[2021] FWCA 235

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

MindChamps Early Learning 3 Pty. Limited
(AG2020/3718)

Educational services
COMMISSIONER JOHNS	SYDNEY, 19 FEBURARY 2021

Application for termination of the Stationbridge Group Australia Enterprise Agreement 2016.

[1] This decision concerns an application by MindChamps Early Learning 3 Pty Limited (Applicant/Employer) under section 225 of the Fair Work Act 2009 (FW Act) to terminate the Stationbridge Group Australia Enterprise Agreement 2016 (2016 Agreement). The Employer is in the business of early learning and preschool education.

[2] Amongst operating other centres the Employer trades as the following centres that are covered by the 2016 Agreement:

a) T/A MindChamps Early Learning @ Ropes Crossing,

b) MindChamps Early Learning @ Lane Cove, and

c) MindChamps Early Learning @ West Hoxton 3.

[3] The nominal expiry date of the 2016 Agreement was 15 November 2020.

[4] The Employer wants to terminate the 2016 Agreement. In summary, it contends that, termination of the 2016 Agreement will allow it to:

a) provide consistency and equity in the employment conditions of all Centres; and

b) increase services to local communications, and enable operational growth that provides job retention, increased employment opportunity and more flexible rosters.

[5] If the 2016 Agreement is terminated, employees covered by it will be covered by either the Educational Services (Teachers) Award 2010 or the Children’s Services Award 2010 (together, the Modern Awards).

[6] The 2016 Agreement covers both the Independent Education Union of Australia NSW/ACT Branch (IEU) and the United Workers Union (UWU) (together “the Unions”) and their respective members. The Unions oppose the termination of the 2016 Agreement.

The proceedings

[7] On 8 December 2020 I programmed the matter for hearing on 9 January 2021. However, after the filing and service of final submissions, the parties agreed that the application could be decided on the papers.

[8] Consequently, in coming to this decision, I have had regard to all the material filed in this matter, including the following:

Exhibit	Date	Document
1	3 December 2020	Form F24B Application
2	3 December 2020	Form F24C Declaration
3	11 December 2020	Statutory Declaration of Scott Spicer
4	24 and 26 December 2020	Employee attendance sign in sheets
5	22 December 2020	IEU Outline of Submissions
6	6 January 2020	Applicant’s Submissions in Reply

[9] It will be noted that no submissions or evidence was received from the UWU. On 8 December 2020 I directed that the Unions file material by 22 December 2020. On 18 December 2020 the UWU sort an extension of time to file its material. It proposed 5 February 2021. In making that application it did not outline what action (if any) it had taken in the previous 10 days to comply with the 8 December 2020 directions. I was not satisfied that the UWU could not have obtained some instructions from its members in that period (especially in the context of the maintenance of pay rates for existing staff and the maintenance of penalty rates and allowances). Consequently, I denied the UWU’s request for an extension of time.

[10] It should also be noted that I received no submissions or evidence directly from employees. In the 8 December 2020 directions they were provided with an opportunity to do so. That opportunity was communicated to them by Mr Spicer providing employees with a copy of the directions. On 11 December 2020 he declared that he had done so.

[11] The only views of employees were those provided by Employer. Mr Spicer provided undated screen shots of emails he had received from:

a) Rebecca Giordmaina, Acting Centre Director, Mindchamps Ropes Crossing,

“Hi Scott,

I am so sorry for my very late reply. Yes, our staff have appeared very positive to move towards the award and were very reassured with both you and Eloise answering their questions. No further questions have been asked in regards to this at this stage.”

b) Ashleen Sen, Centre Director, MindChamps West Hoxton 3

“Good afternoon guys,

Thank you for coming out yesterday.

After speaking to all the rooms, they are feeling quite reassured with not only your presence but specifically with the grandfathering principle being applied and the reintroduction of leave loading. Thus far there have not been any additional questions, I believe what needed to be asked had already been covered yesterday.”

