Queensland Nickel Pty Ltd
[2009] FWA 335
•22 SEPTEMBER 2009
[2009] FWA 335 |
|
DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees in awards
(C2009/10434)
SENIOR DEPUTY PRESIDENT RICHARDS | BRISBANE, 22 SEPTEMBER 2009 |
Summary: application for order s.318 of the Act that a transferable agreement not apply to new employees – is a transitional instrument a transferable instrument? - in-sourcing as a business transfer - nature of discretion – mismatch between employment models - transferable instrument not to apply to transferring employees - commencement date of order
[1] This matter, which was heard on Monday 14 September 2009, comprised of an application for an order relating to an instrument covering a likely new employer and likely transferring employees under s.318(1) of the Fair Work Act 2009 (“the Act”).
[2] At the conclusion of the hearing I indicated to the parties that I was satisfied that I should make an order that the transferable instrument as potentially identified should not apply to the likely transferring employees (as defined below).
[3] I undertook at that time to provide written reasons for my decision. I now do so.
[4] Division 3 of Part 2-8 of the Act invests Fair Work Australia (“FWA”) with a power to make such orders. The relevant provisions are set out below.
[5] The Applicant (Queensland Nickel Pty Ltd) was a new employer or likely new employer (within the meaning of s.308 of the Act and s.311(1) of the Act) of the transferring employees (within the meaning of s.308 of the Act and s.311(2) of the Act).
[6] The orders sought by the Applicant effectively seek that in circumstances where there may be a transfer of business (as described below) of the kind contemplated in the Act, the applicable transferring instrument that applied to the transferring employees will not cover Queensland Nickel Pty Ltd and any transferring employees.
[7] The Applicant has not conceded expressly that its circumstances will necessarily attract the statutory definition of a transfer of business. Its application, it appears, is to ensure that should such circumstances arise in the re-organisation its business consequent of its recent sale, there will be certainty for the business and any transferring employees. The Act appears to contemplate such pre-emptive applications in that it refers to applications being made by “likely new employers” or “likely transferring employees”, amongst others.
[8] That said, it does appear on what has been put before me that the business re-organisation in which the Applicant is engaged is indeed likely to be a transfer of business within the terms contemplated by the Act. The relevant details are as follows.
[9] For approximately the past 14 years, Transfield Services (Australia) Pty Ltd (“Transfield”) has been engaged by the Applicant at its Yabulu Refinery to conduct maintenance and ancillary services. 1
[10] Transfield appears to have some 203 employees at the site performing these duties.
[11] Some 163 of these employees are covered by the Transfield Services Limited (Contract Maintenance –Yabulu) Workplace Agreement 2007-2010 (“the Transfield Agreement”).
[12] By virtue of sub item 2(3), Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“the Transitional Act”), the Transfield Agreement is a transitional instrument for purposes of the Act itself.
[13] On 24 August 2009 the Applicant reached a decision, it appears, to utilise its own employees for purposes of its maintenance requirements. 2
[14] The Applicant has advertised for employees to perform these services subject to its own terms and conditions of employment.
[15] From the Applicant’s evidence, it appears that all but 17 of the 163 Transfield employees who are subject to the Transfield Agreement have applied for these new positions with the Applicant. 3
[16] The contract between the Applicant and Transfield will conclude on 30 September 2009. 4
[17] Queensland Nickel Pty Ltd is subject to three sets of industrial arrangements. The first comprises of 189 Australian Workplace Agreements (“AWA”). The second comprises a union workplace agreement made with the Australian Workers’ Union (“AWU”); the Yabulu Refinery Enterprise Agreement 2007-2010. The scope clause or coverage clause of this agreement appears limited to a small number of employees engaged at a specific time, and appears effectively redundant as an instrument that can regulate the terms and conditions of any new employees. 5
[18] Thirdly, the terms and conditions of employment are also regulated by the Yabulu Refinery Industrial Employee Collective Agreement 2008 (which includes maintenance classifications). 6 The employees who are subject to this agreement are remunerated as salaried staff, as are the employees whose terms and conditions are regulated by the abovementioned AWAs.
