PHIA Operating Company Pty Ltd T/A Port Hedland International Airport

[2018] FWC 1082

[2018] FWC 1082

FAIR WORK COMMISSION

DECISION

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

PHIA Operating Company Pty Ltd T/A Port Hedland International Airport
(AG2017/6425)

Local government administration
DEPUTY PRESIDENT BEAUMONT	PERTH, 21 FEBRUARY 2018

Application for an order that transferable instrument not cover new employer and transferring employee – Conditional offer of employment – Application not opposed – ss. 311, 317 and 318.

[1] This decision concerns an application by PHIA Operating Company Pty Ltd (PHIA) for an order under s.318 of the Fair Work Act 2009 (Cth) (the Act).

[2] The application under s.318 is made in respect of the employment of 3 employees (the Employees) who on 11 March 2016 commenced employment with PHIA (the Application). The Employees were previously employed by the Town of Port Hedland (Town) and worked at the Port Hedland International Airport (Airport) as Airport Reporting Officers (AROs).

BACKGROUND

[3] Since 11 March 2016, PHIA has operated the Airport. Before PHIA took over the operation of the Airport, the Airport was owned and operated by the Town. In 2016 the Town granted PHIA a 50 year lease of the Airport. Under the lease, PHIA took over the operation of the Airport and possession of all Airport equipment.

[4] As part of the aforementioned transaction PHIA offered eight employees (who had been employed by the Town to operate the Airport) continuing employment with PHIA and each employee accepted the offer. The employees included:

● the Compliance and Operations Manager and the Landside Operations Manager, neither of whom were covered by the Town of Port Hedland Enterprise Agreement 2014 (Port Hedland Agreement); and

● six AROs who were covered by the Port Hedland Agreement, of whom three now remain employed by PHIA.

[5] The three remaining Employees accepted employment with PHIA on 11 March 2016. They perform substantially the same work as they did for the Town at the Airport.

[6] The Port Hedland Agreement had a nominal expiry date of 30 June 2017.

[7] PHIA submitted that the Fair Work Commission (Commission) approved a new enterprise agreement between the Town and its employees called the Town of Port Hedland Enterprise Agreement 2017 (AE425345) on 4 September 2017. As such, the Port Hedland Agreement no longer applies to the employees of the Town or the Town, but remains binding on the Employees and PHIA.

[8] If the Port Hedland Agreement did not apply to the Employees, it is submitted that their minimum conditions of employment would be set by the Airport Employees Award 2010 (Award)read in conjunction with the National Employment Standards.

[9] Negotiations for a new enterprise agreement that would cover the Employees commenced, but were said to have been suspended in April 2017 due to impending changes in the management structure of PHIA. The negotiations recommenced in September 2017. However, PHIA reviewed the operation of the Port Hedland Agreement and for the following reasons it decided not to pursue a further agreement:

● costs arising from negotiating and registering an enterprise agreement for the Employees;

● the Employees have different levels of skills and experience which is reflected in their differing remuneration packages and will mean that any negotiation for an enterprise agreement will likely become an individual negotiation;

● the Port Hedland Agreement is drafted for the Local Government industry and is no longer appropriate to the operations of the Airport;

● the nominal expiry date of the Port Hedland Agreement had passed and no longer provided for increases for the Employees;

● the Port Hedland Agreement provides for terms that the Employees would prefer to waive in favour for other benefits;

● individual contracts of employment underpinned by the Awardwill allow PHIA greater flexibility as it develops the Airport; and

● other employees of PHIA are on common law contracts of employment 1.

[10] PHIA now applies for the following order:

1. The Port Hedland Agreement ceases to apply to PHIA and the Employees.

[11] The Application is not opposed by the Australian Municipal, Administrative, Clerical and Services Union West Australian Branch (ASU), being an employee organisation that is covered by the Port Hedland Agreement. The fact that the application is not opposed is evidenced in correspondence sent to the Commission, which I have accepted.

[12] The Application is supported by the affidavit material of Mr Rodney Keith Evans, General Manager of the Airport, for PHIA 2.

[13] Attached to the Evans’ Affidvait were three documents titled ‘Employee feedback form’ (Employee Feedback Form). The Employee Feedback Form provided:

1. I have commenced working at the Port Hedland International Airport (PHIA) whilst it was still operated by the Town of Port Hedland.

