MSF Sugar Pty Ltd T/A Maryborough Sugar Factory

[2019] FWCA 15

[2019] FWCA 15

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date

MSF Sugar Pty Ltd T/A Maryborough Sugar Factory
(AG2018/734)

MSF SUGAR LIMITED TRADING AS MARYBOROUGH SUGAR FACTORY AGRICULTURAL EMPLOYEES' ENTERPRISE AGREEMENT 2014-2017

Sugar industry
DEPUTY PRESIDENT ASBURY	BRISBANE, 2 JANUARY 2019

Application for termination of the MSF Sugar Limited Trading as Maryborough Sugar Factory Agricultural Employees' Enterprise Agreement 2014-2017.

BACKGROUND

[1] On 1 March 2018, MSF Sugar Pty Ltd (MSF Sugar/the Company) made an application to the Fair Work Commission (the Commission) to terminate the MSF Sugar Limited trading as Maryborough Sugar Factory Agricultural Employee’s Enterprise Agreement 2014-2017 (the Agreement) under s.225 of the Fair Work Act 2009 (the Act).

[2] The matter was initially allocated to Senior Deputy President Hamberger, who directed MSF Sugar to provide a copy of the Directions issued on 6 March 2018 to all employees covered by the Agreement and that any party opposing the application advise his Chambers by 27 March 2018. On 23 March 2018, the Australian Workers’ Union (AWU), an organisation of employees covered by the Agreement, notified of the Union’s opposition to the application and the opposition of MSF Sugar’s employees covered by the Agreement. On 26 March 2018, Mr Clinton Harper, an employee of MSF Sugar, also notified that he opposed the application.

[3] The matter was allocated to me and was listed for a further directions conference on 24 April 2018. Directions were made requiring the parties to file and serve material including outlines of submissions addressing the matters in s. 226 of the Act and witness statements of any witnesses setting out evidence the parties sought to rely on in support of or in opposition to the application.

[4] MSF Sugar filed its submissions and evidence on 9 May 2018. The material filed by the Company was in the form of a PowerPoint presentation that was used to communicate its position to employees and did not specifically address the provisions of s. 226 of the Act. The AWU filed its submissions and evidence on 31 May 2018. On 26 June 2018, MSF Sugar was directed to file further material specifically addressing s.226 of the Act. MSF Sugar filed further submissions on 3 July 2018 which essentially reformulated as a Word document the PowerPoint presentation previously submitted. The AWU was given an opportunity to file submissions in reply to those further submissions, but notified my Chambers on 9 July 2018 that the Union was content to rely on its initial submissions and evidence filed on 31 May 2018.

[5] The matter proceeded to hearing on 23 August 2018. At the hearing, MSF Sugar was represented by Ms Rebecca Morgan, Senior HR Manager, and Mr Trevor Crook, General Manager – Agriculture. The AWU was represented by Mr Benjamin Fullarton, Industrial Advocate. Both parties agreed prior to the hearing that no witnesses were required for cross-examination. As a result, the witness statements filed were tendered as exhibits and the parties spoke to their respective submissions.

[6] MSF Sugar tendered the following witness statements in support of the application to terminate the Agreement:

•  Statement of Jeffrey Atkinson, Chairman of Maryborough Cane Growers 1;

•  Statement of Greg Waldrop, Harvesting Supervisor 2; and

•  Statement of Erin Grevell, HR Advisor 3.

[7] The AWU filed the following witness statements from affected employees:

•  Statement of Don Gibson; 4

•  Statement of Peter Harvey; 5

•  Statement of Denbeigh Miles; 6 and

•  Statement of Matt Templeman. 7

[8] The application states that the nominal expiry date of the Agreement was 30 June 2017 and that the AWU is an employee organisation covered by the Agreement. 8 A statutory declaration of Erin Grevell, HR Advisor for MSF Sugar, was filed with the application which records the following matters as indicative that the termination of the Agreement was not contrary to the public interest:9

“Our proposal is to still pay well above the award and in some cases employees will be better off (rates or term of employment).

Our permanent employees will not lose any benefits other than collective bargaining.

The EBA currently makes our harvesting (in particular) unsustainable and with the EBA in place we would have to evaluate if we can continue harvesting ourselves or need to contract this out externally.”

[9] The statutory declaration also states that termination of the agreement would allow MSF Sugar: better flexibility in roles; to standardise harvesting in line with other farming operations; and to ensure its 24/7 harvesting operation remains sustainable, competitive and affordable. 10

[10] The AWU objects to the application, asserting that: the relevant circumstances do not support termination of the Agreement; the termination is opposed by both the employees and the employee organisation covered by the Agreement; and the termination would have a detrimental effect on employees covered by the Agreement. 11 The AWU also contends that the motive of MSF Sugar for seeking to terminate the Agreement is its desire to pursue individual flexibility agreements with employees and submits that the Commission could not be satisfied that it is not contrary to the public interest to terminate the Agreement.

LEGISLATION

[11] The legislative mechanisms by which an enterprise agreement may be varied or terminated are in Division 7 of Part 2–4 of the Act. Subdivision D of Division 7 of the Act contains provisions including provisions for the termination of an enterprise agreement after its nominal expiry date has passed. Relevantly, these provisions are as follows:

“Subdivision D—Termination of enterprise agreements after nominal expiry date

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;

(c) an employee organisation 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.

227 When termination comes into operation

If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”

[12] The Object of the Act in s. 3 is as follows:

“Object of this Act

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia's future economic prosperity and take into account Australia's international labour obligations; and

(b) ensuring 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; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g) acknowledging the special circumstances of small and medium-sized businesses.