[19] The Applicant has sought to maintain a “one staff policy”, which incorporates consistent terms and conditions of employment. 7
[20] The objective of such an approach has been to “unlock the discretionary effort of employees and increase productivity”. 8 The exception to this approach was the concession, if can be so described, to permit a small number of employees to retain a traditional wages and hours structure by way of the Yabulu Refinery Enterprise Agreement 2007-2010.9
[21] Upon the expiry of the AWAs and the Yabulu Refinery Enterprise Agreement 2007-2010, it is contended by the Applicant that employees will be subject to the Yabulu Refinery Industrial Employee Collective Agreement 2008.
[22] The Transfield Services Limited (Contract Maintenance –Yabulu) Workplace Agreement 2007-2010 (referred to above as “the Transfield Agreement”) incorporates a traditional wages and hour structure.
[23] It appears to me that the Applicant is a likely a “new employer” of “transferring employees” from an “old employer” in a transfer of business context as the Act contemplated at s.311(5) of the Act. This is because the Applicant is effectively in-sourcing work that it had had performed by Transfield’s employees. Section 311(5) of the Act reads:
“New employer ceases to outsource work to old employer
(5) There is a connection between the old employer and the new employer if:
(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and
(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.”
[24] As mentioned above, by virtue of sub item 2(3), Schedule 3 of the Transitional Act, the Transfield Agreement is a transitional instrument.
[25] But is a transitional instrument a transferable instrument for the purposes of s.312 of the Act?
[26] Section 312 of the Act reads:
“312 Instruments that may transfer
Meaning of transferable instrument
(1) Each of the following is a transferable instrument:
(a) an enterprise agreement that has been approved by FWA;
(b) a workplace determination;
(c) a named employer award.”
[27] On its face, s.312 of the Act makes no reference to a transitional instrument as being within the meaning of a transferable instrument.
[28] Section 312 of the Act, however, was subsequently modified by the Transitional Act, relevant extracts are as follows:
“7 Application of FW Act in relation to transferring employees covered by transitional instrument
(1) This item applies if:
(a) there is a transfer of business from an employer (the old employer) to another employer (the new employer), as described in subsection 311(1) of the FW Act; and
(b) the connection between the old employer and the new employer referred to in paragraph 311(1)(d) of the FW Act occurs on or after the WR Act repeal day.
(2) This item applies regardless of whether:
(a) the termination of a transferring employee’s employment with the old employer occurs before, on or after the WR Act repeal day; or
(b) the employment of a transferring employee by the new employer occurs before, on or after the WR Act repeal day.
(3) Part 2-8 of the FW Act (as modified by item 8 of this Schedule) applies in relation to the transfer of business.
8 Modification—application of FW Act in relation to transitional instruments
(1) Subsection 312(1) of the FW Act applies in relation to the transfer of business as if the following paragraph were added at the end:
; (d) a transitional instrument (other than a workplace agreement or a workplace determination that has not yet come into operation).
(2) Except as provided in subitems (3) to (5), Part 2-8 of the FW Act applies in relation to the transfer of business as if:
(a) a reference to an enterprise agreement included a reference to an agreement-based transitional instrument; and
[…] [My emphasis]
(3) Paragraph (2)(a) does not apply in relation to the reference to an enterprise agreement in paragraph 312(1)(a) of the FW Act.
[…]
[29] Pursuant to Item 8, Part 3 of Schedule 11 of the Transitional Act, theTransfield Agreement is also a transferable instrument for the purposes of s.312(1) of the Act.
[30] My view in this regard is buttressed by the Revised Explanatory Memorandum to the Transitional Act that states as follows:
“Item 8 – Modification – application of FW Act in relation to transitional instruments
515. This item modifies the application of Part 2-8 of the FW Act to make clear that the definition of transferable instrument in subsection 312(1) of the FW Act is extended to cover transitional instruments, other than workplace agreements and workplace determinations that have not yet come into operation. This means that where a transfer of business occurs and the old employer was covered by a transitional instrument in relation to a transferring employee, the transitional instrument covers the new employer and the transferring employee.”
