Main Sequence Innovation Services Pty Ltd

[2023] FWC 640

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

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

Main Sequence Innovation Services Pty Ltd

(AG2023/428)

Commonwealth employment
COMMISSIONER SIMPSON	BRISBANE, 17 MARCH 2023

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

An application has been made by Main Sequence Innovation Services Pty Ltd (the Applicant) to the Fair Work Commission (the Commission) for an order pursuant to s.318 and s.319 of the Fair Work Act 2009 (the FW Act).

The Applicant submitted that on or around 3 April 2023 (the Transfer Date) a transfer of business will occur under s.311 of the FW Act, and the Applicant will be the new employer of 11 transferring employees (the Transferring Employees).

Orders Sought

The Applicant is seeking the following orders (the Proposed Orders):

In accordance with section 318(1)(a) of the FW Act:
(a) The CSIRO Enterprise Agreement 2020-2023 (the CSIRO EA) does not cover, and will not cover, the Applicant and any transferring employees engaged by the Applicant to perform, or who are likely to perform, transferring work for the Applicant.

(b) The CSIRO Enterprise Award 2016 (the CSIRO Award) does not cover, and will not cover, the Applicant, and any transferring employees engaged by the Applicant to perform, or who are likely to perform, transferring work for the Applicant.
(c) Subject to section 318(4) of the Act, the orders will come into operation from 3 April 2023.

In accordance with section 319(1)(a) of the FW Act:

(d) The CSIRO Enterprise Agreement 2020-2023 does not cover, and will not cover, the Applicant and any non-transferring employees engaged by the Applicant to perform, or who are likely to perform, transferring work for the Applicant.

(e) The CSIRO Enterprise Award 2016 does not cover, and will not cover, the Applicant and any non-transferring employees engaged by the Applicant to perform, or who are likely to perform, transferring work for the Applicant.

(f) Subject to section 319(4) of the Act, the orders will come into operation from 3 April 2023.

Background

The Transferring Employees are currently employed by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and seconded to CSIRO Financial Services Pty Ltd (trading as Main Sequence) (Main Sequence).

The CSIRO is the Australian Government agency responsible for scientific research.

Main Sequence is a venture capital firm established by CSIRO to manage the CSIRO Innovation Funds. The CSIRO Innovation Funds invest in deep tech high growth start-ups with a connection to publicly funded research conducted by CSIRO. CSIRO is a significant investor in the various funds managed by Main Sequence. Other private sector investors who are limited partners in the current funds account for more than $470 million in funds under management.

The Transferring Employees provide investment management services for the CSIRO Innovation Funds.

Upon the establishment of Main Sequence, CSIRO provided the investment management services to Main Sequence by employing the Transferring Employees and seconding those employees to Main Sequence.

CSIRO has established the Applicant to provide the investment management services to Main Sequence in place of CSIRO. This is designed to:

(a) create a level of separation between CSIRO (as the primary investor in Main Sequence venture funds) and the investment managers. This is important because the funds under management have grown significantly, and there are now a number of investors (other than CSIRO) in the funds;

(b) provide flexibility for CSIRO to subsequently divest its ownership interest in the Applicant, as the manager of the funds, creating further separation between CSIRO and the investment managers.

Matters that must be taken into account by the Commission in making orders under s.318 and s.319 of the FW Act are contained within subsection (3).

s318(3)(a)(i) and s.319(3)(a)(i) - The views of the new employer or person who is likely to be the new employer

The Applicant submitted that this application is made as the CSIRO EA is a detailed and prescriptive document, which was drafted and negotiated to set the terms and conditions of a large organisation undertaking science and research, and not investment services for a venture capital fund. The Applicant further submits that the CSIRO EA is unsuited to the Applicant and the Transferring Employees because:

(a) the CSIRO EA does not reflect the terms of employment of employees in the venture capital investment industry;
(b) most of the Transferring Employees are employed in senior roles. With the exception of the "Analyst" position, the positions performed by Transferring Employees are not traditionally covered by awards. 10 of the 11 employees earn above the current high income threshold of $162,000 (and in most cases substantially above that amount);
(c) a number of the terms and conditions in the CSIRO EA set out detailed processes and procedures for managing employment matters which reflect the size, scale and diversity of CSIRO's workforce, but which are not suited to a small company providing investment management services to a venture capital fund;
(d) a number of the terms in the CSIRO EA are not relevant to the work of the Transferring Employees (including terms which provide for enhanced responsibilities allowance (clause 24), restriction duty (clause 26), shift duty (clause 27), diving allowance (clause 28), field work (clause 29), remote localities conditions (clause 30), the Australian Centre for Disease Preparedness (clause 31), Duty at Sea (Schedule 4)); and
(e) the salaries and classification level of most Transferring Employees mean that a number of the terms and conditions of the CSIRO EA relating to hours of work have no application. For example, none of the Transferring Employees are entitled to overtime in accordance with clause 23 of the CSIRO EA because all of the employees are classified above the level CSOF Level 4.