[13] The Objects of Part 2-4 of the Act, in which the provisions for termination of enterprise agreements are found, are as follows:

171 Objects of this Part

The objects of this Part are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) making bargaining orders; and

(ii) dealing with disputes where the bargaining representatives request assistance; and

(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.

APPROACH TO CONSIDERING AGREEMENT TERMINATION

[14] The approach in relation to applications for termination of an enterprise agreement after its nominal expiry date has been set out in a number of Decisions of the Commission including Full Bench Decisions. The principles in the cases dealing with applications under s. 226 of the Act can be summarised as follows. The exercise of power under s. 226 of the Act is an exercise of discretion by the decision maker, 12 albeit it is a “narrow discretion” where the decision maker is required to make a particular decision if he or she forms a particular opinion or value judgment. However, it remains the case that the evaluative assessments required by s. 226 (a) and (b) allow a degree of latitude on the part of the decision maker as to the conclusions to be reached.13 Section 226 of the Act must be construed in a manner that is consistent with the language and purpose of the provision by reference to the language of the Act as a whole, the context, general purpose and policy of the provision are also an important means by which the meaning and effect of a provision is to be ascertained.14

[15] The approach to the assessment of whether the termination of an enterprise agreement that has passed its nominal expiry date is not contrary to the public interest was discussed in Aurizon. Relevantly, the Full Bench in Aurizon said:

“[129] Section 226(a) requires a consideration of whether termination of the agreements is not contrary to the public interest. It seems to us that a consideration of the public interest will involve something that is distinct from the interests of the persons and bodies covered by the agreements. This distinction seems to be reflected in the structure of s. 226. The question of how the public interest is to be assessed was considered by a Full Bench of the Australian Industrial Relations Commission in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000.  The decision in Kellogg Brown concerned an application to terminate a certified agreement pursuant to s. 170MH of the WR Act. The Full Bench observed:

‘The absence of any reference to the interests of the negotiating parties in s.170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include.

The notion of public interest refers to 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. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.’ 

[130] After considering the decision in Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia, the Full Bench in Kellogg Brown said:

‘It is clear from this passage that the ascertainment of the public interest may involve balancing countervailing public interests. That the Commission should take all of the circumstances into account is made clear by Dawson J in Re Australian Insurance Employees Union; Ex parte Academy Insurance Pty Ltd  [(1988) 78 ALR 466 at 467]. These authorities provide useful general guidance in the application of the test in s. 170MH(3). They illustrate the types of interests which can be properly described as public interests and confirm the breadth of circumstances which may be relevant to the ascertainment of those interests.

It should be emphasized that the Commission's consideration of the public interest for the purpose of s. 170MH(3) is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.’

[131] Section 226, unlike s. 170MH(3) of the WR Act, clearly requires the interests of the persons or bodies covered by an agreement to be taken into account. Those interests are considered separately from the question of the public interest, although it is accepted that these interests may nevertheless be similarly affected. It seems to us therefore, that the approach to the question of whether termination of an agreement is not contrary to the public interest in Kellogg Brown remains apposite.” 15 [Endnotes omitted]

[16] In relation to the construction of s. 226 of the Act in the context of the Object of the Act generally, as set out in s. 3, and the Objects of Part 2-4, in which s. 226 is found, the Full Court of the Federal Court of Australia in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd  16said:

“21. In their outline, the applicants identified the essence of that challenge as the Commission having “asked itself the wrong question and/or made an error of law”. On no view, however, did the Commission ask itself the wrong question. The questions posed by s 226 of the FW Act were specifically asked, and answered. As the applicants’ case was developed in argument, however, it became clear that the essence of their complaint was that the Commission misunderstood the way in which the objects of the FW Act informed the assessment of where the public interest lay under s 226(a). Specifically, it was said to be a jurisdictional error for the Commission to have perceived it to be an object of the FW Act to promote productivity per se, rather than, in the words of s 3, to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by, inter alia, achieving productivity through an emphasis on collective bargaining, or, in the words of s 171, to provide a simple, flexible and fair framework that enables collective bargaining in good faith.

22. We do not accept that the Commission made a jurisdictional error of this kind. Indeed, we consider that the answer to the applicants’ case in court has already been provided in the Commission’s own reasons. In our view, the Commission’s own description of the statutory environment which informed its task under s 226, as summarised in paras 15-18 above, was unexceptionable. Save to make the limited number of points which follow below, we would not wish to add anything to that description.

23. First, both s 3 and s 171 of the FW Act set out the objects of the provisions to which they refer (the FW Act as a whole and Pt 2-4 respectively). While the Commission would undoubtedly be required to exercise any otherwise unconfined discretion in a way that was not antagonistic to these objects, it must be remembered that the primary means by which the legislature sought to achieve them was to enact the detailed provisions of the FW Act itself. It will be the section, or group of sections, that applies directly that will most usefully indicate what it was the legislature was seeking to achieve in a particular situation. What the Full Court said about s 208 of the FW Act in Toyota Motor Corporation Australia Ltd v Marmara [2014] FCAFC 84;(2014) 222 FCR 152, 178-179 [86] was an instance of this approach.

24. Secondly, the importance of enterprise agreements in the regulation of terms and conditions of employment under the FW Act cannot be gainsaid. Neither can the central role of collective bargaining in that arena. But we would agree with the Commission insofar as it observed that there is no indication in the FW Act that the existence of a previously-negotiated enterprise agreement should, a priori, be regarded as providing particular encouragement to collective bargaining. Indeed, the legislation contemplates that, at least generally, once a new enterprise agreement has been made, it will apply to those covered by it at least until its nominal expiry date. Under such an environment of stable industrial regulation, what need there would be for further collective bargaining is not immediately obvious. This perception of the scheme of the FW Act is, of course, consistent with the terms of s 417 – and its companion provision, s 413(6) – which proscribe industrial action until the nominal expiry date of the applicable enterprise agreement.