[31] In ordinary circumstances (and but for this application), the transferable instrument should arguably apply to the (likely) new employer and (likely) transferring employees, for purposes of s.313 of the Act:
“313 Transferring employees and new employer covered by transferable instrument
(1) If a transferable instrument covered the old employer and a transferring employee immediately before the termination of the transferring employee’s employment with the old employer, then:
(a) the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time (the transfer time) the transferring employee becomes employed by the new employer; and
(b) while the transferable instrument covers the new employer and the transferring employee in relation to the transferring work, no other enterprise agreement or named employer award that covers the new employer at the transfer time covers the transferring employee in relation to that work.
(2) To avoid doubt, a transferable instrument that covers the new employer and a transferring employee under paragraph (1)(a) includes any individual flexibility arrangement that had effect as a term of the transferable instrument immediately before the termination of the transferring employee’s employment with the old employer.”
[32] It is evident from the above discussion, however, that the transferable instrument, the Transfield Agreement, does not conform to the Applicant’s “one staff” policy objectives, which have informed the remuneration structure for the AWAs and the Yabulu Refinery Industrial Employee Collective Agreement 2008. It is for this reason that the Applicant now seeks an order that in the event of the business transfer, the Transfield Agreement will not cover any transferring employees.
[33] FWA is vested with a power to make such order.
[34] Despite section 313(1) and s.313(2) of the Act, s.313(3) of the Act reads as follows:
“(3) This section has effect subject to any FWA order under subsection 318(1).”
[35] A transferable instrument in a business transfer context as described above need not apply to the transferring employees, contingent upon the conditioned discretion of FWA under section 318(1) of the Act, which, for current purposes, relevantly reads:
“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.”
[36] I note that the exercise of the FWA’s conditioned discretion is also framed within the objects of the Part, 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.”
[37] The objects of the Part seek to provide outcomes that balance employer and employee interests. It is perhaps best to construe this as meaning that the objects of the Part anticipate outcomes that are the result of giving proper account to the interest of both employees and employers. In the current case, this will be achieved by way of giving proper account to the matters stipulated at s.318(3) of the Act.
[38] That said, does the application otherwise meet the requirements of the Act?
[39] The Application before me seeks that I exercise my conditioned discretion for purposes of s.318(1)(a) of the Act.
[40] For reasons discussed above, the Applicant is a person for purposes of s.318(2)(a) of the Act. Section 318(3) of the Act sets out the matters to which FWA must give account in making any order.
[41] I will discuss each of these in their order.
Section 318(3)(a)(i): the views of the new employer
[42] The Applicant seeks that the transferable instrument not apply to any former employees of Transfield who may be engaged by Queensland Nickel Pty Ltd to carry out the same work as that performed through the contract with Transfield. The reason for this has been put earlier: the Applicant seeks to maintain a unified suite of salaried-based terms and conditions of employment.
Section 318(3)(a)(ii): the views of the employees prospectively affected by any order
[43] Following a briefing session the previous day, the Applicant, on 10 September 2009, provided the employees of Transfield who had registered an interest in being employed with the Applicant with an opportunity to participate in a ballot. The ballot question was whether, upon any transfer of business, they preferred to have their terms and conditions of employment regulated by the Transfield Agreement or the Yabulu Refinery Industrial Employee Collective Agreement 2008.
[44] Ninety-six of the 146 relevant employees voted in the ballot. Of these, 70 voted in favour of the Yabulu Refinery Industrial Employee Collective Agreement 2008, with 18 against and 8 invalid votes. 10
Section 318(3)(b): any disadvantage to the employees
[45] The Yabulu Refinery Industrial Employee Collective Agreement 2008 (as do the existing AWAs and Salaried Staff arrangements) incorporate such key provisions as follows:
- annualised salaries subject to an annual review that incorporate a shift loading (ranging between $17,700 for a continuous shift worker and $12,700 for a non-continuous shift worker) 11;
- payment for excess hours above 48 hours per quarter (i.e. 4 hours per week) plus any training days 12 paid at 12% of the base salary rate (including shift allowance)13;
- an incentive scheme with potential to increase salary by between 10% and 15% of the base salary per annum 14;
- 11% company superannuation contribution (payable on the base salary plus the shift loading) 15 and which includes salary continuance insurance16; and
- a standard redundancy entitlement of 14 weeks plus 2.5 weeks for each year of continuous service). 17
[46] On the evidence before me, the Applicant also intends to recognise the likely transferring employees’ period of service with Transfield at the Yabulu Refinery for purpose of leave and redundancy entitlements (though annual leave will be capped at 5 weeks for a continuous shift worker and 4 weeks for other employees). 18
[47] These are terms and conditions of employment that appear generally to be considerably superior in stark earnings potential and other conditions (such as superannuation and redundancy) to those of employees on the Transfield Agreement. 19 There are clearly some views to the contrary (see the ballot outcome referred to above), which may hold the employment model based on salaried arrangements and flexible hours has less appeal for other reasons, including qualitative ones (of which there is some further discussion below).
