Phoenix Alloy Industries Pty Ltd
[2024] FWCA 883
•25 MARCH 2024
| [2024] FWCA 883 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Phoenix Alloy Industries Pty Ltd
(AG2024/386)
PHOENIX ALLOY INDUSTRIES PTY LTD AND CFMEU UNION COLLECTIVE AGREEMENT 2020–2022
| Building, metal and civil construction industries | |
| COMMISSIONER HUNT | BRISBANE, 25 MARCH 2024 |
Application for termination of the Phoenix Alloy Industries Pty Ltd and CFMEU Union Collective Agreement 2020–2022
On 20 February 2024, Phoenix Alloy Industries Pty Ltd (the Employer) made an application pursuant to s.225 of the Fair Work Act 2009 (the Act) to terminate the Phoenix Alloy Industries Pty Ltd and CFMEU Union Collective Agreement 2020-2022 (the Agreement). The Agreement has passed its nominal expiry date of 31 December 2022.
The application was supported by a Form F24C statutory declaration of Mr Keith Douglas, Director of the Respondent, which declared, amongst other things, that the continued operation of the Agreement would pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the Agreement.
On 21 February 2024, I issued directions, including requiring the Employer to provide evidence in support of its contention that the continued operation of the Agreement would pose a significant threat to the viability of the business. Employees covered by the Agreement, together with the Construction, Forestry, Maritime and Energy Union (CFMEU), also covered by the Agreement, were invited to provide any views in respect of the application to my chambers by no later than 4 March 2024.
On 28 February 2024, Mr Douglas provided a signed witness statement declaring that the Agreement had been made to allow the Employer to qualify for Queensland Government funded projects. Mr Douglas stated that as those projects have now concluded, and given the size of the Employer’s business, the continued operation of the Agreement would threaten the viability of the Employer’s business.
He stated that the Employer has returned to working on private industry projects with greater industry competition, hence the need to lower wage rates. He stated that lower wage rates would avoid potential terminations of employment for the employees covered by the Agreement. As the Employer has only six employees, Mr Douglas stated that individual remuneration packages could be created for employees, and employees would not be worse off under this arrangement than under the applicable award.
Mr Douglas stated that the financial constraints associated with the Agreement restrict the Employer’s ability to remain competitive, which ultimately threatens the viability of the business, and may lead to forced terminations.
Legislative provisions
Chapter 2, Part 2-4, Division 7, Subdivision D of the Act is 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 Terminating an enterprise agreement after its nominal expiry date
(1) 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 the continued operation of the agreement would be unfair for the employees covered by the agreement; or
(b) the FWC is satisfied that the agreement does not, and is not likely to, cover any employees; or
(c) all of the following apply:
(i) the FWC is satisfied that the continued operation of the enterprise agreement would pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the agreement;
(ii) the FWC is satisfied that the termination of the enterprise agreement would be likely to reduce the potential of terminations of employment covered by subsection (2) for the employees covered by the agreement;
(iii) if the agreement contains terms providing entitlements relating to the termination of employees’ employment—each employer covered by the agreement has given the FWC a guarantee of termination entitlements in relation to the termination of the agreement.
(1A) However, the FWC must terminate the enterprise agreement under subsection (1) only if the FWC is satisfied that it is appropriate in all the circumstances to do so.
(2) This subsection covers a termination of the employment of an employee:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
(3) In deciding whether to terminate the agreement, the FWC must consider the views of the following covered by the agreement:
(a) the employees (unless there are no employees covered by the agreement);
(b) each employer;
(c) each employee organisation (if any).
Note: The President may be required to direct a Full Bench to perform a function or exercise a power in relation to the matter if any of the employers, employees, or employee organisations, covered by the agreement oppose the termination (see subsection 615A(3)).
(4) In deciding whether to terminate the agreement (the existing agreement), the FWC must have regard to:
(a) whether the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees as the existing agreement; and
(b) whether bargaining for the proposed enterprise agreement is occurring; and
(c) whether the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.
(5) In deciding whether to terminate the agreement, the FWC may also have regard to any other relevant matter.
