Nestlé Australia Limited T/A Nestlé

[2019] FWC 7300

[2019] FWC 7300

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

Nestlé Australia Limited T/A Nestlé
(AG2019/3002)

Manufacturing and associated industries
DEPUTY PRESIDENT MILLHOUSE	MELBOURNE, 24 OCTOBER 2019

Application for orders relating to instrument covering new employer and transferring employees.

[1] Nestlé Australia Limited T/A Nestlé (Nestlé) has made an application under s.318 of the Fair Work Act 2009 (Cth) (Act). The application is made in respect of the prospective employment of Messrs Raymond Grech, Paul Eltze, Gerry Palmier and Lance Sainty (Transferring Employees).

[2] The Transferring Employees are maintenance fitters currently employed by Programmed Industrial Maintenance Pty Limited (Programmed). The Programmed Industrial Maintenance Pty Ltd Metals Labour Hire Agreement 2016-2019 1(Programmed Agreement) covers and applies to the Transferring Employees in their employment with Programmed.

[3] Nestlé has made the Transferring Employees an offer of employment, conditional upon the Fair Work Commission (Commission) making the order that is sought by this application. The order sought is that the Programmed Agreement does not, or will not, cover Nestlé and the Transferring Employees upon their transfer to Nestlé from Programmed.

[4] For the reasons that follow, I am satisfied that the order should be made.

Context

[5] The maintenance function at Nestlé’s Campbellfield site is presently performed by a mixture of Nestlé employees and labour hire workers employed by Programmed. 2 The Nestlé employees at this site are employed under the Nestlé Australia Limited Victorian Confectionery Agreement 2018-20213 (Nestlé Agreement). Nestlé has decided to insource maintenance work at the site. In addition to this application concerning the Transferring Employees, a concurrent application has been made seeking a similar order concerning a maintenance electrician currently employed by Programmed.

[6] Nestlé submits that if the Transferring Employees cease employment with Programmed and commence employment with Nestlé within three months after the termination of their employment with Programmed, as proposed, there will be a transfer of business within the meaning of s.311(1) of the Act. This is because:

(1) the work that the Transferring Employees will perform with Nestlé will be the same or similar to the work they are currently performing for Programmed; 4 and

(2) there is a connection between Programmed and Nestlé, on account of the insourcing of maintenance work from Programmed to Nestlé. 5

[7] The Commission has the power to make certain orders if there is or is likely to be a transfer of business. 6 Nestlé seeks an order under s.318(1) that the Programmed Agreement does not, or will not, cover Nestlé and the Transferring Employees in their employment with Nestlé. It seeks that their employment be covered by the Nestlé Agreement.

[8] The Australian Workers’ Union and the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU), being employee organisations that are covered by the Programmed Agreement, or have the right to represent the industrial interests of the Transferring Employees at the workplace, have not expressed any views to the Commission in respect of the application. However, it is said by Ms Carolyn Gray, Human Resources Business Partner for Nestlé in her statutory declaration that the AMWU supports the application. 7

Consideration

[9] It is not in dispute, and I am satisfied on the basis of the application and accompanying material, that the Commission has the power to make an order under s.318(1) of the Act. In the circumstances described, there is, or is likely to be a transfer of business from Programmed to Nestlé. The Programmed Agreement is a transferable instrument that would, or would be likely to cover Nestlé and the Transferring Employees because of s.313(1)(a) of the Act. 8

[10] Nestlé has standing to make the application because, pursuant to s.318(2)(a) of the Act, it is likely to be the new employer of the Transferring Employees.

[11] In deciding whether to make an order, I must take into account the matters set out in s.318(3) of the Act. I consider these matters below.

