[2016] FWC 9038

FAIR WORK COMMISSION

DECISION

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

Relationships Australia Canberra & Region Incorporated
(AG2016/7255)

DEPUTY PRESIDENT KOVACIC

CANBERRA, 16 DECEMBER 2016

Application for an order relating to instruments covering a new employer and transferring employees in agreements

[1] On 1 December 2016 Relationships Australia Canberra & Region Incorporated (the Applicant) took over the operations of headspace centre in Wagga Wagga (NSW). The headspace website describes headspace as “… the National Youth Mental Health Foundation providing early intervention mental health services to 12-25 year olds, along with assistance in promoting young peoples’ wellbeing.” 1 The website for the headspace Wagga Wagga centre states that “All headspace centres are funded by the Australian Government Department of Health”2 (emphasis as per website). The headspace Wagga Wagga centre was previously operated by Murrumbidgee Primary Health Network (firsthealth Ltd) (MPHN), with employees employed under the firsthealth Enterprise Agreement 20093 (the firsthealth Agreement). Fifteen employees (the transferring employees) transferred to the Applicant on 1 December 2016 when it took over the operations of the headspace Wagga Wagga centre.

[2] On 24 November 2016 the Applicant made an application for orders under s.318 of the Fair Work Act 2009 (the Act). In short, the Applicant is seeking that the firsthealth Agreement not apply to the transferring employees who were employed by it as a result of it taking over the operations of the headspace Wagga Wagga centre and that those employees instead be covered by the Relationships Australia Canberra & Region Incorporated Enterprise Agreement 2016 4 (the Agreement).

[3] The application was the subject of a telephone hearing on 14 December 2016. At the hearing, Ms Kelly Adamcewicz of the Canberra Business Chamber appeared for the Applicant together with Ms Mary Pekin, the Applicant’s Chief Executive Officer, and Ms Sam Badula, the Applicant’s Human Resources Manager.

[4] For the reasons set out below, I am satisfied that it is appropriate to order that the firsthealth Agreement not cover the transferring employees and that the Agreement cover the transferring employees.

The statutory framework

[5] Part 2-8 of the Act deals with transfer of business. The relevant provisions in the context of this matter are set out below:

“311 When does a transfer of business occur

Meanings 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 the 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).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and
(b) the new employer or an associated entity of the new employer;
the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):
(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and
(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.

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.

New employer is associated entity of old employer

(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.”

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 the FWC;
(b) …

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) …

(3) This section has effect subject to any FWC order under subsection 318(1).

317 FWC may make orders in relation to a transfer of business

[6] This Division provides for the FWC to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.

318 Orders relating to instruments covering new employer and transferring employees

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 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) The FWC 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 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.

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.”

Consideration of the issues

[7] There are several threshold issues which need to be dealt with. First, I am satisfied that that the Applicant can make the application for orders under s.318(2)(a) of the Act on the basis that it is the new employer of the transferring employees. I am also satisfied that the firsthealth Agreement is a transferable instrument as per s.312(1)(a) of the Act and that in accordance with s.313(1) of the Act it covered the transferring employees and the Applicant from 1 December 2016.

[8] As can be seen from above, s.317 of the Act only empowers 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”, with s.311 of the Act setting out when a transfer of business occurs. At the hearing of the matter, the Applicant, in response to a question from the Commission, advised that it was renting the premises occupied by headspace staff in Wagga Wagga from MPHN (the old employer) and that MPHN had loaned it the desks, telephones and computers used by the transferring employees. Further, MPHN continued to provide ICT services in respect of the computer and telephony equipment used by the transferring employees, though the Applicant was responsible for replacing computers and telephone hardware as needed during the 19 month duration of its contract to provide the headspace service. Against that background, I am satisfied that there has been a transfer of business as per s.311(3) of the Act.

[9] Having dealt with those threshold issues, I turn now to deal with the matters set out in s.313(3) of the Act which the Commission must take into account in deciding whether or not to make orders sought by the Applicant. I note that the making of the orders sought is discretionary.

The views of the new employer and the employees who would be affected by the order – s.318(3)(a)

[10] The Applicant obviously supports the making of the orders. Primarily it seeks the orders to have consistent terms of employment apply across the enterprise so as to reduce the administrative burden on it and to enable a more streamlined integration of the businesses.

