North East Equity Pty Ltd as trustee for the Nicola Tana Family Trust No 6 T/A Sumich

[2015] FWC 6195

[2015] FWC 6195

The attached document replaces the document previously issued with the above code on 7 September 2015.

Signature of member inserted

Sarscha Wardlaw

On behalf of

Associate to Deputy President Wells

7 September 2015

[2015] FWC 6195

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.319 - Application for an order relating to instruments covering new employer and non-transferring employees

North East Equity Pty Ltd as trustee for the Nicola Tana Family Trust No 6 T/A Sumich
(AG2015/2790)

Tasmania
DEPUTY PRESIDENT WELLS	HOBART, 7 SEPTEMBER 2015

Application for an order relating to instruments covering new employer and non-transferring employees in agreements – benefit of single industrial instrument not sufficient to grant order – application dismissed.

[1] This decision concerns an application that was made on 22 May 2015 by North East Equity Pty Ltd as trustee for the Nicola Tana Family Trust No 6 trading as Sumich (the Applicant) to the Fair Work Commission (the Commission) for an order pursuant to s.319 of the Fair Work Act 2009 (the Act).

[2] Mr Chris Mossman of M + K Lawyers sought, at the hearing of this matter on 29 June 2015, and was granted leave to appear for the applicant. In the application and at the hearing, the applicant advised that it would be purchasing an onion producing operation in Tasmania (the business) with the settlement of the sale of the business due to be effected on 30 June 2015. Subsequently, the business was purchased by the Applicant.

Background

[3] The employees employed within the business are covered by the Webster Fresh Seasonal Employees Agreement 2007 (AC304364) (the Agreement). It is this Agreement which the applicant seeks to cover non-transferring employees. The Applicant submitted that the employees within the business had transferred to work for the Applicant performing the same or substantially the same work that they performed for the old employer.

[4] The Agreement was approved by the Employment Advocate, although the exact date of that approval is not in evidence. However, it is fact that the Agreement became operational on 1 January 2007. The Agreement was made pursuant to s.327 of the Workplace Relations Act 1996 (the WR Act) and accordingly is a collective-agreement based transitional instrument as per Item 2(5)(c)(i) of Schedule 3 of the Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (the Transitional Act). The Agreement reached its nominal expiry date on or about 4 January 2010.

[5] The Applicant submitted that it intends to employ non-transferring employees, on a casual basis, subsequent to the purchase of the business. If the order sought is not granted, future non-transferring employees will be covered by the Horticultural Award 2010 [MA000028] (the modern award) which is a modern award within the meaning of s.314(1)(d) of the Act.

[6] The Applicant seeks an order pursuant to s.319 of the Act that new non-transferring employees engaged subsequent to the purchase of the business will be covered by the Agreement.

[7] Part 2-8 Division 2 of the Act provides for the transfer of rights and obligations under enterprise agreements, certain modern awards and other instruments where a transfer of business occurs from an old employer to a new employer. The definition of transfer of business, old employer, new employer and transferring work is provides in s.311 of the Act. This section also sets out the circumstances in which a transfer of business occurs. Section 311(1) states:

311 When does a transfer of business occur

Meaning of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) The employment of an employee of the old employer has terminated;

(b) Within 3 months after termination, the employee becomes employed by the new employer;

(c) The work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) There is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

[8] The transferring employees commenced employment with the new employer upon settlement of the transfer of business, on 30 June 2015. The work performed by the transferring employees is the same or substantially the same as the work performed for the old employer. Additionally, there is a connection between the old employer and the Applicant in that the Applicant has purchased the old employer’s onion producing operation in Tasmania. There is a transfer of business pursuant to s.311 and within the meaning of the Act.

[9] The definition of a transferable instrument is provided in s.312 of the Act. Item 8 of Schedule 11 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act) modifies Part 2-8 of the Act to establish that the definition of transferable instrument found in s.312(1) is extended to cover transitional instruments, other than workplace agreements and workplace determinations yet come into operation.

[10] The Agreement is a transferable instrument by virtue of s.312(1)(a) of the Act. Section 313 provides for the transferable instrument to, in effect, transfer to the new employer (the Applicant) along with the employees who are transferred. The Applicant and the transferring employees are already covered by the Agreement.

[11] Section 319(1) of the Act provides that the Commission may make orders in relation to a new employer and non-transferring employees. Section 319(3) sets out the criteria that the Commission must take into account when deciding whether to make the order sought.