25. Thirdly, and relatedly, the period after the nominal expiry date of an enterprise agreement is likely to be the very time that the parties concerned are engaged in serious, if not disputatious, collective bargaining. There is, of course, no suggestion in the FW Act that the relevant employer and its employees would not commence to bargain before, even well before, that date (as happened in the present case), but, if they do so and conclude the terms of a new agreement, the existing agreement will

cease to apply immediately it passes its nominal expiry date (s 58(2)(d)(ii)). Alternatively, if there is no new agreement until after the existing agreement has passed its nominal expiry date, the existing agreement will cease to apply when the new one comes into operation (s 58(2)(e)). In the context of an ongoing, single enterprise, business, the most obvious situation in which recourse might be had to s 226 of the FW Act would be where an existing agreement had passed its nominal expiry date (a jurisdictional fact under the section) but where no new agreement had been made. This is the very situation in which collective bargaining is likely to be proceeding; and it is the only time in which industrial action associated with such bargaining might be – subject to compliance with other statutory requirements – protected under Div 2 of Pt 3-3 of the FW Act. The proposition that, as a matter of statutory policy, there should be a predisposition towards regarding it as contrary to the public interest to terminate an enterprise agreement during a period when collective bargaining is taking place must, in the circumstances, be regarded as a most unlikely one.”

[17] Generally the Full Court of the Federal Court upheld the approach of the Full Bench in Aurizon in relation to consideration of whether termination of an enterprise agreement is not contrary to the public interest and balancing the various objects of the Act. It is also necessary to note that, notwithstanding the important role of collective bargaining, the approach in Re Tahmoor Coal Pty Ltd 17to the effect that collective bargaining is the central way in which productivity benefits are to be achieved was not endorsed in Aurizon by either the Full Bench of the Commission or the Full Court of the Federal Court, which upheld the Full Bench Decision on judicial review.

[18] I turn now to consider the approach to considering applications under s. 226 of the Act set out in a number of Full Bench Decisions involving appeals against first instance Decisions by Members of the Commission to terminate enterprise agreements – Re Aurizon Operations Ltd 18(Aurizon); Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd19(Peabody); Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Griffin Coal Mining Company20(Griffin Coal); and Construction, Forestry, Mining and Energy Union v AGL Loy Yang Pty Ltd t/as AGL Loy Yang21(Loy Yang). In all of these cases:

• The agreement in question had reached its nominal expiry date and such date was significantly earlier than the application for termination;

• The parties had been engaged in protracted and difficult negotiations for agreements to replace the agreements sought to be terminated, and had reached impasse;

• Other than in Peabody,applications had been made under s.240 of the Act and/or conferences had been conducted under the auspices of the Commission to attempt to assist the parties to reach agreement, with no agreement being reached;

• The agreements in question had either been inherited by the employer from a previous entity and/or contained long standing provisions that had been negotiated in a different business environment to that which applied at the time the termination was sought;

• Evidence of the business environments in which the agreements in question operated was provided so that the Commission could form a view in relation to this matter;

• Evidence from the employer parties about agreement provisions which were an impediment to productivity, and their relevant effects, was placed before the Commission sufficient for a view to be formed as to whether this was the case and what the likelihood was of the provisions being removed as part of negotiations for a replacement agreement;

• The employers placed evidence before the Commission sufficient for a view to be formed that their desire to remove or amend certain provisions in the negotiations for a replacement agreement was reasonable;

• The Commission was satisfied that bargaining would continue after the termination of the agreement or that termination would either not discourage bargaining or would positively impact on the ability of the parties to reach agreement; and

• In some cases undertakings in relation to maintaining agreement provisions or wage levels were provided by employers seeking to terminate agreements;

[19] There are a number of other cases decided by Members of the Commission where employers have sought to have agreements terminated in circumstances where it is contended that the employer was not competitive or was in financial difficulty because of the rates and conditions in the agreement and the applications to terminate have been refused. 22 There are cases where agreements were terminated in circumstances where the Commission was satisfied that employees would be better off under a relevant modern award than they would be under the agreement23 or where the vast majority of employees (some 450) were employed under other instruments and only three employees were employed under the relevant (change to ‘an’) agreement which had long passed its nominal expiry date24 or where the employer had receivers and managers appointed.25

[20] The cases establish that each application must be decided on its own particular facts and circumstances. Consideration of whether the termination of a particular agreement is not contrary to the public interest must be undertaken in the context of the objects of the Act and in a manner that gives weight to the interests of the parties directly involved and the public as a whole. Circumstances in which the termination of an enterprise agreement will be considered as not contrary to the public interest and appropriate, are not limited to cases where it is established that the agreement in question is an impediment to the making of a replacement agreement providing for productivity benefits or where the Commission is satisfied that the termination of an existing agreement will encourage bargaining. There is no presumption that termination of an enterprise agreement is, of itself, in the public interest unless the Commission is satisfied to the contrary. 26

[21] Aurizon, Peabody, Griffin Coal and Loy Yang simply establish that, where an employer can demonstrate the terms of an expired agreement are hindering the making of a new agreement or inhibiting productivity improvements, the Commission may be satisfied that it is not contrary to the public interest to terminate the Agreement and that it is appropriate to do so in those circumstances. It is axiomatic that in those cases, public interest considerations such as the interests of the public in the achievement of the objects of the Act in relation to encouraging the making of an enterprise agreement to achieve productivity benefits, outweighed the interests of the employees in maintaining their existing terms and conditions of employment or the strength of their bargaining position. There are other cases where the safety net created by a modern award and the National Employment Standards (NES) exceeds the terms and conditions of an expired enterprise agreement and that termination will not be contrary to the public interest on that ground.