[48] It appears from the Illustrative Example in the Supplementary Memorandum (at Item 1 thereof) that it is intended that while the terms and conditions of employment between an employer’s own industrial instrument and the transferable, instrument may be different, FWA should satisfy itself, in respect of s.318(3)(b) of the Act, whether “overall, the employees would not be disadvantaged”. Any such finding in this regard would in turn be weighed in relation to the wider consideration which must be taken into account for purposes of s.318(3) of the Act.
[49] In the current circumstances, on my reading of the instrument before me, it is indeed appropriate to find, at the most conservative level of assessment, that overall, the prospectively transferring employees would not be disadvantaged in relation to their remuneration (at least) if the Transfield Agreement were not to be a transferable instrument and that their terms and conditions of employment were to reflect those of the Yabulu Refinery Industrial Employee Collective Agreement 2008.
Section 318(3)(c): the nominal expiry date of the transferable instrument (the Transfield Agreement)
[50] The Transfield Agreement expires on 30 June 2010. 20
Section 318(3)(d): any negative impact on the employer’s workplace
[51] If the Transfield Agreement were to apply to any likely new employees who had performed work for Transfield under the terms of that agreement, the Applicant claimed:
- it would need to maintain two distinctive and disparate employment systems;
- the likely new employees would not be integrated into the wider existing workforce and productivity losses would follow (such a the scope to arrange hours and work and roster the two sets of employees), which would undermine the business case for in-sourcing the maintenance work;
- the Applicant’s goal of maintaining a “one staff” policy would be defeated, with a consequent loss of workplace harmony and a reduction in the workforce-wide discretionary effort the Applicant has sought to capture by the ‘one staff’;
- the wages\overtime approach in the potentially transferable instrument (the Transfield Agreement) insufficiently motivates employees to complete work within normal hours.
Section 318(3)(e): any significant economic damage to the employer
[52] The Applicant claimed that if the Transfield Agreement were to cover any likely transferring employees, Queensland Nickel Pty Ltd would need to meet the costs of maintaining two starkly contrasting sets of employment arrangements: one where employees are paid an annualised salary monthly and where there is little overtime and few other exception-type payments; and the other where employees are paid weekly wages, and employees are paid overtime, penalties and allowances.
[53] No costing was provided in respect of these claims, or indications of the higher administrative staffing requirements to process a weekly wages employment model such that they represented “significant economic damage”.
[54] The Applicant claimed that the “one-staff” arrangements were critical to capturing productivity, ensuring the performance of the Yabulu Refinery and keeping it operating for the benefit of its owners, employees and the local community.
[55] I was not provided any data in respect of these claims. I do not know whether these claims are empirically verifiable and to what extent labour costs inputs and labour unit ratios are available. Much might be said of international nickel prices and the type of nickel that is being refined in relation to the ultimate viability of the refinery.
[56] Annexure 1 to Mr Azzopardi’s witness statement provided some information on the importance of the mine to the local community (though this is hardly relevant to s. 318(3)(e) of the Act).
Section 318(3)(f): business synergy between the transferable instrument and the existing agreement
[57] For the reasons given above, there appear to be very little synergy between the two sets of terms and conditions under discussion. That is to say, the two agreements do not complement one another. Arguably, the mismatch in employment models outlined above is one example of what is intended to be captured within the notion of “business synergy”, which may have wide connotations. I note that (Supplementary) Explanatory Memorandum does not assist in this regard.