[12] For obvious reasons the evidence proffered by the Employer is of little probative value. I give it no weight.

Legislative scheme

[13] Sections 225 and 226 of the FW Act provide:

“225 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;

“226 When the FWC must terminate an enterprise agreement

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 it is not contrary to the public interest to do so; and

(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:

(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and

(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”

The Authorities

[14] Since the decision of the Full Bench in Re Aurizon Operations Ltd 1 the authorities concerning s.225 applications are clear:

a) the FW Act enables and facilitates good faith bargaining, but does not mandate a result.

b) the FW Act does not intend that enterprise agreements operate in perpetuity,

c) after the passing of the nominal expiry date (NED) a party to whom an enterprise agreement applies may take steps to terminate it.

d) considerations of the public interest involve something distinct from the interests of the persons covered by the enterprise agreement.

e) the notion of public interest refers to matters that might affect the public as a whole including, but not limited to, such things the achievement or otherwise of various objects of the FW Act, employment levels, inflation, and the maintenance of proper industrial standards.

f) there is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its NED and collective bargaining in good faith.

g) a s.225 application involves an exercise of discretion.

Submissions

[15] The Employer’s Form F24B Application for termination of an enterprise agreement after the nominal expiry date was supported by a declaration made by Mr Scott Spicer, the Employer’s Senior Director Human Resources.

[16] In answer to the question “Explain why you believe that termination is not contrary to the public interest?” Mr Spicer explained that:

“There will be a grandfathering of the current pay rates to protect existing employees, ensuring there is no reduction in take home pay.

This grandfathering will include all pay rates, penalty rates and allowances (including the Centre/Assistant Director Allowances).

With the termination of the Agreement, existing employees will revert to the provisions of their relevant Awards:

• Educational Services (Teachers) Award 2010; and

• Children’s Services Award 2010.

The Agreement generally reflects the NES, although leave loading is not payable under the Agreement and instead is loaded into the pay rates.

MindChamps will grandfather the pay rates etc as stated above and reflect the NES in full including reintroducing the leave loading.

Maintain employment and existing hours across all three Centres. For the year to date financials (October 2020), our Cost of Sales exceeded our revenues at our Lane Cove Centre. This financial position has been ongoing and was exacerbated with the Agreement’s prescribed July pay rate increase of 3%, whilst all non-Agreement Centres received the legislated 1.75% increase. This is compounded with the need to recruit Casual staff for employee absences rather than accessing our existing employees within the three Centres, which impacts on labour costs. This limits MindChamps discretion on rosters and reduces the opportunity for employee within the three Centres to earn extra income through working at other MindChamps Centres.

MindChamps will be able to provide a consistent and equitable approach to all its 19 Centres.

Employees will have the ability to work across any of the MindChamps 19 Centres, which is currently blocked by the Agreement due to prescribing a different set of pay rates, allowances and conditions of employment.

With the nominated expiry date of the EBA now passed, MindChamps is seeking to increase services to these local communities (i.e. operational times), enabling operational growth that provides job retention and attraction through more flexible rosters, as well as provide more opportunity for employees to work at our other 16 Centres. This final point being a regular inhibitor for employees due to the prescribed laws regarding an employee working under two separate conditions with the one employer.

In consideration of the contracts of employment already in place at these three Centres, there will be an undertaking by MindChamps that those contracts will be replaced with new contracts that will reaffirm the maintenance of existing rates of pay, allowances etc, including the reintroduction of the leave loading entitlement which was deleted from the Agreement in lieu of a higher rate of pay.”