2. I understand that my employment conditions are still covered by the Town of Port Hedland Enterprise Agreement 2014 (‘PHIA EA’).

3. I have negotiated new terms and conditions of employment with PHIA which will come into effect if and when the orders sought in this application have been granted.

4. I am happy/comfortable with the new terms and conditions of employment.

5. In exchange for an agreed salary increase (which will be back dated to 1 July 2017) and an agreed one-off payment, I have agreed to the reduction of the following benefits contained in the PHIA EA:

a. A reduction from 6 to 4 weeks annual leave (Clause 24 of the PHIA EA).

b. A reduction from 5 days compassionate leave on each occasion to 3 days per occasion (Clause 28 of the PHIA EA); and

c. The removal of the entitlement to 2 days extra public holidays (Clause 32 of the PHIA EA).

6. PHIA has explained the consequences of the order to me and I am aware that, upon the granting of the order, the Town of Port Hedland Enterprise Agreement 2014 will no longer apply to my employment.

7. I support the granting of the order in the terms sought.

[14] Due to the limited number of Employees, I accept that the anonymity of the Employees with regard to the provision of feedback was difficult to maintain. There is no evidence before me to suggest or otherwise infer that such feedback was not provided voluntarily.

[15] In the circumstances, I have decided to deal with the application on the papers without conducting a hearing.

The statutory provisions

[16] Section 317 of the Act enables the Commission to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer 3.

[17] The discretion to make the order sought by PHIA under ss.318(1) of the Act will only be exercised after taking into account the matters set out in ss.318(3) of the Act 4. These factors, which must be read having regard to the objects of the Part, are intended to enable the Commission to balance appropriately the protection of employees’ entitlements under certain instruments with the need for some flexibility to depart from the default rules about coverage of instruments following a transfer of business5.

[18] Section 318 provides as follows:

318 Orders relating to instruments covering new employer and transferring employees

Orders that FWA may make

(1) FWA 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 transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee;

(b) an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.

Who may apply for an order

(2) FWA may make the order only on application by any of the following:

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

(b) a transferring employee, or an employee who is likely to be a transferring employee;

(c) if the application relates to an enterprise agreement—an employee organisation that is, or is likely to be, covered by the agreement;

(d) if the application relates to a named employer award—an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (b).

Matters that FWA must take into account

(3) In deciding whether to make the order, FWA 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.

Restriction on when order may come into operation

(4) The order must not come into operation in relation to a particular transferring employee before the later of the following:

(a) the time when the transferring employee becomes employed by the new employer;

(b) the day on which the order is made.

[19] I also note that the exercise of the discretion given to the Commission in this regard is also undertaken within the objects of this Part of the Act, which state as follows:

309 Object of this Part

The object of this Part is to provide a balance between:

(a) the protection of employees’ terms and conditions of employment under enterprise agreements, certain modern awards and certain other instruments; and

(b) the interests of employers in running their enterprises efficiently;

if there is a transfer of business from one employer to another employer.

Valid application

[20] PHIA is the new employer for the purposes of ss.318(2)(a) of the Act. I find that the Application is validly before the Commission.

[21] This application was filed on 18 December 2017, being some months after the transfer of business took place. However, I have considered whether the terms of s.318 of the Act are intended to only apply where the Application is made prior to the transfer and consider that is not the case.

[22] However, where the matter is considered after the transfer has taken place, the considerations cited in ss.318(3) of the Act must be approached having regard to the fact the transferrable instrument (in this case the Port Hedland Agreement) is already applying to the parties concerned 6.

Subsection 318(3)(a)(i): the views of PHIA as the employer

[23] PHIA has made submissions why it seeks the order applied for. PHIA has been administering the Port Hedland Agreement since the commencement of the Employees’ employment (pending the making and determination of this Application) but, has taken active steps to replace the Port Hedland Agreement on at least two occasions.

[24] The Port Hedland Agreement, having past its nominal expiry date, does not provide for future increases in salary 7. Mr Evans has provided evidence that in 2017 the Employees approached the Chief Executive Officer to ask whether they would be getting salary increases when the Port Hedland Agreement reached its nominal expiry date of 30 June 20178.