The views of the new employer and the employee affected by the order (s.318(3)(a))

[12] As the applicant, Nestlé supports the making of the order. It submits that for its insourcing to be effective, employees must be engaged on equivalent terms and conditions of employment. 9 It wishes to employ the Transferring Employees under the Nestlé Agreement and has consulted with them (and the AMWU) regarding its application to the Commission.10

[13] The application is accompanied by a statutory declaration of one of the Transferring Employees, Mr Grech. He supports the making of the order and states that:

“I understood that my employment with Nestlé was conditional upon the terms of the Nestlé Agreement applying and not the Programmed Agreement. I still want to be directly employed by Nestlé in a permanent role. I understand this might change the amount of money I am paid each week.” 11

[14] Mr Grech said that he understands that direct employment with Nestlé will result in a change to his rate of pay, 12 a reduction in allowances,13 and that he will not receive an entitlement to income protection insurance, including contributions into the Protect redundancy fund.14 Despite this, Mr Grech said that he voluntarily applied for an advertised vacancy with Nestlé.15

[15] The conditional offers of employment made by Nestlé to the Transferring Employees are attached to the application. The offers have been signed by each of the Transferring Employees and each acknowledges that he:

(1) supports the making of the order;

(2) understands that the effect of the order will mean that the terms and conditions of employment will be different and that he will no longer be entitled to some of the benefits he currently receives and that his take home pay may be less;

(3) has had the opportunity to obtain advice about what the order would mean for him; and

(4) agrees to assist Nestlé with its application for the order.

[16] The views of Nestlé and the Transferring Employees weigh in favour of the making of the order.

Whether any employees would be disadvantaged by the order (s.318(3)(b))

[17] The Programmed Agreement contains certain benefits that will not apply to the Transferring Employees if the application is granted. This includes a travel allowance, a tool allowance and income protection insurance, as acknowledged by Mr Grech in his statutory declaration. Furthermore, a comparison table contained in an information sheet provided to the Transferring Employees by Nestlé identifies that the shift length in the respective instruments differs (8 hours under the Programmed Agreement and 8.5 hours under the Nestlé Agreement). It also states that any leave balances will not be transferred to Nestlé.

[18] However, a review of the Programmed Agreement reveals that where Programmed cannot provide work, employees may be required to remain at home while they await an allocation of duties. In these circumstances, any accrued rostered days off must be used and then, by agreement, accrued annual leave. Employees that remain on standby will be paid their weekly base wage, less $10.00 per day. 16

[19] The Programmed Agreement provides for relativity of terms and condition at client sites. 17 The key effect of this provision is that the Transferring Employees are currently in receipt of the wage rates under the Nestlé Agreement. Accordingly, their rate of pay will remain unchanged following the transfer.

[20] The information sheet provided also contains a comparison between other entitlements in the respective instruments. It specifies that the Nestlé Agreement has a reduced afternoon shift loading. However, a review of the Programmed Agreement discloses that the afternoon shift loading is the same as the shift loading under the Nestlé Agreement. 18 The overtime penalties in each instrument is also the same.

[21] Accordingly, on balance, if the order is made, it may result in a marginal reduction to the Transferring Employees’ take home pay.

[22] To be weighed against the potential reduction in take home pay is the value of permanent, secure employment with Nestlé. The Transferring Employees have expressed a preference for direct employment with Nestlé rather than continuing as contractors with Programmed. They do not appear to consider that they would be disadvantaged by the order sought in relation to their terms and conditions of employment. They wish to accept employment with Nestlé on the understanding that the Nestlé Agreement would apply to their employment and they would obtain job security. In any case, I note that the rate of pay and conditions under the Nestlé Agreement are well in excess of the legislative safety net.

[23] Having regard to the above matters, I am of the view that the Transferring Employees will not be disadvantaged if the order is made. This factor weighs in favour of the application being granted.

The nominal expiry date of the agreement(s.318(3)(c))

[24] The nominal expiry date of the Programmed Agreement is 30 June 2019. The last wage increase pursuant to the Programmed Agreement was effective on 1 July 2018.

[25] The Nestlé Agreement has a nominal expiry date of 24 November 2021. It provides for further wage increases in November 2019 and November 2020.

[26] The fact that the Nestlé Agreement is currently in operation while the Programmed Agreement is not, weighs marginally in favour of making the order.