[17] On 22 December 2020 the IEU made submissions to which the Employer responded on 6 January 2021 as follows:

IEU	Employer
Public Interest
10. In determining whether the FWC should terminate an enterprise agreement, it must first be satisfied that the termination is not contrary to the public interest. The ‘public interest’ has been held to be ‘matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation and the maintenance of proper industrial standards. 2
11. The IEU submits that the termination of the Agreement is contrary to the public interest as it removes the broader benefits of the aims of the Agreement to uphold industrial standards.	It is noted that in lieu of the enterprise agreement, the applicable Awards provide the minimum requirements. These requirements ensure employees are suitably remunerated, there continues to be workplace safety and social protections, along with prescribed training and advancement opportunities. Pay rates and general conditions of employment whether via an Award or enterprise agreement are subject to minimum standards, yet these standards generally provide ‘decent’ work and work opportunities which to some extent remain the discretion of the employer. Our ability to align all 19 Centres (albeit with the existing three (3) maintaining their pay rates and conditions) ensures consolidation and a collective mindset.
12. One of the key aims of the Agreement is to provide a safe and secure working environment of all employees, contractors and clients. The Agreement achieves this aim by outlining policies and procedures which both the employee and employer has a responsibility and duty to comply with. These policies include: a. a commitment to healthy and safe working environment, b. the employer’s obligation to provide property and personal protective equipment, c. workplace anti-discrimination and d. Union recognition and consultation obligations.	A, B and C whilst not prescribed in detail with the applicable Awards to the extent found within the enterprise agreement, it is noted that A, B and C is still prescribed within the applicable Awards. Further, their application is implied into the employment contract sans industrial instrument and supported by the applicable government bodies that set benchmarks, guidelines and enforce the same. In respect to D ‘Union recognition and consultation obligations’, as already stated the rights pertaining to Union entry, access to employee files and representation of employees are (well) implied. Union recognition and consultation obligations have the necessary platform that currently exist via the various Acts and Regulations that cover A, B, C and D.
13. In addition to the above, the Agreement confers responsibility on the employer to provide an accredited training education program which includes the funding of two professional development programs annually. Ensuring that benefits such as these remain is essential for the improvement of teaching skills generally that advances the delivery of educational objectives.	MindChamps submits that it is committed to continuous improvement in the quality of care for children and safe work practices. Forming part of the MindChamps career path is either 100% paid or subsidized training, from traineeships to studying to become an Early Childcare Teacher. Further, MindChamps already has in place the opportunity to become an ‘International Principal’, which following further study will allow employees to work as Centre Directors within MindChamps Centres internationally. This MindChamps initiative is supported with the recent acquisition of a Registered Training Organisation which will provide the accredited training to support our employees with their career goals. The existing enterprise agreement prescribes educational opportunities, although it is noted that such opportunities remain at the discretion of the employer. From the enterprise agreement: cl. 6.1.2 Professional Development does not include graduate / secondary educational courses or programs of a Certificate, Diploma or Degree status which form part of an employee’s industry employment requirement. cl. 6.1.3 The annual work performance appraisal program shall operate to identify goals and build the knowledge, skills and experience of educators. Educational training program cl. 6.2.1 The employer shall identify and provide training education program appropriate to the Centre’s needs for the training and development of employees. cl. 6.2.2 Training courses shall be in compliance with recognised ACECQA and State or Territory accreditation standards. cl. 6.2.3 The employer will fund two professional development programs annually which may include first aid, cardiopulmonary resuscitation, emergency management and child protection programs. These courses are compulsory. It is noted the use of