Nga Man Kwok
[2022] FWCA 594
•22 FEBRUARY 2022
| [2022] FWCA 594 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Nga Man Kwok
(AG2021/8972)
Carroll Resources Enterprise Agreement 2013
| Fast food industry | |
| DEPUTY PRESIDENT CLANCY | MELBOURNE, 22 FEBRUARY 2022 |
Application for termination of the Carroll Resources Enterprise Agreement 2013.
On 14 December 2021, Ms Nga Man Kwok filed an application (the Application) pursuant to s.225 of the Fair Work Act 2009 (the Act) to terminate the Carroll Resources Enterprise Agreement 2013 (the Agreement), which nominally expired on 3 May 2017.[1] The Agreement is expressed to cover Carroll Resources Pty Ltd (the Employer) and its employees employed in certain specified job classifications.[2]
On 15 December 2021, I issued directions requiring Ms Kwok to serve the application form and the statutory declaration made by herself on the Employer by 17 December 2021. The directions also required:
- the Employer to provide a copy of the Form F24B application, the Form F24C statutory declaration made by Ms Kwok and the directions to each of their employees via email and place a copy on a noticeboard at each workplace that is used for communications with staff;
- the Employer to lodge with the Commission and serve on Ms Kwok any material and witness statements upon which it relied, including material which addresses whether it is or is not contrary to the public interest for the Commission to terminate the Agreement, material which expresses the views of the Employer regarding the application to terminate the Agreement and material which describes the circumstances of the Employer, including the likely effect that the termination of the Agreement would have on it;
- any employee who wished to do so to send to the Commission and serve on Ms Kwok any material addressing the same issues; and
- Ms Kwok to lodge with the Commission, and serve on the Employer, any reply material.
When the timeline for the various parties to file and serve material expired on 9 February 2022, my Chambers sent an email asking Ms Kwok whether she wished to be heard in relation to the application. Ms Kwok sent a reply email to my Chambers on 14 February 2022 advising that she did. Accordingly, I conducted a hearing via Microsoft Teams at 10:00am on 21 February 2022 at which Ms Kwok appeared on behalf of herself and the Employer was represented by Mr Martin Alden, with Mr Xavier Ryan (In-house Legal Counsel) giving evidence for the Employer.
Legislation
The Act relevantly provides as follows:
“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.”
Consideration
Section 225 of the Act
I am satisfied that the two threshold requirements set out in s.225 of the Act have been met.
Firstly, as noted above at [1], the Agreement has passed its nominal expiry date of 3 May 2017. Secondly, having regard to the Form F24C statutory declaration by Ms Kwok and the witness statement of Ms Kwok, I am satisfied that Ms Kwok is an employee covered by the Agreement. As such, I am satisfied that Ms Kwok has standing to bring the Application pursuant to s.225(b) of the Act.
Section 226(a) of the Act – Public Interest
As regards s.226(a) of the Act and the manner in which the public interest is to be assessed, the Full Bench in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd[3] (Aurizon) cited various passages from the Full Bench of the Australian Industrial Relations Commission’s decision in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000[4] (Kellogg) which had concerned the corresponding, but not identical, provision from the Workplace Relations Act 1996. Relevantly, these passages included:
“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…”[5]
It is also relevant to highlight the Full Bench in Aurizon concluded that it cannot be expected that the terms and conditions of an agreement will continue unaltered in perpetuity after it has passed its expiry date. This is because the Act contemplates the terms and conditions of an agreement may be altered by making a new agreement or by terminating the existing agreement.[6]
As was also recognised in Aurizon, s.226 of the Act is not limited to circumstances in which an agreement no longer applies to any employee. The Act clearly contemplates an agreement that still applies to employees being terminated and prescribes a safety net upon termination in such circumstances. The prescribed safety net is the relevant modern award created during the Award Modernisation process and the National Employment Standards (NES). In this case, the relevant modern award for the relevant employees is the Fast Industry Award 2010 (the Award).