[22] However, while the importance of enterprise agreements and the role of collective bargaining in the regulation of terms and conditions of employment under the Act cannot be gainsaid, those matters will not automatically outweigh other considerations which are also consistent with the Objects of the Act. There may be cases where it is appropriate to terminate an enterprise agreement in circumstances where there is no likelihood that a new agreement will be made. For example, where it is established to the satisfaction of the Commission that the terms of an enterprise agreement will likely cause an employer to lose work or cease to be competitive in the market in which the employer operates, it may be found that it is not contrary to the public interest to terminate the relevant agreement even where there is no immediate or even medium-term prospect that a replacement agreement will be made so that the employer can continue to operate and to employ persons. However, in such cases, evidence would be required from the employer to establish that public interest considerations associated with the objects of the Act in relation to encouraging collective bargaining were balanced by some other consideration such as termination of the agreement being consistent with the maintenance of a guaranteed safety net of terms and conditions, and/or the special circumstances of small to medium-sized business, and/or national economic prosperity, and/or social inclusion through maintaining employment of employees of that employer.

[23] The termination provisions in s. 226 of the Act are not intended to be the first port of call for employers dissatisfied with the terms of enterprise agreements they have previously entered into. As the Full Court of the Federal Court said in Aurizon, the importance of enterprise agreements in the regulation of terms and conditions of employment and the central role of collective bargaining in this area cannot be gainsaid. The fact that in considering whether to terminate an agreement the Commission must be satisfied that termination is not contrary to the public interest is a clear indicator that more than mere dissatisfaction with the terms of an agreement is required to be established. In deciding whether termination is not contrary to the public interest and in considering whether it is appropriate to terminate an agreement taking into account all of the circumstances including those in s. 226 of the Act, the motives and conduct of the parties in seeking or opposing termination and the consistency of these motives with the objects of the Act are relevant. Motives and conduct may include whether reasonable attempts to negotiate a replacement agreement using the good faith bargaining provisions of the Act have been made.

EVIDENCE AND SUBMISSIONS

MSF Sugar

[24] MSF Sugar submits that it is not contrary to the public interest to terminate the Agreement on the basis of the important role played by MSF Sugar Farms in forging a sustainable sugarcane industry on the Fraser Coast. Without change to the Agreement, reduction in harvesting costs and flexible working conditions, MSF Sugar is unsustainable and would need to close part of its operations. MSF Sugar emphasised that the Maryborough Sugar Mill relies on its cane for 30% of the Mill’s throughput and that without MSF Sugar Farms the Mill may no longer have enough cane supply to be viable. MSF Sugar also emphasised its role in advancing best management practices for the industry.

[25] It is vital that MSF Sugar Maryborough Farms has a sustainable and profitable business. Through the current enterprise agreement it has unsustainable labour costs, in particular for harvesting, that have also set unrealistic benchmarks for other harvest contractors and growers which are increasing their production costs. The Company’s significantly out of proportion labour costs is one of the main contributing factors impacting its economic sustainability.

[26] The sugarcane industry is a major economic driver in the Fraser Coast region. In this regard, MSF Sugar submitted inter alia that it directly employs 130 people, provides financial support for around 600 Fraser Coast families and generates around $50 million in export sales each year. MSF Sugar submits that, without a reduction in harvesting labour costs and more flexible working conditions, it will need to close this part of the business and engage a contractor who can access lower market rates to attract and retain a harvesting crew. 27

[27] In relation to the views of employees, the employer and employee organisations, MSF Sugar outlined the history of the Agreement. According to the submissions the enterprise agreements go as far back as 1993 for the field sector in Maryborough and since 2008 agreements have been standalone with no fall back provisions in relation to the Award. In 2008 the business implemented a best practice farming system and, to take control over harvesting systems, employed 3 to 4 seasonal harvesting workers for a day operation only. Harvesting employees were first added to the Agreement as an employment category in July 2012. Prior to this time, all of MSF Sugar’s harvesting was contracted out and the Agreement was designed to suit MSF Sugar’s farm workers. 28 MSF Sugar eventually moved to a full-scale, 24/7 harvesting operation with harvesting employees paid as casuals under the current Agreement. There are 17 employees employed on that basis. This is said by MSF Sugar to be the cheapest option for harvesting employees but still more expensive than the provisions of the Sugar Industry Award 2010 (the Award) which allows for a single contract hourly rate and piecework.

[28] MSF Sugar submits that 24/7 harvesting operations require more cost effective overtime and shift penalty rates, such as those available to the its competitors under the Sugar Industry Award 2010 (the Award). 29 The Agreement reached its nominal expiry date on 30 June 2017. MSF sugar has not commenced bargaining for a new agreement and accepts that it has made no attempt in this regard. The Company consulted with its workforce commencing in February 2018 and advised of its intention to apply to the Commission to terminate the Agreement. MSF Sugar also states that the AWU has not provided a log of claims and has advised that it will never recommend that members accept a reduction in wage rates and conditions.

[29] MSF Sugar states that it is bound to an existing enterprise agreement that has unfavourable conditions and that termination of the Agreement will allow the Company to achieve productivity gains and build a sustainable business now and into the future. The Company also states that it is not opposed to collective bargaining and would be willing to begin negotiations for a new agreement, should its workforce desire this, once the Agreement is terminated. In relation to its objectives, MSF Sugar states that these include simplified and flexible employment terms for field workers and lower cost but sustainable pay rates that are both competitive and affordable.