the word ‘may’, and the reality that these courses are compulsory and therefore more about maintaining credentials than developing a career within the Early Learning Sector. cl. 6.2.4 Individual educators who may wish to attend professional development program operated by an external provider, may make a request in writing to the employer for funding support. In assessing the funding application, the employer must take into account the financial cost to the employer, the nature and benefits of the program being offered, the overall direction of the Centre’s professional development plan for its educators, the personal development plan and best learning approach to meet the needs of the educator. There is clearly nothing of note prescribed with the existing enterprise agreement that would suggest it is more beneficial than the Award that would operate in lieu of it, notwithstanding MindChamps existing position on the promotion of training and development of its people.
14. The termination of the Agreement will also result in the removal of advantageous terms and conditions of employment for employees including five days of paid Domestic and Violence leave, flexibilities and return to work guarantee upon return from parental leave.”	The existing MindChamps employment agreements detail the provision of five (5) days’ paid Domestic and Family Violence Leave as follows: Full time and part-time employees experiencing domestic and family violence will be entitled to five (5) days of paid domestic and family violence leave per annum and where that leave is depleted up to two (2) days unpaid domestic and family violence leave on each occasion. A regular and systematic casual employee shall be entitled to one (1) day of paid and one (1) day of unpaid domestic and family violence leave on each occasion. The return-to-work flexibilities and guarantee of MindChamps are underpinned by the National Employment Standards.”
Reasonableness of termination
18. Firstly, contrary to the Applicant’s submission, the existence of an enterprise agreement assists in providing certainty of terms and conditions of employment for both the employer and the employee. This is because an enterprise agreement clearly outlines the terms and conditions of employment. The Agreement will therefore provide certainty of employee entitlements for employees particularly where there is a ‘grandfathering’ arrangement in place.	Contrary to the IEU’s submission regarding certainty, an enterprise agreement is prescriptive for the agreed term. Subsequent to its nominal expiry date an enterprise agreement can be benchmarked to the mutual benefit of employee and employer notwithstanding external forces that at best may influence negotiations, and at worst become detrimental to its ongoing viability due to factors from market forces to pandemics. The allure of quick fixes via the introduction of enterprise agreements to overcome everything from angst to maintaining equilibrium is motivating, but because of the everchanging landscape of the wants and needs of employees and employers over a four (4) year period is inevitable it often produces unintended consequences. For both employee and employer to be beholden to ‘those motivations’ so me four (4) years later is in itself contrary to the Public Interest. MindChamps submits that the enterprise agreement does not provide a grandfathering certainty, prescriptive laws and moral due diligence does in this respect.
19. Secondly, in respect to work opportunities across the Applicant’s early learning centres, the IEU submits that the existence of the Agreement does not prevent the Applicant from doing so. The Agreement does not prohibit the Applicant from offering other work opportunities. In any event, the Applicant has indicated an intention to continue to pay employees covered under the Agreement pursuant to a ‘grandfathering’ arrangement. Hence, the entitlements provided by the Agreement has no bearing on the Applicant’s decision to provide other work opportunities.	MindChamps submits that it accepts for the short term that a pay rate disparity will exist within the Centres. For the long term, MindChamps submits that providing two (2) separate pay rates for undertaking the same job task within the same Centre will have an adverse effect on employees, the employer and therefore the creation of such a division is contrary to the Public Interest. Unless long term MindChamps can zero out this derision, MindChamps will not have the option to advance opportunities within other areas of its expanding business.
