Royal Aero Club Of Western Australia Inc
[2023] FWCFB 247
•11 DECEMBER 2023
| [2023] FWCFB 247 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional instruments
Royal Aero Club Of Western Australia Inc
(AG2023/4117)
ROYAL AERO CLUB OF WA (INC) COLLECTIVE AGREEMENT 2006
| DEPUTY PRESIDENT WRIGHT | SYDNEY, 11 DECEMBER 2023 |
Application to extend the default period for Royal Aero Club of WA Inc Collective Agreement 2006
Royal Aero Club of Western Australia Inc (the Applicant) has applied, pursuant to item 20A(4) of Sch 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (Cth) (Transitional Act), to extend the default period for the Royal Aero Club of WA (Inc) Collective Agreement 2006 (Agreement). The application seeks to extend the Agreement for a period of 12 months until 5 December 2024.
The Agreement was made in 2006 and approved under the Workplace Relations Act 1996 (Cth) (WR Act). The Agreement is a ‘WR Act Instrument’ within the meaning of item 2(2) of Sch. 3 to the Transitional Act. It is classified by item 2(5)(c)(i) of Sch. 3 as a ‘collective agreement-based transitional instrument’.
Item 20A of Sch 3 to the Transitional Act provides for the automatic sunsetting of agreement-based transitional instruments by the end of the default period on 6 December 2023, subject to the capacity to apply to the Commission for an extension of that period for up to four years in prescribed circumstances. The agreements to which these provisions apply are known as zombie agreements. The main features of item 20A of Sch 3 are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd (Suncoast)[1] and we rely upon what is said in that decision.
When an application is made under subitem (4) of item 20A of Sch 3 to the Transitional Act, the Commission is required, under subitem (6), to extend the default period if the Commission is satisfied that:
(a) Subitem (7), (8), or (9) applies and it is otherwise appropriate in the circumstances to do so; or,
(b) It is reasonable in the circumstances to do so.
This application has been made on the basis that subitem (7) applies, and it is otherwise appropriate in the circumstances to extend the default period. The Applicant did not contend that either of subitems (8) or (9) applied to the application.
Background and Submissions
The Applicant is based in Western Australia and is a not-for-profit organisation providing aircraft pilot training and aircraft maintenance services to private consumers. The Applicant’s employees covered by the Agreement would otherwise be subject to the terms of the Air Pilots Award 2020 (the Award). The Agreement’s coverage clause at clause 2 provides that it applies to the Applicant and flight instructors and charter pilots engaged by the Applicant.
Of the Applicant’s 75 employees, 38 are covered by the Agreement (and any future or proposed Agreement subject to bargaining). In support of a 12-month extension, the Applicant indicated that the negotiation of a suitable enterprise agreement may take up to twelve months to complete, referring to difficulties and delays in getting in touch with its casual employees who may also be engaged to work for other employers elsewhere.
The Applicant noted that the majority of its employees are engaged on a casual basis, due to the seasonal and variable aspects of the Applicant’s business. The Applicant also indicated that it currently employs 11 administrative staff members, and that these resources would be unreasonably stretched should the Applicant have to negotiate a new enterprise agreement in the lead up to the Christmas period, given leave arrangements. The Applicant also submitted that the Award is not fit for purpose and is overly complex to administer for the 38 employees covered by the current Agreement given the nature and small scale of operations. It was also contended that reverting to paying its staff under the Award and then under a new, soon to be negotiated agreement, would incur significant administrative resources. The Applicant indicated that, in the event its application was unsuccessful, the resulting wage liability in having to comply with the terms of the Award would likely result in the Applicant laying off some of its casual staff.
In correspondence to the Commission on 16 November 2023, the Applicant indicated that its employees were paid the same salary as the ‘base salary’ provided for in the Award. This was contradicted in the same communication where the Applicant said that it paid an additional 3% above the Award. On its face the Agreement does not provide for pay rates that are 3% above the Award although clause 11(e) provides that rates of pay will be reviewed on the 1st of April each year and at a minimum will be increased by the rates of the Consumer Price Index All Groups (Perth). The submission that pay rates are above the Award is inconsistent with the submission that reverting to the Award would result in a wage liability. Nevertheless, for the purposes of our consideration, we have accepted that pay rates in the Agreement will range from Award rates to 3% more than the Award.