Non-transferring employees

[12] Section 314 of the Act provides:

314 New non-transferring employees of new employer may be covered by transferable instrument

(1) If:

(a) a transferable instrument covers the new employer because of paragraph 313(1)(a); and

(b) after the transferable instrument starts to cover the new employer, the new employer employs a non-transferring employee; and

(c) the non-transferring employee performs the transferring work; and

(d) at the time the non-transferring employee is employed, no other enterprise agreement or modern award covers the new employer and the non-transferring employee in relation to that work;

then the transferable instrument covers the new employer and the non-transferring employee in relation to that work.

(2) A non-transferring employee of a new employer, in relation to a transfer of business, is an employee of the new employer who is not a transferring employee.

(3) This section has effect subject to any FWC order under subsection 319(1).

[13] The Applicant is covered by a modern award within the meaning of s.314(1)(d), that award being the Horticultural Award 2010 as indicated earlier in this decision. Accordingly, the broader ‘automatic’ coverage of the Agreement to new employees as facilitated by s.314 does not operate in this matter.

[14] Section 319(1) states:

Orders that the FWC may make

(1) The FWC may make the following orders:

(a) an order that a transferable instrument that would, or would be likely to, cover the new employer and a non-transferring employee because of subsection 314(1) does not, or will not, cover the non-transferring employee;

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

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

Note: Orders may be made under paragraphs (1)(b) and (c) in relation to a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer, whether or not the non-transferring employee because employed by the new employer before or after the transferable instrument referred to in paragraph (1)(b) started to cover the new employer.

[15] Section 319(3) sets out the matters that the Commission must take into account when determining whether to issue an order pursuant to s.319 as follows:

Matters that the FWC must take into account

(3) In deciding whether to make the order, the FWC must take into account the following:

(a) the views of:

(i) the new employer or a person who is likely to be the new employer; and

(ii) the employees who would be affected by the order;

(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;

(c) if the order relates to an enterprise agreement – the nominal expiry date of the agreement;

(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;

(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;

(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;

(g) the public interest.

The Applicant’s submissions

[16] The Applicant has addressed each of the matters that the Commission is required to have regard to, when determining whether to issue an order under s.319 of the Act. The application was accompanied by an affidavit (the Affidavit) of Ms Lisa Tana, a Director of the Applicant, outlining the reasons why the Applicant sought for the Agreement to apply to non-transferring employees.

[17] The Applicant submitted that they intended to employee new employees soon after the transfer of the business and that if the Order was made, all employees working in the business would receive the same entitlements and conditions, and that as a result, the administrative functions of the Applicant would be simplified. It was said that there would be a significant impact on business operations if the Applicant was required to administer two sets of employment conditions under two sets of industrial instruments, although no detail was provided as to what that ‘significant impact’ would involve.

[18] The Applicant also sought for the continued operation of the Agreement for new employees (non-transferring employees) and stated this would keep the status quo as much as possible for the business to ensure a smooth transition period.

[19] The Applicant initially submitted that the Agreement was a pre-reform agreement.

[20] In an effort to obtain all information relevant to the criteria listed in s.319(3) of the Act, I sought, on two occasions (29 June 2015 and 16 July 2015), further information from the Applicant relating to any possible disadvantage to non-transferring employees should the requested order issue, the lack of a flexibility term and consultation clause in the Agreement, the status of the Agreement (having regard to Item 28 of Schedule 3 of the Transitional Act), the history of the Agreement and the verification of information previously provided which related to the Agreement.

[21] Further written submissions were received from the Applicant on 30 June 2015 and 28 August 2015 and a second affidavit was provided by Ms Lisa Tana which dealt ostensibly with the wages that would be payable to new casual employees. The Applicant clarified in its submissions of 28 August 2015 that the Agreement was not a pre-reform agreement, but rather a workplace agreement, in accordance with item 28(1)(a) of the Transitional Act.

[22] I now deal with each of the matters under s.319(3) of the Act.

Views of the new employer – s.319(3)(a)(i)

[23] The Applicant favoured the granting of the order and requested the Agreement to apply to non-transferring employees as it will allow for all employees to be covered by a single industrial instrument.

Views of the employees – s.319(3)(a)(ii)

[24] The Applicant submitted the order will have no effect on transferring employees. The Applicant did not address this criteria any further as there were no non-transferring employees in existence as at the date of the hearing and subsequent submissions.

Whether any employees would be disadvantaged by the order – s.319(3)(b)

[25] In its initial submissions, the Applicant only addressed the matter of transferring employees under this criteria. The Commission sought further information and the Applicant provided further submissions stating that on a global basis, the Agreement provided more beneficial terms than the modern award, as it related to casuals.