[11] As to the views of the transferring employees, the Applicant stated in its application that it sought the views of all 15 employees who would be affected by the orders sought, with all affected employees expressing the view that they wished to be covered by the Agreement as opposed to the firsthealth Agreement. Statutory declarations were provided by 2 transferring employees both of who deposed that on 14 November 2016 the Applicant provided transferring employees with a copy of the firsthealth Agreement, the Agreement and a comparison document and that on 15 November transferring employees were asked to complete a survey as to whether they wished to remain covered by the firsthealth Agreement or be covered by the Agreement. Both transferring employees further deposed that on 28 November 2016 they were advised by the Applicant that transferring employees had chosen to be covered by the Agreement.

[12] The views of the new employer and particularly those of transferring employees support the making of the orders sought.

Whether any employees will be disadvantaged by the order – s.318(3)(b)

[13] As noted above, on 15 November 2016 the Applicant provided transferring employees with a document comparing the firsthealth Agreement and the Agreement. I accept that document as accurate. In its application the Applicant also set out those provisions of the Agreement which are more favourable to the transferring employees. Those provisions include:

higher minimum rates of pay;

higher severance pay;

better leave arrangements, including 14 weeks paid parental leave (as opposed to 6 weeks under the firsthealth Agreement), long service leave after 7 as opposed to 10 years continuous service and access to 5 days paid domestic and family violence leave;

a casual loading of 25 per cent as opposed to 20 per cent under the firsthealth Agreement;

accrual of time off in lieu of overtime worked on a penalty basis as opposed to an hour for hour basis;

a broader range of allowances; and

paid rest breaks.

[14] The application also set out those provisions in the Agreement that are less beneficial for transferring employees. The provisions cited were:

annual wage increases of 2.7 per cent as opposed to 3 per cent;

a greater span of hours;

compassionate leave of 3 days per occasion as opposed to 5 days per occasion; and

jury service top up pay limited to 10 days as opposed to being uncapped.

[15] In summary, the more favourable provisions clearly outweigh the less beneficial provisions. This factor therefore supports the making of the orders sought.

The nominal expiry date of the firsthealth Agreement – s.318(3)(c)

[16] The firsthealth Agreement passed its nominal expiry date on 19 February 2014. The nominal expiry date of the Agreement is 8 August 2019.

[17] I consider this to be a neutral factor given that the firsthealth Agreement expired almost three years ago and negotiations for a replacement agreement do not appear to have commenced at this stage.

Whether the firsthealth Agreement would have a negative impact on the productivity of new employer’s workplace – s.318(3)(d)

Whether the new employer would incur significant economic disadvantage if the order is not made – s.318(3)(e)

[18] The Applicant submits that were the firsthealth Agreement to continue to apply to transferring employees it would have a negative impact on productivity because it would be required to administer two instruments. The Applicant also stated that conversely, productivity would be enhanced were the orders sought granted as a result of the reduced administrative burden and the higher wages and more generous terms and conditions of employment which the transferring employees would receive under the Agreement.

[19] While the Applicant stated that it would not incur significant economic disadvantage in circumstances where the orders sought were not made, it reiterated that the administrative burden associated with administering two agreements would be avoided.

[20] Against that background, I consider that the firsthealth Agreement is unlikely to have a negative impact on the productivity of the Applicant’s business, therefore I consider that factor a neutral consideration.

[21] As to the issue of economic disadvantage, there is clearly an administrative burden and cost associated with administering two agreements. The Applicant does not contend that the burden and cost would be significant. As such, I consider this factor to also be a neutral consideration.

The degree of business synergy between the firsthealth Agreement and any workplace instrument that already covers the new employer – s.318(3)(f)

[22] The Applicant contends that there is a high degree of synergy between the firsthealth Agreement and the Agreement. In those circumstances I do not consider this factor supports the making of the orders sought.

The public interest – s.318(3)(g)

[23] The Applicant contends that it is in the public interest for the transferring employees to be covered by the Agreement as, consistent with the objects of the Act, productivity will improve as a result of the reduced administrative burden and employees will receive more generous terms and conditions of employment.

[24] While I note the Applicant’s contention, in my view the public interest in this case is not enlivened. I therefore consider this factor to be a neutral consideration.

Approach to the factors in Section 318(3)

[25] In weighing the factors considered above I have had regard to the Object of Part 2-8 - Transfer of Business of the Act as set out in s.309, which requires me to balance the protection of employees’ terms and conditions of employment and the interests of employers in running their business efficiently.

Conclusion

[26] Taking into account each of the matters set out in s.318(3) of the Act, I am satisfied that it is appropriate to order that the firsthealth Agreement not cover the transferring employees and that the Agreement cover the transferring employees.

[27] An Order to that effect will be issued concurrently with this decision.

Appearances:

K. Adamcewicz for the Applicant.

Hearing details:

Canberra.

2016

December 14.

1 AE874027

4 AE420399

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