226A Guarantee of termination entitlements
Guarantee of termination entitlements
(1) A guarantee of termination entitlements is an undertaking given by an employer covered by an enterprise agreement that:
(a) is an undertaking that the employer will comply with subsection (3) if the agreement is terminated under section 226 and the employer terminates the employment of a protected employee for the termination of the agreement:
(i) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the insolvency or bankruptcy of the employer; and
(b) is in writing; and
(c) meets any requirements relating to the signing of undertakings that are prescribed by the regulations.
(2) A protected employee for a termination of an enterprise agreement under section 226 is an employee who would, but for the termination of the agreement, be covered by the agreement.
(3) For the purposes of paragraph (1)(a), the employer complies with this subsection, in relation to the termination of the protected employee’s employment, if the employer complies with the terms of the enterprise agreement that, if the agreement were still in operation, would have provided the employee with entitlements that:
(a) relate to a termination of the employee’s employment:
(i) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the insolvency or bankruptcy of the employer; and
(b) except if the employee was an award/agreement free employee immediately before the termination of the employee’s employment—are more beneficial than the entitlements under a modern award that covered the employee in relation to the employment at that time.
When guarantee is in force
(4) A guarantee of termination entitlements given in relation to the termination of an enterprise agreement:
(a) comes into force on the day on which the termination of the agreement comes into operation under section 227; and
(b) ceases to be in force at the earliest of the following times:
(i) if the guarantee specifies a period during which the guarantee is to remain in force and the FWC approves that period under subsection (5)—the end of that period;
(ii) immediately before another enterprise agreement that covers the same, or substantially the same, group of employees as the terminated agreement comes into force;
(iii) the end of the period of 4 years beginning on the day the guarantee is given to the FWC.
(5) The FWC may, in its decision terminating an enterprise agreement, approve a period for the purposes of subparagraph (4)(b)(i) if it considers the period to be appropriate.
Employer must comply with guarantee
(6) An employer must comply with a guarantee of termination entitlements given by the employer to the FWC in relation to the termination of an enterprise agreement if:
(a) the agreement is terminated under section 226; and
(b) the employer terminates the employment of a protected employee for the termination of the agreement while the guarantee is in force:
(i) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the insolvency or bankruptcy of the employer.
Note: This subsection is a civil remedy provision (see Part 4‑1).
Guarantee is a governing instrument for employment
(7) To avoid doubt, a guarantee of termination entitlements is a governing instrument for employment for the purposes of the Fair Entitlements Guarantee Act 2012.
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
I accept the matters declared by Mr Douglas, including that the nature of the Employer’s enterprise has changed such that it would be commercially impractical for the Employer to compete for contracts, given the financial constraints imposed by the continued operation of the Agreement. Pursuant to s.226(1)(c) of the Act, I am satisfied that this would pose a significant threat to the viability of the Employer’s business, and that termination of the Agreement would allow the Employer to pursue individual remuneration packages for its employees, with the relevant underpinning minimum conditions, thereby ensuring financially stability of the Employer and reducing the likelihood of potential terminations of employment.
The Agreement contains terms that provide for entitlements relating to the termination of employees. A Guarantee of Entitlements undertaking has been provided by the Employer to preserve such entitlements for protected employees within the meaning of s.226A(2) of the Act. A copy is attached at Annexure A. I am satisfied that the Guarantee of Entitlements undertaking complies with the requirements set out in s.226A of the Act.
In accordance with s.226(3)(a) of the Act, I must consider the views of the employees covered by the Agreement. None of the employees covered by the Agreement corresponded with my chambers.
In accordance with s.226(3)(c) of the Act, I must consider the views of the CFMEU as it is covered by the Agreement. In written communication, the CFMEU advised that it is not opposed to termination of the Agreement, provided appropriate conditions were included in the Guarantee of Entitlements undertaking. The CFMEU was provided with the undertaking.
Having regard to s.226(3)(b), the views of the Employer are naturally, by virtue of the application, that it wishes for the Agreement to be terminated as it no longer wishes to be bound by it.
The considerations at ss.226(2) and (4) are not relevant and I am satisfied that there are no other relevant matters to take into account in deciding whether to terminate the Agreement.
Having regard to s.226(1A) of the Act, I am satisfied that it is appropriate in all the circumstances to terminate the Agreement. Accordingly, I must do so. The application to terminate the Agreement is approved.
The termination will take effect from today, 25 March 2024.
COMMISSIONER
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<AE518523 PR772233>
Annexure A – Guarantee of termination entitlements
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