[30] MSF Sugar proposes to achieve these objectives by offering new contracts, based on the Award and the NES, with separate individual flexibility arrangements for:

•  Permanent employees (Farm, Maintenance and Harvesting);

•  Fixed term farm employees; and

•  Seasonal harvesting employees. 30

[31] In relations to options going forward, MSF Sugar lists the following:

•  Agreement is terminated and we continue to operate under more competitive employment arrangements;

•  Contract out all harvesting operations;

•  Contract out the work using MSF Sugar equipment; or

•  Contract out all harvesting and farm work. 31

[32] MSF Sugar also submitted information provided to employees in relation to their pay rates if the Agreement was terminated, proposing a higher base rate and indicating that if farm employees worked the same hours under the Company’s proposal they would receive an increase in “total remuneration” while harvesting employees would receive rates slightly lower than the current casual rate but would be employed on a full time seasonal basis and would still be paid in excess of the Award. A timeline of discussions in relation to the application to terminate the Agreement set out in Appendix 1 of the submissions indicates a series of meetings and discussions were held with employees over the period 5 February to 11 May 2018, at which a variety of matters were raised including: why the Agreement was no longer fit for purpose; the Company’s preference for individual contracts paired with IFAs; advice to employees that the Company did not wish to renegotiate the Agreement and that a log of claims was not sought from employees or the AWU; and the AWU’s position that it would not agree to reduction of earnings or conditions.

[33] MSF Sugar submits that termination of the Agreement will benefit employees on the basis that its proposal for individual flexibility agreements will provide more full-time positions within the organisation, less casual hours and higher base rates of pay for farm employees, whilst enabling the Company’s harvesting employees to remain employed. 32

[34] In oral submissions MSF Sugar indicated that it wishes to terminate the Agreement and “to reset” by redesigning employment arrangements with its employees with reference to the Award. MSF Sugar intends to use the individual flexibility agreement provisions of the Award to allow harvesting employees to work more than 38 hours under a single contracted hourly rate. 33

[35] MSF Sugar states that it is not opposed to collective bargaining and is aware that it is a concern for employees. 34 However, MSF Sugar intends to pursue the current application, rather than enter into bargaining for a new agreement, as the growing costs of the business and resulting losses are “a burning platform for us”.35 At the hearing, MSF Sugar clarified that proposed rates of pay in the event that the Agreement is terminated had been outlined in the Company’s written submissions and that the Company was comfortable giving an undertaking to the Commission that these would be the rates of pay, as such an undertaking had already been provided to employees.36

[36] Evidence given by witnesses for MSF Sugar can be summarised as follows. Mr Atkinson is the Chairman of the Maryborough Cane Growers and has grown sugar cane in the region for over thirty years. Mr Atkinson supports MSF Sugar’s application to terminate the Agreement to ensure that the Company’s involvement in the sugar industry can continue and to reduce the market pressure of unsustainable labour costs on the local harvesting and growing sector. Mr Atkinson maintains that, given the importance of the sugar industry in the Maryborough region, it is in the public’s best interests that the Agreement be terminated.

[37] Mr Waldrock, the Harvesting Supervisor for Maryborough Farms, also supports the application for termination of the Agreement on grounds that:

• It will allow more employees to be converted to permanent employees offering job security;

• It will enable MSF Sugar to offer employees dual roles so that there is a consistent and skilled workforce;

• The proposed contracts and individual flexibility agreements based on an average scenario would mean an increase in gross earnings for most employees;

• Harvesting costs will be realigned and unrealistic expectations for labour cost benchmarking reduced;

• While proposed contracts and individual flexibility arrangements would mean a decrease in harvesting earnings employees would be offered better security, paid leave entitlements and guaranteed minimum hours;

• MSF Sugar will be able to pay employees on the basis of merit, experience, skills and performance consistent with the desire that many have expressed to this effect;

• MSF Sugar harvesting operations will be assisted to become viable and sustainable; and

• It will allow MSF Sugar to realign with other MSF farming regions which already have these employment terms and conditions in place.

[38] Ms Grevell is the HR Advisor for the MSF Sugar’s Maryborough farms along with farms in the South Johnstone and Tableland regions. According to Ms Greville, both South Johnstone and Tableland farms employ with individual contracts and in some cases individual flexibility agreements. Employees under these arrangements are employed on a single contracted hourly rate with ability to work up to 60 hours per week when needed. That hourly rate is significantly lower meaning the cost and employment terms of MSF Sugar’s farming business in Maryborough is uncompetitive and unsustainable.

[39] Ms Grevell also states that the classification system in the Agreement allows for two pay levels and most employees are at level 1 and unable to be reclassified to level 2 because of the criteria. Without the Agreement MSF Sugar could employ and retain talent based on merit, skills, experience and performance. Ms Grevell’s belief is that individual bargaining would allow employees to better themselves and further their careers without being tied to a collective agreement.

[40] The farming business in Maryborough needs to establish a more permanent workforce and plans to do so if the Agreement is terminated so that the Company can offer sustainable roles in the crushing seasons and the maintenance and planting season and permanent roles that will offer security for employees as well as a cost effective workforce for the business. Employees who could fill such roles if the Agreement was terminated have already been identified. Ms Grevell also states that she has been approached by and had private meetings with some employees to discuss the proposed options. Those employees are more concerned with having permanent work and understand the business is unsustainable. They also support the concept of individual contracts and are comfortable with not having collective bargaining.

[41] It is Ms Grevell’s firm belief that MSF will not be able to continue some of its farming operations if it cannot change the way employees are employed and the current rates of pay and that this will result in loss of jobs and income for internal and external stakeholders.