The Applicant submits that the CSIRO Award is unsuited to the Applicant and the Transferring Employees for similar reasons.

The Applicant submits that they are a small company with no dedicated human resources function and that the Applicant seeks to engage the Transferring Employees on terms that better reflect the nature of the work undertaken by investment managers.

If the CSIRO EA and/or CSIRO Award covered the Transferring Employees in their employment with the Applicant (or new employees performing transferring work), this would create inefficiencies, costs and unnecessary complexities in the administration of the Transferring Employees' employment terms and conditions.

s318(3)(a)(ii) and s.319(3)(a)(ii) – the views of the employees who would be affected by the order

The Applicant submits that the Transferring Employees support the Application and that a consultation process was undertaken with the Transferring Employees from 5 December 2022 to 22 December 2022 in relation to:

(a) the outsourcing of the services by CSIRO to the Applicant;
(b) the terms and conditions of the Transferring Employees' employment with the Applicant; and
(c) the Proposed Orders sought from the Commission for the Transferring Employees and the impact of those orders on the Transferring Employees' terms and conditions.

The Applicant further submits that the Transferring Employees attended a briefing on 13 December 2022 (A copy of the presentation is included at Attachment E). And that the Transferring Employees were given an opportunity to ask questions, which were responded to by CSIRO on behalf of Applicant (Attachment F).

Directions were issued on 2 March 2023 for the Applicant to serve a copy of the Application and a statement setting out a comparison of the existing conditions for affected employees compared to the conditions that would apply if the application were granted (including an attachment a template contract of employment), as well as a copy of the Directions. The Directions also provided that if any affected employees or the Community and Public Sector Union (CPSU) wished to be heard on the matter, they were to file any submissions and/or evidence in relation to the application by 13 March 2023. The Applicant confirmed, by way of email on 6 March 2023, that it had complied with the Directions. To date, no material has been received from any affected employees of the Applicant.

s318(3)(b) and s.319(3)(b) – whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment

The Applicant submits that all the Transferring Employees will be remunerated at the same level or higher than the rate at which they are currently paid by CSIRO. The rate of pay that each Transferring Employee will be paid upon commencement of employment with the Applicant is well in excess of the salary point for the Transferring Employee's classification under the CSIRO EA.

Further, the Applicant anticipates that any New Employees would be paid commensurate levels of remuneration, which would significantly exceed the rates under the Banking, Finance and Insurance Award 2020 (the BFI Award) (to the extent that it covered any New Employee).

Additionally, the Applicant submits that the contracts of employment provide that the Transferring Employees will be entitled to:

(a) equivalent amounts of annual leave, personal/carer's leave, maternity leave and parental leave to that which is currently provided in Part F of the CSIRO EA;
(b) long service leave in accordance with legislation;
(c) for employees other than the Analyst, a period of notice of termination between 2 and 6 months in duration (compared to up to 5 weeks under the CSIRO EA) and redundancy pay in accordance with the NES (compared to redundancy pay between 4 and 48 weeks under the CSIRO EA); and
(d) in the case of the employee in the Analyst position, notice of termination and redundancy pay in accordance with the CSIRO EA.

s318(3)(c) and s.319(3)(c) – if the order is in relation to an enterprise agreement – the nominal expiry date of the agreement

The CSIRO EA's nominal expiry date is 16 November 2023.

s318(3)(d) and s.319(3)(d) – whether the transferrable instrument would have a negative impact on the productivity of the new employer’s workplace

The Applicant submits that given the size of the Applicant's workforce (11 employees), there would be a negative impact on the productivity of the Applicant's workplace if the Proposed Orders are not granted, due to the requirement to administer the prescriptive terms of the CSIRO EA as identified above.

The potential application of the CSIRO EA will create inefficiencies and unnecessary complexities that will, in turn, hinder productivity.

The Applicant is a small employer and does not have dedicated human resources staff to administer these processes.