Having regard to the Application, the termination of the Agreement would not lead to an absence of award coverage for the employees. The Award provides for “proper industrial standards” within the meaning given to that term by Kellogg and in circumstances where there was no material before me suggesting otherwise, I am satisfied it is not contrary to the public interest to terminate the Agreement.
Section 226(b) of the Act – Appropriateness
The approach to assessing appropriateness by taking into account all the circumstances, as enunciated by the Full Bench in Aurizon, is to have reference to the construction of s.226 and the contextual matters that bear upon that construction, as well as giving specific consideration to the matters identified in ss. 226(b)(i) and (ii):
“All of the circumstances also need to be taken into account in considering whether termination of the agreements is appropriate. In particular the views of employers and employees covered by the agreement, their circumstances, and the impact of termination need to be taken into account. The requirement in s. 226(b) to take into account all of the circumstances including those set out in s. 226(b)(i) and (ii) is a requirement to take the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement. In assessing appropriateness by taking into account all of the circumstances, we approached the task by reference to the construction of s. 226 and the contextual matters that bear upon that construction dealt with earlier as well as giving specific consideration to the matters identified in s. 226(b)(i) and (ii).”[7] (My emphasis, reference omitted)
I intend to adopt this approach.
Section 226(b)(i)
In terms of s.226(b)(i), I note that there is no employee organisation covered by the Agreement.
As for the Employer, I note it operates as a Japanese Fast Food restaurant chain with stores located throughout Australia. It currently owns and operates a total of 50 stores and has 62 franchisees operating 83 stores. The Employer does not object to the termination of the Agreement and advises it was proposing to transition to the Award. As at the hearing date, the Agreement applies to approximately 800 employees and the Employer confirmed that if the Agreement is terminated, the minimum terms and conditions of employment of those employees will become governed by the Award.
As an employee covered by the Agreement, Ms Kwok filed the application to terminate the Agreement. Clearly, she supports the Agreement being terminated.
As for other employees covered by the Agreement, I am satisfied that they have been on notice as to the Application through the Directions I issued on 15 December 2021 and the various requirements outlined therein. I am also satisfied that the employees had a reasonable period of time to file material should they have wished to do so. In the Directions, I outlined that the impact of the Agreement being terminated would be the Award, setting the terms and conditions of employment and a hyperlink to the Award was provided. Ultimately, apart from Ms Kwok, no submissions from any other employees were filed in the Commission and I will therefore accord neutrality to their views in considering the application.
Section 226(b)(ii)
As there are no organisations covered by the Agreement, there are no circumstances for me to take into account in this respect.
Direct evidence from current employees is limited to Ms Kwok.[8] Ms Kwok’s statutory declaration indicates her motivation for supporting termination in favour of the Award is because she has “been paid a lower hourly flat rate than minimum wages and working [sic] 40 hours and receive no penalty rates at all for the extra 2 hours and always work Saturday, Sunday and most Public Holidays”. Ms Kwok submits that terminating the Agreement will advantage the employees covered by it. She asserts the effect of a termination would be that she, and other employees currently covered by the Agreement will be entitled to receive penalty rates, allowances, a higher hourly rate and other benefits prescribed by the Award.
The Employer denies any suggestion that Ms Kwok has been paid less than the hourly minimum wage rate prescribed by the Award for her classification. Mr Ryan gave the following evidence:
· The Agreement is in significantly different terms to the Award. In particular, the Agreement provides for salaried and non-salaried employment. The salaried employees receive a salary in satisfaction of all hours worked and are not entitled to overtime and penalty rates, while the non-salaried employees receive an hourly rate of pay for each hour worked and have an entitlement to specified overtime and penalty rates;
· There are five Wage Schedules attached to the Agreement which provide differing rates of pay for non-salaried employees for work performed on weekdays, weekends and public holidays. At the commencement of employment, each employee covered by the Agreement receives written notice of the particular Wage Schedule that will apply to their employment; and
· As per its legal obligations, the Employer has always sought to ensure that the base rate of pay payable to all employees covered by the Agreement is no less than the base rate of pay that would be payable under the Award for all hours worked.
Assessing the likely effect of termination of the Agreement on the Employer and the employees more broadly requires evaluating the impact of the Award applying instead of the Agreement.
