCHADS Award rather than the Education Award.
The Applicant submitted that the Education Award was the “better fit”. They said it is an instrument that has been designed for the environment in which the “transferring work” is being performed, i.e. a school. It contains the more appropriate conditions and classifications for the work being performed at the Waranara School and is the instrument that will apply to any new support staff employed by MacKillop at the Waranara School.
The Applicant said that a clear example of the Education Award containing the more appropriate conditions is demonstrated by the treatment of non-term weeks. The Education Award enables an employee to choose whether to be paid only during term weeks or to be paid an adjusted salary and therefore receive payments throughout the school year (including non-term weeks). This is not an option available to employees under the GSANZ Agreement who receive no payment during non-term weeks (beyond their annual leave entitlements). This was said to be a key example of how the Transferring Employees are disadvantaged under the terms of the GSANZ Agreement as these employees do not have certainty of income and may have long periods of receiving no income at all.
I am satisfied that granting the order would result in greater business synergy as a single industrial instrument (the Education Award) would apply to all of MacKillop’s educational support staff employed at the Waranara School.
Subsection 318(3)(g) - the public interest.
MacKillop said it is an important charitable organisation that provides critical services to vulnerable and disadvantaged members of the community. They submitted that granting the proposed order will enable it to continue the important work currently being performed at the Waranara School to educate young people who have become disengaged from mainstream education, which is to the benefit of the public and naturally in the public interest. They said the granting of the application will also result in the achievement of industrial harmony for MacKillop’s support staff and provide improvements in employment conditions in a cost-effective way (so that a greater portion of MacKillop’s finances can be directed to providing critical community supports, instead of to administrative costs associated with running a charitable organisation).
Further, MacKillop submitted that it is generally in the public interest that a business is able to efficiently operate without unnecessary complications in its employment arrangements. On this basis, granting the application is consistent with the objects of the Act in that it balances the protection of employees’ terms and conditions of employment with MacKillop’s charitable interests in running its services as efficiently as possible so that it can divert a greater portion of its funds to supporting vulnerable members of the community.
Further, MacKillop submitted that given that the Transferring Employees will continue to be covered by the Education Award should the Commission make the order, that is, their employment will continue to be underpinned by the minimum employment conditions set by this Commission, there would be no public interest grounds against the order being made.
I accept the submissions of the Applicant and am of the view that the making of the proposed order would be in the public interest for the reasons given.
Applications of this kind involve an assessment of the desirability of departing from the default position provided for by Part 2-8 of the Act that the instrument follows the employees where there is a transfer of business. The objects of Part 2-8 dictate that there must be a balance struck between the protection of employees’ conditions of employment and the interests employers have in running their enterprises efficiently. Section 318 recognises the need for flexibility in some transfer of business scenarios provided an appropriate balance is achieved. Having regard to the conclusions I have reached in relation to each of the above matters I have come to the view that the application should be granted and the order made.
The Applicant asked that the order come into operation immediately upon the application being determined and no later than Friday 11 October 2024. Section 318(4), referred to above, restricts the time at which any order under s.318 comes into operation. The order accompanying this decision will reflect that requirement.
DEPUTY PRESIDENT
[1] Lend Lease Engineering Pty Ltd and Ors [2014] FWC 5499 at [11] to [14].
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