20. Thirdly, in respect of attracting and retaining employees, the IEU submits that an enterprise agreement offers a more attractive employment package which has the effect of attracting and retaining employees. An enterprise agreement can only be approved by the FWC where it passes the ‘better off overall test’ in comparison to the applicable modern award(s)3. That is, the enterprise agreement offers greater entitlements for the employees compared to the modern award which has the practical effect of attracting and retaining more talented candidates to the workplace.	MindChamps submits the IEU’s argument that the ability to attract and retain employees due to this enterprise agreement is unqualified. The AI Group reported Labour turnover in their Economics Fact Sheet* for the 12 months to February 2019 across Australia as being 8.5%, this compared to a 30.1% turnover for the 2020 calendar year across the three (3) Centres. Further, whilst the enterprise agreement provided certainty before and during this unprecedented year of the pandemic, it did little to retain employees in comparison. *	21. Finally, the IEU does not concede that the Applicant will achieve consistency to roster and pay employees across all of the Applicant’s 19 early learning centres by terminating the Agreement. The Applicant intends to pay employees covered by the Agreement under a ‘grandfathering’ arrangement. The ‘grandfathering’ arrangement means these employees will be paid differently to other employees employed in the Applicant’s other early learning centres. The termination of the Agreement will not deliver consistency as submitted by the Applicant.	As submitted under Paragraph 19, the consistency MindChamps is pursuing is about focusing on providing more employment opportunities with an organisation that is undertaking an expansion. With an existing enterprise agreement in place that covers less than 13% of the employees, this pursuit will inevitably be inhibited. MindChamps submits that the termination of this enterprise agreement is not a means to an end, or that this is a fatalistic approach. This is only the first step in working towards a better and consistent business model that ultimately provides MindChamps with a level of discretion to initiate employee value propositions that deliver beyond the scope of the existing enterprise agreement for all employees across all 19 Centres.
22. Further, the IEU submits that administrative complexities are not valid reasons for terminating the Agreement and has no relevance to public interest considerations.	MindChamps submits that its Centre acquisitions of 19 within a three-year period, with differing pay rates and conditions of employment, as well as different pay periods requiring four (4) pay periods being processed each fortnight for 600 plus employees increases the risk of payroll inconsistencies. Payroll inconsistencies are of Public Interest, further such Public Interest has been fueled by pay discrepancies inadvertently made by organisations that are household names and which (understandably), have shone a positive light on the work of those Unions involved. The cost at the employee level and for the organisation can be detrimental to it ongoing viability, both of which are indeed of the Public Interest. MindChamps is a relatively young entrant into the Australian Early Education market, and consequently bears many risks and market forces, and is therefore averse to any unnecessary risks.
23. The IEU submits that the Applicant has not provided cogent reasons to terminate the Agreement.
24. There has only been four weeks since the date of the Agreement expiry and the Applicant agrees to continue to pay employees covered under the Agreement the current pay rates, penalties and allowances. For enforceability reasons, the IEU submits that the Agreement should not be terminated.	MindChamps submits there is no relevance with the maintenance that the enterprise agreement sustains enforceability, as it is clear with or without the enterprise agreement such enforceability is covered by MindChamps’ legal requirements to maintain the prescriptive pay rates, penalties and allowances.
25. The Agreement should not be terminated as it provides broader benefits for employees through the inclusion of workplace policies and procedures.	As per our submissions via Paragraph 11. and Paragraph 12.
26. When considering the above, the IEU submits that the termination of the Agreement is not reasonable as the impact of the termination on affected employees far outweighs the impact on the Applicant. Accordingly, the FWC should exercise its discretion and not terminate the Agreement.	MindChamps submits that at best this submission attempts to provide a wide ranging argument succinctly in the face of our application reaffirming its position to maintain the prevailing pay rates and conditions via a grandfathering arrangement. As already submitted via the application, the benefit gained with the termination of this enterprise agreement was overwhelmingly supported by those employees that are set to gain these benefits.