I have noted that the Award:
· provides for a range of allowances that are not contained in the Agreement and some of these may be relevant to the workplaces of the employees (e.g. meal allowance and laundry allowance);
· provides for standard penalty rates whereas the Agreement provides for different penalty rates depending on which particular “Minimum Wage Rate Schedule” the Employers nominates for their employees;
· provides for a standard public holiday penalty rate of pay and a public holiday overtime rate of pay, whereas the Agreement does not;
· includes a right to request casual conversion whereas the Agreement does not.
· provides for annual leave loading whereas the Agreement does not;
· does not permit an employee to be required to work 7 consecutive days at ordinary time rates and provides for overtime after five consecutive days (or six in one week and four in the week following) rather than after 7 consecutive days of work;
· provides leave to deal with Family and Domestic Violence whereas the Agreement does not; and
· provides that variations in working hours for part time employees are to be agreed in writing whereas the Agreement does not.
As to the likely effect of the termination of the Agreement on Ms Kwok and the other employees, the information provided is such that I consider it is open to me to infer they would not be worse off should the Agreement be terminated, leaving the Award to apply.
Conclusion - Termination
Having regard to the material before me and noting the Act contemplates the Award and NES applying as the safety net in the event of termination of the Agreement, I am satisfied that it is not contrary to the public interest to terminate the Agreement. I have noted the views and circumstances of Ms Kwok and the Employer covered by the Agreement and I have considered the Agreement terms compared with the Award. I am satisfied it is appropriate in all the circumstances to terminate the Agreement.
Further to these findings, the Act requires that I terminate the Agreement.[9]
Operative Date of Termination
The Employer seeks for the Commission to exercise its discretion under s 227 of the Act and determine that the termination of the Agreement will operate from 28 March 2022 because this will enable it to effectively transition employees from the Agreement to the Award during a period in which it is operating in a challenging environment caused by the ongoing COVID-19 pandemic. The Employer submits that transitioning approximately 800 employees from the Agreement to the Award will require extensive changes to its payroll, time recording and rostering systems and that it requires time for:
· educating payroll and administrative staff on the complexities associated with the new codes and policies;
· training its Store Managers regarding the implications of the change to the Award, the new rostering code/policy to be developed, and how to use this to budget wages appropriately; and
· engaging in communication with employees who are covered by the Agreement regarding the shift to the Award and its implications.
The Employer submits the date of 28 March 2022 provides the time it requires and advises that this date also coincides approximately with the commencement of a new financial quarter for its business, as well as the start of a fresh pay cycle.
Mr Ryan gave evidence on behalf of the Employer as follows:
· Since learning of the recent application to terminate the Agreement just prior to the closure of its office for the Christmas/New Period, the Employer has started the process of transitioning the employees who are covered by the Agreement towards the Award, including establishing an internal project team of four staff members and liaising with its external payroll and time in attendance system providers regarding carrying out the proposed transition;
· The following key steps will need to be taken to transition the employees to the Award:
(i)The payroll system (ADP Payforce) must be repopulated and reconfigured for all employees who are currently covered by the Agreement. As ADP Payforce stores employee details and makes scheduled pay runs based on their status under the applicable industrial instrument, the status of each of the approximately 800 employees covered by the Agreement will need to be manually updated to reflect the change to the Award. This will involve navigation of up to 6 pages per employees, and will be particularly time consuming;
(ii)The time recording system will need to be reviewed and updated, with a significant amount of employee information needing to be exported and imported onto the time in attendance system (TANDA) before it is suitable to be used for Award covered employees;
(iii)It will need to develop and implement a new rostering code/policy that accounts for the particular terms of the Award and the development and implementation of this will take time and resources to ensure it functions correctly;
(iv)It will be required to train and educate its Store Managers regarding the implications of the change to the Award, the new rostering code/policy to be developed, and how to use this to budget wages;
(v)It will also be required to train and educate payroll and administrative staff regarding the new codes and policies; and
(vi)It will need to engage in communications with the employees who are covered by the Agreement regarding the change to the Award and what it means for them.