Granting the Proposed Orders would enable administrative simplicity, and would allow the Applicant to provide terms and conditions which better reflect the nature of the work they perform.

s318(3)(e) and s.319(3)(e) – whether the new employer would incur significant economic disadvantage as a result of the transferrable instrument covering the new employer

The Applicant submits that they are a small employer with no dedicated human resources capability. Therefore, setting up processes to administer the CSIRO EA for a discrete workforce would create an economic disadvantage to the Applicant.

s318(3)(f) and s.319(3)(f) – the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer

The Applicant submits that as they are covered by the BFI Award, there is a lack of synergy between the CSIRO EA and the BFI Award because the CSIRO EA covers employees who, amongst other things, perform scientific research, as opposed to the BFI Award which covers employees in the banking, finance, insurance industry.

The Applicant further submits that any non-transferring employees engaged by the Applicant are unlikely to be covered by the BFI Award because they will likely be employed in roles not traditionally award covered. Accordingly, while there are differences between the terms and conditions of the BFI Award and the CSIRO EA (and CSIRO Award), the Applicant submits that this is not a relevant factor in the circumstances.

s318(3)(g) and s.319(3)(g) – the public interest

The Applicant submits that it would be in the public interest to grant the Proposed Orders as they would provide the Applicant with greater flexibility and agility to manage a discrete, highly paid workforce, and would allow the Applicant to provide terms and conditions which are tailored to the nature of the work performed by the Transferring Employees and better reflect the terms and conditions of senior employees in the investment industry.

The Applicant further submits that the Proposed Orders are consistent with the objects of the transfer of business provisions of the FW Act, in striking a balance between the protection of employees' terms and conditions of employment and the interests of employers in running their enterprises efficiently without the burden of unnecessary complications in their employment arrangements.

Additionally, the Applicant submits that the Proposed Orders would support the CSIRO's objective of creating a level of separation between CSIRO (as the Main Sequence funds' primary investor) and the investment managers (being the Transferring Employees).

CPSU Submissions

The CPSU provided their views on the application. Reference was made to additional material filed by the Applicant on 6 March 2023 which provided an analysis and comparison of the CSIRO EA to the template contract. The CPSU noted that the information showed many superior rights and entitlements contained in the CSIRO EA and that information also included that one employee, an analyst, who would not ordinarily be classed as a ‘highly paid’ employee like others covered by this application, had beneficial redundancy entitlements from the CSIRO EA preserved in their common law contract.

The CPSU also notes, based upon the materials provided, most of the transferring employees are in receipt of remuneration packages well in excess of their classification under the CSIRO EA.

The CPSU advised that they, the CSIRO and management of Main Sequence met on 9 March 2023 to discuss the transfer of business application and CPSU concerns about a failure to be consulted upon the earlier decision to transfer employment of these employees from CSIRO to the Applicant. The CPSU was informed at this meeting by management that the Transferring Employees had received the additional materials and had conveyed their continued support to management for the transfer of business to occur.

On that basis the CPSU does not oppose orders sought by the Applicant.

Statutory provisions

Section 318 and Section 319 of the FW Act relates to the application sought by the Applicant. Section 318(3) and Section 319(3) of the FW Act sets out those matters the Commission must have regard to in determining if the orders sought should be granted.

Section 318 provides as follows:

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 319 provides as follows:

319 Orders relating to instruments covering new employer and non-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 non-transferring employee because of paragraph
314(1) does not, or will not, cover the new employer and the non-transferring
employee;

(b) an order that a transferable instrument that covers, or is likely to cover, the new employer, because of a provision of this Part, covers, or will cover, a non‑transferring employee who performs, or is likely to perform, the transferring work for the new employer;

(c) an order that an enterprise agreement or a modern award that covers the new employer does not, or will not, cover a non‑transferring employee who performs, or is likely to perform, the transferring work for the new employer.

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 non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;

(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 non-transferring employee before the later of the following:

(a) the time when the non-transferring employee starts to perform the transferring work for the new employer;
(b) the day on which the order is made.

Conclusion

I have considered each of the matters set out in sections 318(3) and 319(3) that are required to be taken into account in determining whether to grant the orders sought by the Applicant. I am satisfied that the statutory tests have been met for the granting of the orders. Orders will be issued separately and concurrently with this decision to operate from 3 April 2023.

COMMISSIONER SIMPSON

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Citations

Main Sequence Innovation Services Pty Ltd [2023] FWC 640

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[2023] FWC 640

17 MARCH 2023