Consideration – s.226(a) - Is termination of the Agreement contrary to the public interest?

[18] Neither the Employer or the IUE raised issues that genuinely went to the public interest as opposed to the interest of the Employer and the employees respectively.

[19] The IEU attempted to characterise the effect on individual employees as a matter of public interest by reason of the removal of the broader benefits of the aims of the 2016 Agreement to:

a) uphold industrial standards, and

b) provide a safe and secure working environment of all employees, contractors and clients by outlining policies and procedures which both the employee and employer has a responsibility and duty to comply with

[20] These arguments were not persuasive.

[21] If the 2016 Agreement is terminated the Employer still has obligations under the Modern Awards and applicable work health and safety legislation to provide a safe and secure work environment.

[22] There is little public interest in this matter at all. The termination of the 2016 Agreement will have no effect on the public as a whole. It will not affect employment levels. It will not affect inflation. It will not affect the maintenance of proper industrial standards for the broader population. There are underpinning modern awards, as minimum standards, that will continue to cover the employees. Consequently, because the matter is invested with little public interest it cannot be contrary to the public interest to terminate the 2016 Agreement.

[23] As has been recognised in other matters “the longer the time after expiry of the nominal term the strong the case for termination.” 3 The 2016 Agreement commenced 4 years ago. At the date of this decision it passed its nominal expiry date around 3 months ago. The FW Act provides for termination. It cannot be assumed that enterprise agreements will continue unaltered forever. It might also be that in reverting to the Modern Awards it encourages enterprise bargaining. This would be consistent with the objects of the FW Act.

[24] For these reasons the Commission, as presently constituted, is satisfied that the termination of the 2016 Agreement would not be contrary to the public interest.

Consideration – s.226(b) – views and circumstances of the parties

[25] I am required to take into account the views and circumstances (including the likely effect of termination) on employees, each employer and each employee organisation. I do so below.

Employer	Employees	Employee Organisation
Views (s.226(b)(i))	Terminate Mr Spicer declared that: “From the Employer perspective, terminating this Agreement will: - Provide certainty for the Employees. - Provide opportunities for Employees to work at any of the Employer’s 19 Early Learning Centres, not just the three Centres underpinned by the Agreement. These benefits for the Employees are a definite Employee Value Proposition (EVP), which enables the Employer to better attract and retain Employees within a highly competitive employment market. The ability to roster and pay Employees across all 19 Centres based on a consistent approach will provide equity amongst the Centres, noting the grandfathering of existing pay rates, allowances etc that are currently prescribed in the Agreement. With no decrease in take-home pay, all rates and allowances being grandfathered and leave loading being re-introduced on top of their existing loaded rates of pay in lieu thereof leave loading, permanent employees will effectively earn more money than they would have had they continued under the Agreement. Programming hours will continue as per the Agreement and will increase based on needs at the Centre level and/or in accordance with the applicable Award conditions. The feedback generated from onsite consultations with the Employees and their Centre Directors regarding terminating the Agreement and moving to the Award have been very positive.”	No direct views received from any employees	Do not terminate
Consideration - Effect (s.226(b)(ii))	For new employees and (over time) the Employer will have a common set or terms conditions governed by contracts of employment and the Modern Awards across all centres. There will be administrative advantages. Across all centres the Employer will have greater rostering flexibility.	Current employees will receive maintenance of current pay rates. Employees will revert to the Modern Awards. Employees will receive leave loading. Employees will be provided with a greater opportunity to work across different MindChamp sites. I do not accept that there is a reduction in enforceable rights to training other than in respect of clause 6.2.3. D&FV leave will now be covered by the National Employment Standards.	There is no discernible effect on the employee organisations if the 2016 Agreement is terminated.
Finding	The effects on the Employer weigh in favour of terminating the 2016 Agreement.	The effects on the employees weigh in favour of terminating the 2016 Agreement.	This is a neutral consideration.

[26] Having considered all that I am required to consider under s. s.226(b), on balance the Commission, as presently constituted, is satisfied that it is appropriate to terminate the 2016 Agreement taking into account all the circumstances.

[27] In respect of existing employees there appears to be no discernible loss of any entitlements upon termination of the 2016 Agreement, and current employees will remain covered by a safety net of minimum entitlements and entitlements in excess of the Modern Awards under contract between them and the Employer.

Conclusion

[28] Having considered each of the matters I am required to consider under s.226 of the FW Act, I am satisfied that the termination of the 2016 Agreement is:

(a) not contrary to the public interest; and

(b) appropriate in all the circumstances.

[29] Consequently, I must terminate the 2016 Agreement.

[30] The Commission, as presently constituted, orders that the 2016 Agreement is terminated with effect from end of the next pay period after the date of this decision.

COMMISSIONER

Printed by authority of the Commonwealth Government Printer

1 [2015] FWCFB 540.

2 Re Aurizon Operations Ltd [2015] FWCFB 540 at [129] citing RE Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 138 IR 34 at [23].

3 Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union[2010] FWA 2434, [31]

MindChamps Early Learning 3 Pty. Limited