The Applicant also indicated that the Agreement had some terms that were more beneficial than the Award, such as an additional day of compassionate leave over the two provided for under the NES, and the provision of four weeks’ pay in lieu of notice on termination of employment. The Applicant also identified that the Award contained a number of terms that were more beneficial than those in the Agreement, including minimum engagement periods for casual employees, uniform allowance, loss of licence allowance, accommodation, meal allowances, accident insurance, and accident pay.
The three nominated employee bargaining representatives support the extension of the Agreement.
Subitem (7) - Consideration
The Full Bench in ISS Health Services Pty Ltd[2] described the three requirements for subitem (7) to apply. The first is the requirement that the application is made at or after the ‘notification time’ for a proposed agreement as defined in s.173(2) of the Fair Work Act 2009 (FW Act). The second is that the proposed agreement must cover the same or substantially the same group of employees as the zombie agreement. The Full Bench stated that this could be established by comparing the NERR for the proposed agreement to the coverage clause of the zombie agreement. Relevantly, the third is that bargaining for the proposed agreement has commenced.
The Applicant lodged its application to extend the default period for the Agreement on 6 November 2023. At Part 2.6 of the application, the Applicant indicated as follows:
“Bargaining is occurring for a new enterprise agreement that would cover the group of employees covered by the zombie agreement. We wish to request an extension of 12 months to the operation of the agreement, as we believe this to be a reasonable amount of time necessary to complete the bargaining process for a new Enterprise Agreement.”
On 10 November 2023, the Commission wrote to the Applicant to seek further material in support of its application, including, inter alia, a copy of any Notice of Employee Representational Rights (NERR) that had been issued to the Applicant’s employees at the commencement of bargaining for a new enterprise agreement.
On 16 November 2023, the Applicant provided further material to the Commission in response to its request, which included an email sent to employees attaching a NERR and an accompanying memo to employees regarding the Applicant’s intention to initiate the enterprise agreement bargaining process. The email and the memo were both dated 13 November 2023, being a date after the application was made. No further documentation was provided to demonstrate that the application was made at or after the notification time for the proposed enterprise agreement. The Applicant properly conceded in correspondence with the Commission that it was not aware that it was required to have already commenced bargaining prior to making its application and confirming that the Applicant had commenced bargaining by issuing the NERR and details of its intention to commence bargaining on 13 November 2023.
The Fair Work Act 2009 (the Act) provides a series of definitions of “notification time” for the purposes of a proposed enterprise agreement. At s. 173(2)(a), it provides that the notification time for a proposed enterprise agreement is the time when “the employer agrees to bargain, or initiates bargaining, for the agreement”. None of the material before us supports a finding that any of the alternative definitions have been met (such as those relating to majority support determinations or scope orders). Given that the memo and the NERR were provided to employees on 13 November 2023 and that no evidence has been advanced that the employer otherwise initiated bargaining before this date, we find that the employer agreed to bargain or initiated bargaining on 13 November 2023. Accordingly, the application was not made “at or after the notification time for a proposed enterprise agreement” in accordance with the requirement at subitem (7)(a) of the Transitional Act. Consequently, we find that subitem (7) does not apply and the default period cannot be extended pursuant to subitem (6)(a).
Item 6(b) - Consideration
As subitem (7) cannot be met, the Commission may consider whether to extend the default period pursuant to subitem 6(b), requiring a consideration of whether it is otherwise reasonable in the circumstances to extend the default period. This involves the application of a broad evaluative judgement.
In Suncoast,[3] the Full Bench said:
“[17] The ‘reasonable’ criterion in the subitem should, in our view, be applied in accordance with the ordinary meaning of the word – that is, “agreeable to reason or sound judgment”. Reasonableness must be assessed by reference to the circumstances of the case, that is, the relevant matters and conditions accompanying the case. Again, a broad evaluative judgment is required to be made.”
The Agreement was made and approved in 2006. It excludes all other statutes and instruments, including Awards. Clause 3 of the Agreement expressly excludes:
“entitlements in relation to annual leave, personal leave, parental leave, long service leave, notice, jury service, superannuation, public holidays, rest breaks (including meal breaks), shift/overtime loadings, annual leave loading, allowances, penalty rates and incentive·based payments and bonuses except as provided for by this Agreement.”
The Transitional Act provides that the base rates of pay payable under agreement-based transitional instruments are not to be less than the base rates payable under a modern award that is in operation and covers an employee.[4] The terms of the Agreement in this case represent the benchmarks created by the legislative scheme under which it came into operation, and that scheme has long since been superseded. The terms fall short of the safety net standards provided for by the Fair Work Act 2009 (Cth) (Act) and modern awards made under the Act.