AWU

[42] The AWU submits that it commenced bargaining with MSF Sugar for a new enterprise agreement on 5 October 2017. After some delay an initial bargaining meeting was held on 12 February 2018. 37 At that meeting the AWU presented a Log of Claims. At the hearing, it was clarified that the log of claims was presented verbally.38 The AWU states that MSF Sugar advised at that meeting that it wished to pursue individual flexibility agreements with employees.39

[43] At a later meeting on 4 May 2018, MSF Sugar advised of its intention to terminate the Agreement. The AWU submits that there have been no further attempts by MSF Sugar to participate in bargaining. 40 The AWU submits that the application should be understood in the context of the MSF Sugar’s desire to pursue individual flexibility agreements, as opposed to an enterprise agreement.41 In relation to public interest the AWU submits that the Commission should only consider those consequences which are clearly foreseeable rather than speculate about potential possible consequences as relevant to s.226(a) of the Act.42 

[44] The AWU submits that it does not consider sections of the MSF Sugar’s business closing as a result of the Agreement not being terminated as a likely foreseeable consequence. The AWU submits that there has been no evidence led to demonstrate that this would be an immediate consequence of the Agreement not being terminated other than general references to unsustainable labour costs. 43

[45] The AWU submits further that a likely consequence of allowing the application is that it may set an unfortunate industrial precedent whereby employers are able to terminate agreements without first attempting to bargain for a new agreement. The AWU contends that this would weaken industrial standards in Australia by placing agreements at risk of termination in situations where employers simply want to avoid the inconvenience of bargaining for a new agreement because they are unhappy with the terms of the current one. Further, the AWU submits that the Commission terminating the Agreement would be contrary to the public interest and the objectives of the Act; namely, to promote fairness in enterprise-level collective bargaining. 44 In relation to the relevant circumstances, the AWU submits that the Commission must only terminate an agreement when satisfied that it is appropriate to do so taking into account all the circumstances, as provided in s.226(b) of the Act.45

[46] The AWU acknowledges that the decision in Aurizon Operations Limited & Aurizon Network Pty Ltd and Another 46 540 provides that an agreement may be terminated in circumstances where an employer is bound by an agreement that has unfavourable conditions that makes terminating the agreement necessary to achieve productivity gains.47 However, the AWU submits that in the present case the failure of MSF Sugar to demonstrate a need to terminate the Agreement and to engage in bargaining for a new agreement makes it inappropriate to terminate the Agreement. The AWU further submits that the present case can be distinguished from Aurizon.48In this regard, the AWU points to the fact that MSF Sugar has made clear its desire to avoid continuing negotiations for a new enterprise agreement in contrast with the facts in Aurizon where meetings had taken place prior to the termination application and with the assistance of the Commission.49 Further, the AWU points to MSF Sugar’s clear statement that it wishes to place employees onto individual contracts based on the Award. The AWU submits accordingly that it is highly unlikely that MSF Sugar will agree to bargain should the Agreement be terminated.50

[47] The option of continued negotiation and collective bargaining will also not be available to the employees should the application be granted and Aurizon can be distinguished further on this basis. 51 The AWU submits further that the Union and its members are ready and willing to constructively bargain for a new agreement through the usual process. In this regard, an application has already been lodged by the AWU under s. 240 of the Act seeking the assistance of the Commission in negotiating a new agreement.52 At the initial conference in relation to that application, the AWU was again advised by MSF Sugar that it had no interest in participating in discussions in relation to a new agreement and simply wished to terminate the Agreement.53

[48] The AWU submits that s.226(b)(i) establishes that the views of all parties to an agreement, including employees and employee organisations, are of relevance in determining an application to terminate an agreement. The AWU has consulted with its members and workplace delegates regarding the termination application. The AWU states that each employee is concerned that a loss of collective bargaining will significantly reduce the capacity of employees to negotiate for pay and conditions that are fair and reasonable, both now and in the future. Employees are also concerned about a potential loss of wages, lack of detail provided for individual flexibility agreements and job security. The AWU further states that employees are willing to negotiate in good faith for a new agreement. 54

[49] The AWU submits that the effect of terminating an agreement on the workforce is relevant to considering whether or not to grant an application to terminate, as per s.226(b)(ii). If the Agreement is terminated and replaced with the individual flexibility agreements sought by MSF Sugar employees will lose their ability to collectively bargain and take industrial action when negotiating terms and conditions of employment. 55

[50] The AWU also submits that the termination of the Agreement will likely see employees experience a reduction in conditions and pay. The AWU bases this submission on the absence of any undertakings by MSF Sugar to maintain certain conditions and wages in response to concerns regarding the effect of the termination. The AWU submits that any reduction in wages would have a marked effect on a workforce that is already relatively low-income in nature. 56 The AWU states that Aurizon can be further distinguished on these grounds, as the employees in that case did not lose the right to collectively bargain and were given an undertaking by the employer to preserve wages and conditions.57

CONSIDERATION

Section 226(a) – not contrary to the public interest

[51] In support of the contention that termination of the Agreement is not contrary to the public interest, MSF Sugar points to the Company’s important role in forging a sustainable sugar cane industry and the economic importance of the sugarcane industry to the Fraser Coast economy. The Company also points to the 130 persons it employs and the 100 private cane growers who are partners in the industry. Further, MSF Sugar essentially contends that if the Agreement is not terminated, the Company will not be economically viable and will need to consider a number of options including to close the harvesting part of its business and hire a contractor who can access lower market rates and retain harvesting crews.

[52] I accept that the sugar industry is important to the economy of the Fraser Coast. However, I do not accept that MSF Sugar has established that there is a sufficient connection between the economic viability of its farming business and the economy of the Fraser Coast so that it could be said that the public interest is engaged. The matters raised by MSF Sugar in relation to the public interest are matters that relate primarily to its own interests. In short, MSF Sugar wishes to reduce the cost of its harvesting operations by terminating the Agreement which it maintains prescribes rates that are higher than market rates and creates inflexibilities with respect to hours of work and other conditions for harvesting employees.