Ms Kwok contends that the Employer is exaggerating the time required to transition employees from the Agreement to the Award. Ms Kwok argues:
• While the Employer indicated they started the process in December 2021, it implemented TANDA in 2019 and therefore it should be very easy to transition to the Award;
· The set up will not take from now until the end of March 2022 if the Employer has already started the process of transitioning;
· As she has been informed by someone who has worked in Sushi Sushi Payroll that the ADP payroll system already has the Award within it, the Employer only needs to allocate an employee’s classification and the system will work out the rest. Further, the navigation of up to 6 pages per employee will be done online via the system itself;
· The exporting and importing of employee information from and onto TANDA is carried out at the push of a button.
· Communication was received via email from the Employer in December 2021 to inform all employees that the company will transition to the Award.
Ms Kwok appears to seek termination with retrospective effect,[10] and asserts that the Employer continues to intentionally delay the transition so that it can continue to benefit financially from the operation of the Agreement.
Conclusion - Operative Date of Termination
I accept there should be no undue delay in terminating an agreement where it is appropriate to do so. The Application has been dealt with expeditiously, noting that the Agreement reached its nominal expiry date on 3 May 2017 and the Application was not made until 4 years and 7 months after this. All relevant parties with an interest in the Application then had to be notified and required an opportunity to put material before the Commission. There has been the Christmas/New Year period to contend with. Overlaying these factors have been ongoing challenges associated with the COVID-19 pandemic, the impact of which on the Employer has been large numbers of staff being required to isolate at various times under relevant public health orders.
The Full Bench of the Commission in Australian Concert & Entertainment Security Pty Ltd T/A ACES GroupEmployer v David Mapledoram[11] addressed the question of whether the termination of an Agreement can operate retrospectively and having considered Application by Kelly,[12] endorsed the analysis of Deputy President Colman therein as providing a sound basis for the conclusion that there is no power for the Commission to terminate an enterprise agreement with retrospective effect and further, that even if there were power under s.227 for the Commission to specify that the termination of an enterprise agreement commences from a date that is in the past, it should be exercised with caution, and only in exceptional circumstances.[13] This is my position in relation to s.227 of the Act and I am not persuaded there are exceptional circumstances associated with the Application that warrant a departure from a termination with either immediate or prospective effect.
Having considered the evidence of both Mr Ryan and Ms Kwok on what is involved from a payroll and administrative perspective to transition the Employer and its 800 employees from the Agreement to the Award, I prefer the more comprehensive evidence of Mr Ryan dealing with what is involved. His account included evidence that it has been the prior experience of the Employer that when transitioning a single employee from a company store operating under the Agreement to a franchisee using the Award, 30-40 minutes is required. I am therefore satisfied that moving 800 employees across will be no small undertaking. There will be changes in terms and conditions, rostering and time recording. Training of various tiers of management across multiple functions is required. As such, and in order to help ensure the transition and implementation of not insignificant changes are as smooth and error-free as possible, I am persuaded it is appropriate to specify a prospective date from which the termination will operate and that a 5-week period that coincides with the commencement of both a new pay cycle and a new financial quarter is appropriate in all the circumstances of this case.
In accordance with s.227 of the Act, the termination will take effect from 28 March 2022. An order to this effect will be issued today.
DEPUTY PRESIDENT
Appearances:
Ms N Kwok on her own behalf.
Mr M Alden for Carroll Resources Pty Ltd
Hearing details:
2022.
Melbourne (via Microsoft Teams):
February 21.
[1] AE401080 at clause 4.
[2] Ibid at clause 2, sub-clause 4.2 and clause 10.
[3] [2015] FWCFB 540.
[4] (2005) 139 IR 34.
[5] Ibid at 40.
[6] [2015] FWCFB 540 at [176].
[7] Ibid at [167].
[8] See Form F24C Statutory Declaration and Exhibit A1.
[9] Fair Work Act 2009 (Cth), s.226.
[10] Exhibit A1 at [14].
[11] [2020] FWCFB 7032.
[12] [2019] FWCA 8563 at [37] – [47].
[13] [2020] FWCFB 7032 at [23].
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