Section 318(3)(g): the public interest
[58] Annexure 1 to Mr Azzopardi’s statement provides some information on the importance of the continued operation of the refinery to the local community. The source information is not provided. But it would be unreasonable to find that the refinery’s continued operation was not of great significance to the surrounding service and retail sectors, in particular, which are not part of any wider or more complex economy.
[59] I should make clear at this juncture that the unions which have an interest in this application are the AWU, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia. Each of these unions is a party bound by the Transfield Agreement. 21 Each was represented at the hearing of this application.
[60] The unions have not sought to make submissions in relation to the evidence led by the Applicant. This is not intended, as I understand it, to concede the evidence as led, nor does it provide a precedent in relation to each union’s respective position in relation to any other applications or future claims.
[61] It is perhaps enough to state that Applicant and the interested unions at a conference of the parties conducted on Friday, 11 September 2009 reached agreement in relation to some features of the future industrial framework to apply at the Applicant’s workplace. This agreement has informed the interested unions’ position in relation to this particular application. It may also have informed the views of the employees more widely for reason that some key qualitative differences between the Yabulu Refinery Industrial Employee Collective Agreement 2008 and the Transfield Agreement (relating to representational issues) have not been germane in this case.
[62] I note that I have made no comment on the legislative machinery the parties might utilise for the purpose of reaching their agreed intentions.
CONCLUSION
[63] On balance, and having given account to each of the matters stipulated at s.318(3) of the Act, which have had varying weight in respect of my discretion given their degree of appropriate demonstration, I am satisfied that the order as sought by the Applicant should be made. That order reads as follows:
“[1] In accordance with my decision in transcript on 14 September 2009, I order that the Transfield Services Limited (Contract Maintenance - Yabulu) Workplace Agreement 2007-2010 not cover Queensland Nickel Pty Ltd and any employees of Queensland Nickel Pty Ltd formerly engaged by Transfield Services (Australia) Pty Ltd.
[2] This order has effect from 14 September 2009.”
[64] I note that any order I might make is subject to s.318(4) of the Act, which reads:
“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.”
[65] Potentially, if I made an order (in the above terms) that was prospective in its operation from the date of the hearing of the application, and a transferring employee were to be employed in the interim, the Applicant would need to operate the two employment models until, such time as the order took effect.
[66] Though I understand that there is little likelihood of any prospectively transferring employee becoming employed by the Applicant before 30 September 2009, it would be prudent in my view to make the date of commencement of the order from the date of the hearing. This was the decision that I made in transcript at the time of the hearing of the application.
SENIOR DEPUTY PRESIDENT
Appearances:
S Dewberry of Freehills for the Applicant
D Broanda and C Stockham for the Australian Workers’ Union
S Fentiman for the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
W Giordani for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
Hearing details:
2009.
Brisbane:
September 14
1 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 15
2 See the Application for Orders in Relation to Transfer of Business filed on 14 September 2009 and Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 18
3 Transcript of Proceedings on 14 September 2009 at PN 78 and Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 21
4 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 16
5 Transcript of Proceedings on 14 September 2009 at PN 87-103
6 Transcript of Proceedings on 14 September 2009 at PN 81 and Statement of Alan Joseph Azzopardi dated 14 September 2009 at 24
7 Transcript of Proceedings on 14 September 2009 at PN 84-85 and Statement of Alan Joseph Azzopardi dated 14 September 2009 at 25-26
8 Transcript of Proceedings on 14 September 2009 at PN 84
9 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 28
10 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 45-52 and Annexure 11
11 Clause 6 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
12 Clause 6 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
13 Clause 6 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
14 Clause 7 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
15 Clause 9 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
16 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 30(a)
17 Clause 13 of the Yabulu Refinery Industrial Employee Collective Agreement 2008
18 Statement of Alan Joseph Azzopardi dated 14 September 2009 at PN 31-32
19 See comparative earnings documents annexed to the Statement of Alan Joseph Azzopardi dated 14 September 2009 at Annexure 7
20 See clause 5 of the Transfield Services Limited (Contract Maintenance –Yabulu) Workplace Agreement 2007-2010
21 See clause 3.1.2 of the Transfield Services Limited (Contract Maintenance –Yabulu) Workplace Agreement 2007-2010
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