[25] After putting the question about salary increases to the Chief Executive Officer it was said that negotiations for a new enterprise agreement were embarked upon by the Employees and PHIA 9. These were suspended when a restructure to the management team occurred and recommenced in September 201710.

[26] However, the outcome of the September 2017 negotiations with the Employees was that an agreement in principle was reached with each of the Employees, subject to a successful outcome with regard to this Application.

[27] Mr Evans provided evidence on why the order had been sought from the Commission 11.

Consideration

[28] PHIA submitted its views regarding the expiry of the Port Hedland Agreement, its irrelevance to the operation of the Airport and PHIA, the lack of provision for salary increases for the Employees under it, the integration of the Employees within the business, and the maintenance of productivity and tailoring terms and conditions to best fit the experience and responsibilities of the Employees. In my view, the reasons provide a legitimate basis and accordingly weigh significantly in favour of granting the application.

Subsection 318(3)(a)(ii): the views of the employees who would be affected by any order

[29] The Evans’ Affidavit attaches Employee Feedback Forms from the affected Employees that clearly sets out that PHIA would be applying to the Commission for an order that the Port Hedland Agreement no longer cover the Employees. Further there is an acknowledgment that an explanation of the consequences of such order had been provided to the Employees 12.

[30] On 9 January 2018, my Chambers sent correspondence to the ASU seeking their view regarding the Application. On 12 January 2018 the ASU responded to this correspondence noting that they did not object to ‘cancellation of the (‘Agreement’)’ [sic].

Consideration

[31] Given the provision of documentary information and advice to the Employees that an application would be made to the Commission to seek orders, I am satisfied that the Employee Feedback Forms represent the genuine views of those that completed them. Namely, the three Employees.

[32] The ASU has not opposed the application.

Subsection 318(3)(b): any disadvantage to the employees in relation of their terms and conditions of employment

[33]

[1] PHIA submitted that where the Port Hedland Agreement is more favourable than the Award in all but three of those instances it has agreed with the Employees to continue the benefits set out in the Port Hedland Agreement through their common law contracts of employment or the introduction of a policy 13.

[2] Terms and conditions that will not be honoured include 6 weeks of annual leave per annum, 5 days of compassionate leave for each occasion where eligibility for compassionate leave arises and 2 days extra public holidays 14. However, it is submitted that PHIA has negotiated with each of the Employees and has reached agreement with them regarding terms and conditions of employment. Concerning the annual leave entitlement there is agreement that this will be reduced to 4 weeks and the Employees will forgo the entitlement to the extra 2 days of public holiday15. Compassionate leave will be 3 days for each occasion16. It is said that the Employees were agreeable to these compromises because they had secured increased rates of pay and an immediate payment17.

[3] Attachment 5 of the Evans’ Affidavit sets out a comprehensive table comparing the Port Hedland Agreement with the Award and stipulating the end negotiation position reached by both PHIA and the Employees. The Employees will attract an hourly rate of $41.16 per hour under the proposed terms and conditions of employment, in comparison to an hourly rate of $24.2869 under the Award, and $34.40, $37.23 and $38.01 under the Agreement.

Consideration

[4] Material has been provided the Commission analysing the differences between the Port Hedland Agreement, the Award and terms and conditions of employment that PHIA have offered. Whether overall any of the Employees would be disadvantaged if no longer covered by the Port Hedland Agreement is a matter that must be taken into account 18.

[5] While a disadvantage to the Employees may not prevent the granting of the application, it may represent a significant hurdle as part of the wider considerations which must be taken into account for the purposes of ss.318(3) of the Act 19.

[6] One of the primary considerations regarding disadvantage is, in my view, the pay rates that will be afforded to the Employees. The evidence before the Commission is that the Employees will not be disadvantaged by the pay rates.

[7] Having regarded the operation of both the Port Hedland Agreement, the Award and terms of conditions of employment, it is my view that there would not be a considerable reduction in the entitlements of the Employees if the order was granted, and further I am unpersuaded that overall the Employees would be disadvantaged.