In Peter Frick,[5] the Full Bench considered that the default position of the statute to automatically terminate transitional instruments on 6 December 2023 suggests a policy preference for employees covered by transitional instruments to be regulated by contemporary instruments made under the Act.[6] In Kalfresh Management Services Pty Ltd,[7] the Full Bench expressed that where an agreement contains inferior and outdated terms and conditions, this weighs strongly against a conclusion that it is reasonable in the circumstances to extend a default period.[8]
The Applicant does not suggest that the better off overall test is met. It instead, argues that the Agreement provides other sufficiently beneficial terms to its employees when compared with the Award so as to reasonably justify the extension of its operation. We do not accept this argument. The number of beneficial terms in the Agreement compared to the Award are limited. In contrast, as set out at [10], the beneficial provisions in the Award that the 38 agreement covered employees of the Applicant will miss out on if the Agreement’s operation is extended are significant in their number and nature. Given the largely inferior conditions in the Agreement, we think it unlikely that there would be a disadvantage to employees in a reversion to award conditions prior to the finalisation of a new agreement. This is a significant factor in our consideration, weighing against the grant of an extension.
Further, the large number of casual employees engaged by the Applicant and the disparity between the terms and entitlements for casual employees in the Agreement when compared with the Award, weighs against the reasonableness of extending the Agreement.
The Applicant has indicated that its employees are paid equal to or more than they would be entitled to under the Award. However, it has also referred, in its submissions in support of the application to extend, to the risk of having to lay off casual staff members should it be subject to wage liability arising from, we infer, additional costs if made to comply with the Award. These costs are not in evidence before us. It may be that the Applicant incurs increased costs as a result of complying with the largely beneficial conditions under the Award. However, if the Applicant is paying its employees what are essentially Award rates or slightly above Award rates, as it has indicated to the Commission that it does, we do not consider that the termination of the Agreement should result in such significant additional costs that render it likely that the Applicant will lay off casual staff, as suggested.
Finally, we are not persuaded by the Applicant’s submission that reverting to the Award for the 38 affected employees would create an unreasonable administrative burden or that the Applicant’s administrative resources are so limited as to justify the extension of this Agreement. The Applicant has 11 administrative staff including a Human Resources Manager. The Applicant has already had over 12 months to make arrangements for the sunsetting of the Agreement.
As to bargaining, we acknowledge that the Applicant’s 7-day operations and staff demographics, with some employees also engaged elsewhere for other organisations, may make bargaining slower and more challenging. However, the Applicant has had 12 months to negotiate a replacement agreement and had not even commenced bargaining until recently. Further, we consider that bargaining can be expedited given the technological advancements that mean that video based, face to face and hybrid negotiations can all be readily facilitated. While bargaining can and does take time, we do not consider it sufficiently likely that a fit-for-purpose enterprise agreement would take twelve months that the Applicant seeks.
In Qualipac,[9] the Full Bench rejected an application for an extension of the default period in circumstances where an applicant wanted to continue to rely on the inferior terms and conditions in a zombie agreement. We consider there to be some parallels with the present case. The Bench in Qualipac said:
[20] We are mindful of the need to ensure that the integrity of the safety net provided for by the Act and modern awards is not undermined by very old agreements that may no longer meet contemporary standards.
We have taken into account that the Applicant has taken material steps to commence bargaining for a new enterprise agreement, albeit this was since this application was made. We have also factored into our consideration that the three nominated employee bargaining representatives have indicated their support for the extension of the existing Agreement. These factors however do not convince us that we should extend the life of a zombie agreement that provides for terms and conditions that are inferior to the relevant modern award and fails to reflect contemporary standards.
On balance, we are not satisfied that it is reasonable in the circumstances to extend the default period of the agreement. The Application is dismissed.
DEPUTY PRESIDENT
[1] [2023] FWCFB 105.
[2] [2023] FWCFB 122 at [4]
[3] [2023] FWCFB 105.
[4] Item 13 of Sch 9.
[5] [2023] FWCFB 137
[6] Ibid, [32].
[7]& Kallium Management Services Pty Ltd As Trustee For The Kalium Labour Trust T/A Kalfresh Pty Ltd [2023] FWCFB 217
[8] Ibid, [14].
[9] [2023] FWCFB 212
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