Whether the Programmed Agreement would have a negative impact on productivity at Nestlé (s.318(3)(d))

[27] Nestlé contends that should the Programmed Agreement apply to the Transferring Employees in their employment with Nestlé, it would require Nestlé to maintain two distinct employment systems, which will give rise to operational inefficiencies. There are also administrative issues that would arise as a consequence of compliance with the Programmed Agreement for the Transferring Employees. In particular, Nestlé notes that the instruments differ in a number of key respects. A review of each instrument discloses differences in weekly hours, 19 rest breaks,20 and allowances.21 I therefore accept that the potential for differential treatment arises in such circumstances and this may negatively affect employee productivity.

[28] However, given Nestlé’s submission that the conditional employment will not proceed in the absence of the order sought, I cannot be satisfied that the Programmed Agreement would have any relevant negative impact upon productivity. Accordingly, this factor is neutral in my consideration.

Whether Nestlé would incur significant economic disadvantage by coverage of the Programmed Agreement (s.318(3)(e))

[29] Nestlé submits this is a neutral consideration, and in absence of any contrary submissions, I consider it to be so.

Degree of business synergy between the Programmed Agreement and any workplace instrument covering Nestlé (s.318(3)(f))

[30] There is little business synergy between the Programmed Agreement and the Nestlé Agreement. The Programmed Agreement is an industry agreement specific to labour hire staff, and the Nestlé Agreement contains terms and conditions specific to its sites. 22 This factor weighs in favour of making the order.

The public interest (s.318(3)(g))

[31] Nestlé submits that it would not be contrary to the public interest to make the order sought. It says that facilitating the insourcing of the Transferring Employees will benefit its business and therefore contribute to the economy. There were no other submissions concerning the public interest before me.

[32] The notion of public interest refers to matters that might affect the public as a whole. 23 Having regard to those matters, there are no public interest considerations that would militate against making the order sought. This weighs in favour of the order being made.

Conclusion

[33] Taking into account all of the above matters, I am satisfied that the order sought by Nestlé ought to be made.

[34] I will make an order that the Programmed Agreement will not cover Nestlé and the Transferring Employees in relation to their employment with Nestlé, and that the Nestlé Agreement will cover the Transferring Employees.

[35] For the purposes of s.318(4) of the Act, the order will come into operation in relation to each Transferring Employee on the date that the Transferring Employee becomes employed by Nestlé.

[36] An order giving effect to this decision will be issued separately in PR713600.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

<AE416989  PR713599>

 1  AE422584.

 2 Statutory declaration of Carolyn Gray dated 25 July 2019 (Gray declaration) at [2].

 3   AE504063.

 4   Section 311(1)(c) of the Act.

 5   Section 311(1)(d) and s.311(5) of the Act.

 6   Section 317 of the Act.

 7 Gray declaration at [12].

 8   The Programmed Agreement is an enterprise agreement approved by the Commission on 8 December 2016.

 9 Form F40, Q.2 at [9].

 10   Gray declaration at [10]-[11]; Statutory Declaration of Raymond Grech dated 25 July 2019 (Grech declaration) at [8]-[9].

 11 Grech declaration at [14].

 12   Ibid.

 13 Ibid at [15].

 14   Ibid.

 15 Ibid at [17].

 16   Clause 18 Programmed Agreement.

 17   Clause 36 Programmed Agreement.

 18   Clause 7.1 Programmed Agreement; Clause 37.3(a) Manufacturing and Associated Industries and Occupations Award 2010 (Manufacturing Award).

 19   Clause 7.1 Programmed Agreement; Clauses 36.2, 36.3, and 36.4 Manufacturing Award; Clause 8 of Appendix 2 Nestlé Agreement.

 20   Clause 7.1 Programmed Agreement; Clauses 38 and 40.10 Manufacturing Award; Clause 6.8, and Clause 10 of Appendix 2, Attachment 3 Nestlé Agreement.

 21   Clauses 15, 17, 21, and 24 Programmed Agreement; Clause 9 Nestlé Agreement.

 22   Clause 3.2 Nestlé Agreement.

 23   See Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 at [23].