[26] The Applicant identified that three all-purpose allowances contained in the modern award, are not contained within the Agreement, those being the leading hand allowance, wet work allowance and travel allowance. The Applicant submitted that “adequate equipment” is provided to employees in terms of wet weather work and that employees are not required to travel from one place to another and therefore there is no practical detriment to these employees.

[27] The Applicant argued that the Agreement compensated for this through a night work allowance of $1.25 per hour for casual employees who may work at night and a higher rate of pay for casual employees through the application of penalty rates under the Agreement for the sixth day (1.15 times the standard rate) and seventh day (1.5 times the standard rate) of work in a week. The modern award does not provide penalty rates or a night work allowance for casual employees. The Applicant did not provide historical data as to the amount of night work undertaken by casuals or hours worked on the sixth and seventh day of a work week.

[28] The Applicant submitted that the Agreement provides for a first aid allowance at cl.7(g) of $2.50 per day, which was higher than the modern award allowance of $9.07 per week (see cl.17.1(d) of the modern award).

[29] Further, the Applicant argued that the penalty rates for casual employees, that casual employees can access classification Level 7 and a higher classification for juniors provided in the Agreement, which are not contained within the modern award, provided for more benefits terms than the modern award.

[30] Ms Tana’s second Affidavit set out the current wage rates applicable to transferring and non-transferring employees. These rates consisted of the minimum wage rates contained in the modern award, together with the applicable 25% casual loading.

Expiry date of the agreement s.319(3)(c)

[31] The nominal expiry date of the Agreement was 4 January 2010.

[32] The Applicant indicated in its submissions of 30 June 2015 that as the nominal expiry date of the Agreement had passed, any party, should they so choose, could initiate bargaining for a new Enterprise Agreement immediately.

Productivity s.319(3)(d)

[33] It was submitted that without the granting of the order sought, the Applicant will be forced to administer two sets of different working conditions due to two different industrial instruments applying to the workforce, with the result of significant detriment in terms of the administration of its payroll although the significant detriment was not itemised.

Economic disadvantage s.319(3)(e)

[34] The Applicant stated that it will be exposed to direct administration costs of payroll and also a direct cost of the impact on operational efficiencies in the event of two separate industrial instruments covering the same workplace, although no examples or details were provided.

Degree of business synergy s.319(3)(f)

[35] The Applicant does not currently have an Enterprise Agreement, however it was submitted that the terms and conditions of employment applicable to the transferring work have long been covered by the Agreement and that the Applicant does not wish to introduce significant changes to the arrangements at the workplace.

Public interest s.319(3)(g)

[36] The Applicant drew the Commission’s attention to a decision of Sams DP in Optus Administration Pty Ltd v Australian Municipal, Administrative, Clerical and Services Union, Communications, Electrical, Electronic, Energy, Information, Postal and Plumbing and Allied Services Union of Australia – Communication Division [2010] FWA 3567, wherein the Deputy President stated that ensuring the efficient and effective operation of the business was a matter within the public interest.

[37] It was said that it is not in the public interest for a business to be covered by a multiple of industrial instruments and that it was in the public interest to grant the order.

Consideration

[38] I am required, in accordance with the Act, to take account of the circumstances of the transmission of business with respect to the various criteria set out above and to balance these considerations in making my determination of whether to issue the order sought. The Applicant referred the Commission to the decision in Zancott Recruitment Pty Ltd [2013] FWC 8865 per Bartel DP (Zancott) where the Commission granted an order under s.319 even in circumstances where the Commission was of the view that the agreement provided for terms and conditions of employment which were less beneficial than the modern award. Similar to this matter, the Zancott decision involved a collective-agreement based transitional instrument. However that agreement had not reached its nominal expiry date at the time of Bartel DP’s decision.

[39] The Agreement in this matter was negotiated in 2006 and came into operation on 4 January 2007, having operated since that time. I reached its nominal expiry date on 4 January 2010. The Agreement is inferior to the modern award in a number of areas.

[40] Whilst the Applicant stated ‘compensation’ is applicable to casual employees by way of penalties and a night work allowance for casuals under the Agreement, this compensation does not address any disadvantage that may exist should the Applicant engage new permanent employees. I accept that the Applicant’s current intention is to employ casuals. However, there is nothing precluding the Applicant from engaging new employees on a permanent basis. I must have regard to the disadvantage that would exist for any class of non-transferring employee.

[41] The Agreement does not contain a leading hand allowance, a wet weather allowance or a travelling allowance.