Subsection 318(3)(c): the nominal expiry date of the enterprise agreement

[8] The Port Hedland Agreement nominally expired on 30 June 2017.

Consideration

[9] I regard this matter for the purposes of determining the application as a neutral.

Subsection 318(3)(d): any negative impact on productivity in the workplace

[10] It is submitted that were the order sought not granted then a lesser salary increase may be forthcoming and inevitably this would impact on the productivity of employees.

Consideration

[11] The consideration outlined under ss.318(3)(a)(i) remains pertinent in taking account this matter under ss.318(3)(d). Further, those considerations are arguably compelling when compared to the limited impact traversed by PHIA in relation to this subsection.

Subsection 318(3)(e): any significant economic disadvantage to PHIA

[12] There is no evidence before the Commission regarding any significant economic disadvantage that PHIA may face should the Port Hedland Agreement cover it.

Consideration

[13] There is insufficient material presently before me that would allow me to conclude that PHIA would incur significant economic disadvantage for the purposes of ss.318(3)(e) of the Act as a result of the Port Hedland Agreement covering it. This is a factor that weighs against the making of the order sought.

Section 318(3)(f): business synergy between the Port Hedland Agreement and the Award

[14] It is submitted that the Port Hedland Agreement was drafted to include conditions specific to the Local Government sector, including, for example, the provisions of the Local Government (Long Service Leave) Regulations. It is further submitted that these provisions became obsolete upon the transport of the Airport to PHIA and are no longer relevant to the Town given the replacement by the Town of Port Hedland Enterprise Agreement 2017.

Consideration

[15] There appears to be limited business synergy between the Port Hedland Agreement and the Award, which appears to be the only other relevant workplace instrument that may already cover the Employer. A Local Government enterprise agreement appears to be at odds when considering the business synergy of a private enterprise.

Section 318(3)(g): the public interest

[16] In respect of ss.318(3)(g) of the Act, PHIA contends that no public interest issues affect the application.

Consideration

[17] The public interest in this context is influenced by the objects of this Part of the Act in s.309 and those adopted by the Act more broadly.

[18] There is public interest in ensuring that agreed and statutorily approved arrangements are not put aside lightly and where they are to no longer apply, the interests of the employees concerned are safeguarded 20. The absence of an overall disadvantage in the terms and conditions of employment of the Employees, and the evident Employee support and lack of objection from Employees or relevant registered organisations for the change in this case, are important considerations.

[19] It is also the case that the public interest in this matter is served by facilitating arrangements that permit and encourage the maintenance of employment for the employees through the transfer of business process.

[20] Taking into account all of the circumstances, I am satisfied that there are no public interest considerations that arise in making the order sought in relation to PHIA and three employees. This weighs in favour of the order being made.

CONCLUSIONS AND ORDERS

[21] Having regard to all of the matters raised by s.318 of the Act, I am satisfied that I should exercise my discretion to grant the application and to make an order.

[22] An order 21 will be issued in conjunction with the decision and operate in accordance with ss.318(4) of the Act.

DEPUTY PRESIDENT

 1 Affidavit of Rodney Keith Evans sworn on 25 January 2018 in support of an application for orders under section 318 of the Fair Work Act 2009 (Evans’ Affidavit) [15]; Application for orders in relation to a transfer of business [10].

 2 Evans’ Affidavit.

 3 Section 311 of the Fair Work Act 2009 (Cth).

 4 Fair Work Bill 2008 Explanatory Memorandum [1259].

 5   Ibid.

 6   Stratco (NSW) Pty Ltd [2010] FWA 7036 [14].

 7   Clause 16.4 Port Hedland Agreement.

 8 Evans’ Affidavit [13].

 9   Ibid.

 10   Ibid.

 11 Ibid [15].

 12   Ibid [20] Attachments C1, C2 and C3.

 13 Applicant Submissions [17].

 14 Evans’ Affidavit [19].

 15   Ibid.

 16   Ibid.

 17   Ibid.

 18 Subsection 318(3)(b) of the Act; Linfox Australia Pty Ltd [2013] FWC 3384 [19].

 19   Linfox Australia Pty Ltd [2013] FWC 3384 [19].

 20   Linfox Australia Pty Ltd [2013] FWC 3384 [29].

 21   PR600543

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