[53] The evidence does not establish that the Company will cease operations in its entirety if the Agreement is not terminated. Rather the evidence is that harvesting operations are of particular concern. The Company ceasing all of its farming operations is one of the options it is considering to address its concern. Another option is that if labour costs associated with the Company’s harvesting operations cannot be made sustainable, that part of its operations will cease. However the harvesting operations will not cease altogether. There is no evidence to suggest that cane will not be harvested and supplied to the Mill for processing. Rather, the evidence is that the cane will be harvested by contractors rather than by direct employees of MSF Sugar. While this will affect the interests of MSF Sugar and its employees, it will not affect the public interest.

[54] Even if I am wrong in this view, MSF Sugar has not placed any evidence before the Commission about its costs of harvesting compared to costs if a harvesting contractor was engaged. There is no evidence about the competition in the harvesting sector faced by MSF Sugar. At best, the Company has made bare assertions about these matters such that I cannot be satisfied that there are any economic considerations beyond those particular to the parties to the Agreement, associated with the termination of the Agreement that are of significance in assessing whether it is not contrary to the public interest to terminate the Agreement. There is no evidence of the financial circumstances of MSF Sugar upon which it could be concluded that its operations would cease or be reduced if the Agreement was not terminated or that the cessation of its operations would have an impact beyond the Company and its employees.

[55] The present case can distinguished from Aurizon and other cases where agreements have been terminated. In Aurizon, in relation to public interest, there was evidence before the Commission about the impact of terminating or not terminating the relevant agreement on parties other than the parties to the agreement. That evidence included details of the economic and business environment in which the employer operated including the competition it was subject to. In the present case, MSF Sugar has made assertions which at best deal with its own interests and has provided no evidence about market conditions or competitive pressure. The assertions are not sufficient to establish that the public interest is engaged in relation to the application to terminate the Agreement. Further, MSF Sugar has not placed any evidence before the Commission about the terms of the Agreement which it asserts are an impediment to the achievement of productivity benefits. It is also the case that there has been no effort made by the Company to negotiate about these alleged impediments.

[56] Further, it is relevant that MSF Sugar is not seeking to terminate the Agreement so that it can make a replacement agreement. While this is not fatal to a termination application, the Company’s position is not consistent with the objects of Part 2-4 of the Act to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits or, in s.3 by achieving productivity and fairness through an emphasis on enterprise-level collective bargaining. This weighs against termination of the Agreement and the Company has not placed evidence before the Commission to establish that termination of the Agreement would be consistent with some other object of the Act that would counter this consideration.

[57] There is also no evidence before me in relation to exactly what provisions of the Agreement MSF Sugar maintains are impeding its productivity, in order for an assessment to be made as to whether it is reasonable for the Company to seek to remove those provisions. These alleged impediments are not apparent from a plain reading of the Agreement. If MSF Sugar wishes to implement individual flexibility arrangements with employees covered by the Agreement then it can do so under the terms of the Agreement. It also appears that the Agreement provides for hours in excess of 38 per week and for various types of employment. If the Company chooses to contract out its harvesting operations then that is a matter for the Company and a scenario which the AWU, as bargaining representative, and the employees are well aware of – via the Company’s communications – and have presumably weighed up in maintaining their opposition to the termination of the Agreement.

[58] The fact that the AWU has indicated that it will not agree to the alleged impediments to productivity in the Agreement being removed is also not determinative in circumstances where there have been no meetings between the parties since the Agreement expired on 30 June 2017 which in any way resemble meetings for the purpose of negotiating a replacement agreement. The AWU may be prepared to negotiate about provisions which will increase productivity to maintain the employment of its members notwithstanding its advice to the contrary provided to MSF Sugar. Further, the AWU has established that it does wish to negotiate by making an application under s. 240 of the Act seeking the assistance of the Commission to make an agreement with MSF Sugar. MSF Sugar indicated that it did not wish to participate in those negotiations and that it would press its application for termination of the Agreement. The file in relation to that application has not been closed and it can be reactivated. None of these matters weigh in favour of a finding that termination of the Agreement would not be contrary to the public interest.

[59] Not only has MSF Sugar adopted an attitude to bargaining which is inimical with some of the Objects of Part 2-4 and of the Act, the Company has also failed to put any evidence to the Commission of a business or economic imperative which could provide a basis for a finding that termination of the Agreement would not be contrary to the public interest on the basis that the termination of the Agreement would improve the productivity or viability of the Company. There is no evidence that the Company will lose a contract or suffer some immediate and significant competitive disadvantage if the Agreement is not terminated.

[60] In all of the circumstances I am not satisfied that it is not contrary to the public interest to terminate the Agreement.

Section 226(b) – appropriate to terminate the agreement

[61] Given my finding above, it is not necessary for me to consider whether it is appropriate to terminate the Agreement. However, for completeness I make the following findings. In relation to the views of employees, there is evidence which I accept, that employees do not support the termination of the Agreement. Given the submissions of the Company, it is clear that at least in their view, harvesting employees will suffer detriment in terms of their wages and working conditions if the Agreement is terminated. There is no evidence – other than unsupported assertions in the submissions of MSF Sugar – that any employees support the application for termination of the Agreement. I also note that the opposition of the employees and the AWU is maintained in the face of the Company’s stated position about the likelihood of contracting out its harvesting operations if termination of the Agreement is not approved.