[42] It is clear from the wording within the modern award that the wet work allowance (10% of the standard rate for each hour) is not payable if the employee is provided with “adequate protection”. Having regard to the Applicant’s submissions, evidence and the wet work allowance clause in the modern award, I am not satisfied that there would not be circumstances in which this clause may be applicable to a non-transferring employee working within the business.

[43] The travelling allowance provided for in the modern award at cl.17.1(e) states:

(e) Travelling allowance

Where an employee is required to travel from one place to another, the time occupied in travelling will be counted as time worked and paid for as such. Where an employee is compelled by their duties to spend the night away from home or the property at which the employee is employed (whichever is the employee’s normal place of sleeping during employment) the employer will reimburse the employee for the demonstrable cost of suitable accommodation. The provisions of this clause will not apply where the employer provides the employee with suitable accommodation free of charge.

[44] I am not convinced, on the basis of the submissions and evidence provided by the Applicant, that there will not be circumstances in future where non-transferring employees would be entitled to travelling allowance. An example of this would be training which cannot be provided on site.

[45] In relation to the heading hand allowance, the modern award, at cl.17.1(a) provides:

(a) Leading hand allowance

A leading hand will be paid a leading hand allowance based upon the following:

In charge of: % of the standard rate per week

2 to 6 employees 115%

7 to 10 employees 134%

11 to 20 employees 191%

More than 20 employees 240%

[46] The Applicant provided no submissions in relation to the disadvantage of the Agreement relating to the leading hand allowance. The classification levels in the Agreement provide for Levels 4, 5, 6 and 7 employees to supervise other employees. It is clear from the classification descriptors within the Agreement, that Level 5, 6 and 7 employees would be entitled to payment of the leading hand allowance as contained in the modern award. As such I have determined that a non-transferring employee, employed at a classification Level of 5 or above would be disadvantaged should I issue the order sought.

[47] It was initially submitted by the Applicant that the flexibility term and consultation provisions of the modern award would apply, as Item 28 of Schedule 3 of the Transitional Act provided that if an employee is covered by an “agreement based transitional instrument” and a modern award then both of those instruments apply to an employee. Unfortunately this submission is erroneous.

[48] The Agreement was approved by the Employment Advocate and was operational from 1 January 2007. Pre-reform certified agreements are agreements made by the Australian Industrial relations Commission prior to 28 March 2006. Employee collective agreements which were approved by the Employment Advocate or the Workplace Authority between 28 March 2006 and 30 June 2009 are, for the purposes of Item 28 of Schedule 3, Workplace Agreements. Accordingly the Agreement in this matter is captured by Item 28(1) of Schedule 3 and therefore the modern award does not apply. In further submissions provided by the Applicant on 28 August 2015, it was clarified that the Agreement was a “workplace agreement” for the purposes of Item 28(1)(a) of the FW (TPCA) Act 2009. If I were to grant the order sought, non-transferring employees would be disadvantaged as the modern award would not apply and they would not be entitled to flexibility arrangements or consultation provisions contained within the modern award.

[49] The Applicant did not indicate there was a high risk of industrial disharmony or that there would be any productivity issues other than having to administer two different sets of entitlements under the payroll system; although I accept there would be additional administrative duties in having to do so.

[50] It is clear from the objects of the Act that the making of enterprise agreements is intended to be the principal means whereby working conditions and arrangements are negotiated to meet the needs of individual workplaces. Also, the maintenance of proper industrial standards by way of an appropriate safety net of “fair, relevant and enforceable minimum terms and conditions” of employment is also an object of the Act. I note that the Applicant is free to immediately commence negotiation of a replacement Enterprise Agreement for the new business. I do not consider there is any specific public interest in the application of the Agreement to non-transferring employees.

Conclusion

[51] Having regard to the submissions and evidence of the Applicant, the matters under s.319(3) of the Act and the exercise of discretion in balancing these considerations, I am not satisfied that the order sought should be granted. I have concluded that the disadvantage to future non-transferring employees outweighs the other considerations.

[52] I accept the desirability of having a single industrial instrument for the employer to operate under, but it is clear the Act countenances that this will not be the determinative factor, but merely a consideration among a number of considerations.

[53] This decision will not impact on the existing transferring employees, only those non-transferring employees.

[54] For the reasons given above, the application is dismissed.

DEPUTY PRESIDENT

Appearances:

Chris Mossman for the Applicant

Hearing details:

2015

Hobart

June 26

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<Price code C, AC304364  PR571644 >