[62] The employer MSF Sugar supports the termination of the Agreement and it was implicit in the submissions made by the Company in support of the application that the termination of the Agreement would positively impact its financial position. However, absent evidence about the impediments that the Agreement places on the productivity of MSF Sugar or the effect of the Agreement on the Company’s financial position, I am not prepared to give this consideration more weight than the position of employees. This is particularly so in circumstances where MSF Sugar has not engaged with the employees or the AWU to advance its position or made any attempt to bargain with employees in good faith in the manner provided for by the Act. Indeed the position of the Company is that it does not wish to bargain and at best, the Company states that it is not opposed to collective bargaining if employees seek to bargain. In my view, the position of the Company in this regard was more about shoring up its termination application than it was about a real desire to make an attempt to bargain with employees in relation to matters it asserts are an impediment to productivity.

[63] As previously stated the AWU has indicated that it prepared to bargain in good faith for a new agreement and has made an application under s. 240 in this regard. This is also a matter to which I have had regard to considering whether it is appropriate to terminate the Agreement. Further I have had regard to the fact that if there is an issue for MSF Sugar it relates to harvesting operations. It is not appropriate to terminate an agreement that covers a broader range of employees to deal with issues with a small group.

[64] On balance, and in all of the circumstances, if it was necessary for me to come to a conclusion in relation to whether it is appropriate to terminate the Agreement taking into account all of the circumstances including the matters in s. 226(b) I would conclude that it is not appropriate. In reaching this conclusion I do not underestimate the difficulty in reaching an agreement which addresses the issues being faced by the Company. However in circumstances where no real effort has been made MSF Sugar to do so, it is not appropriate to terminate the Agreement and the application is dismissed.

[65] In dismissing the application I reiterate that the s. 240 application can be reactivated or a further application filed and note that the Commission remains ready to assist the parties in reaching an agreement.

DEPUTY PRESIDENT

Appearances:

Ms R Morgan and Mr T Cook for the Applicant

Mr B Fullarton for the AWU

Hearing details:

23 August 2018 at Brisbane

Final written submissions:

9 July 2018

 1   Exhibit A1.

 2   Exhibit A2.

 3   Exhibit A3.

 4   Exhibit R1.

 5   Exhibit R2.

 6   Exhibit R3.

 7   Exhibit R4.

 8   Applicant’s Form F24B filed 1 March 2018, at 1.3.

 9   Applicant’s Form F24C signed 1 March 2018, at 2.1.

 10   Applicant’s Form F24C signed 1 March 2018, at 2.3.

 11 AWU Outline of Submissions filed 23 March 2018, at [4].

 12   AWX Pty Ltd [2013] FWCFB 8726 at [18].

 13   Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd [2016] FWCFB 3591 at [18].

 14   Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd [2015] FWCFB 540 at [120].

 15   [2015] FWCFB 540 at [129]-[131],

 16 [2015] FCAFC 126 at [22]–[25].

 17   [2010] FWA 6468.

 18   [2015] FWCFB 540.

 19   [2016] FWCFB 3591.

 20   [2016] FWCFB 4620.

 21   [2017] FWCFB 1019.

 22   Allen v O’Brien Pty Ltd t/as O’Brien Electrical Services Enterprise Agreement 2010-2014 [2016] FWCA 1906; Rose Cleaning Service and LHMU Clean Start Union Collective Agreement 2008 [2016] FWCA 1769.

 23   Cleanevent Australia Pty Ltd AWU Agreement 2006 [2015] FWCFA 3956.

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

 25   Retail Adventures Store Sales Staff Pty Ltd 2009 [2014] FWCA 5344.

 26   Automotive, Food, Metals, Engineering, Printed and Kindred Industries Union v Griffin Coal Mining Company Pty Ltd [2016] FWCFB 4620 at [40] – [52].

 27   Applicant’s Submissions filed 3 July 2018, pg 6.

 28   Applicant’s Submissions filed 3 July 2018, page 6.

 29   Applicant’s Submissions filed 3 July 2018, page 6.

 30   Applicant’s Submissions filed 3 July 2018 page 8.

 31   Applicant’s Submissions filed 3 July 2018 page 10.

 32   Applicant’s Submissions filed 3 July 2018, pg 11.

 33   Transcript of Proceedings, 23 August 2018, at PN44, PN65.

 34   Transcript of Proceedings, 23 August 2018, at PN45.

 35   Transcript of Proceedings, 23 August 2018, at PN116.

 36   Transcript of Proceedings, 23 August 2018, at PN168.

 37   AWU Outline of Submissions filed 23 March 2018, at [6]-[8].

 38   Transcript of Proceedings, 23 August 2018, at PN75.

 39   AWU Outline of Submissions filed 23 March 2018, at [8] and [9].

 40   AWU Outline of Submissions filed 23 March 2018, at [11]-[13].

 41 AWU Outline of Submissions filed 23 March 2018, at [14].

 42   Aurizon Operations Limited & Aurizon Network Pty Ltd and Another[2015] FWCFB 540 at [150].

 43   Transcript of Proceedings, 23 August 2018, at PN82 and PN83.

 44   Transcript of Proceedings, 23 August 2018, at PN85.

 45 AWU Outline of Submissions filed 23 May 2018, at [15].

 46   [2015] FWCFB 540.

 47 Ibid at [178].

 48   AWU Outline of Submissions filed 23 May 2018, at [15]-[18].

 49   AWU Outline of Submissions filed 23 May 2018, at [22]-[24].

 50   Transcript of Proceedings, 23 August 2018, at PN89.

 51 AWU Outline of Submissions filed 23 May 2018, at [21].

 52   B2018/159.

 53   Transcript of Proceedings, 23 August 2018, at PN95.

 54   AWU Outline of Submissions filed 23 May 2018, at [37]-[42]

 55 AWU Outline of Submissions filed 23 May 2018, at [48].

 56   AWU Outline of Submissions filed 23 May 2018, at [50], [52] and [55].

 57   AWU Outline of Submissions filed 23 May 2018, at [49], [53].

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