S.C. Heinrich & Co Pty Ltd
[2023] FWCFB 203
•10 NOVEMBER 2023
| [2023] FWCFB 203 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 7, Item 30(4) - Application to extend default period for enterprise agreements made during the bridging period
S.C. Heinrich & Co Pty Ltd
(AG2023/2895)
| DEPUTY PRESIDENT WRIGHT DEPUTY PRESIDENT ROBERTS DEPUTY PRESIDENT SLEVIN | SYDNEY, 10 NOVEMBER 2023 |
Application to extend the default period for the SC Heinrich & Co Pty Ltd Heavy Vehicle and Construction &Maintenance Agreement 2009
S.C. Heinrich & Co Pty Ltd (the Applicant) has applied under item 20A(4) of Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (TransitionalAct) to extend the default period for the SC Heinrich & Co Pty Ltd Heavy Vehicle and Construction &Maintenance Agreement 2009 (Agreement) for a period of four years.
The Agreement was made during the ‘bridging period’ as defined[1] in the Transitional Act and approved under the Fair Work Act 2009 (Cth) (FWAct) on 2 February 2010. Applications for the extension of agreements made during the bridging period are required to be made under item 30(4) of Sch 7 of the Transitional Act. We propose to treat the application as if it had been made under that item.
Agreements made during the bridging period are one of a number of types of agreement that are commonly referred to as zombie agreements. The main aspects of the statutory framework for applications for the extension of the default period for zombie agreements were detailed in the Full Bench decision in Suncoast Scaffold Pty Ltd.[2] The Full Bench there dealt with an application to extend a ‘WR Act agreement’ under item 20A of Sch 3 to the Transitional Act. The terms of item 20A of Sch 3 are relevantly the same as item 30 of Sch 7. The Full Bench’s analysis of those provisions applies equally to item 30 of Sch 7. It is not necessary to repeat that analysis here.
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) amended the Transitional Act to include item 30 in Sch 7. Item 30 provides for the sunsetting of any remaining enterprise agreements made during the bridging period on 6 December 2023 unless that deadline is extended by the Commission. Subitem 30(6) provides that where an application is made under subitem 30(4) for the period to be extended, the Commission must extend the default period for a period of no more than four years if either:
a)subitem (7) or (8) applies and it is otherwise appropriate in the circumstances to do
so; or
b)it is reasonable in the circumstances to do so.
Subitem (7) applies where the application is made at or after the notification time for a proposed enterprise agreement that will cover the employees and bargaining for the proposed enterprise agreement is occurring. No reliance was placed on this subitem by the Applicant.
The present application was advanced on the basis that subitem (8) applies. This subitem applies if it is likely that as at the time the application is made, the relevant employees covered by the Agreement, viewed as a group, would be better off overall if the Agreement applied to the employees than if the relevant modern award referred to in subitem (9) applied. The relevant modern awards in this case are the Road Transport and Distribution Award 2020 (Transport Award), the Building and Construction General On-site Award 2020 (Construction Award), the Cement, Lime and Quarrying Award 2020 (Quarrying Award) and the Manufacturing and Associated Industries and Occupations Award 2020 (Manufacturing Award).
The Agreement
Clause 9 of the Agreement, Rates of Pay, sets out a table of rates of pay that applies to various classifications covered by the Agreement. Those rates are described as Base Rates, which are in turn broken down into a Base Weekly Agreement Rate and a Base Hourly Rate and Local Agreement Flat Hourly Rates. The Base Rates reflect the relevant base award rates at the time the Agreement was made.
Clause 9.2 of the Agreement provides as follows:
9.2 The Agreement Rates of pay set out in the table in clause 9.1 are based on 38 Ordinary Hours per week and include payment for Overtime. However for ease of calculation, the Company shall provide the employees an Agreement Flat Hourly rate which shall be paid for each hour worked up to 63 hours per week.
9.2.1 The employees shall be paid a Flat Hourly Rate that is at least equal the (sic) Local Agreement Flat Hourly rates of pay as set out in the table in clause 9.1 for the employee’s classification level.
Clause 6, No Further Claims, provides in part:
6.2 If the Base Weekly and Base Hourly rates of pay set out in the table in clause 9.1 are adjusted from time to time through Federal Minimum Wage Increases such that they exceed the rates payable under this Agreement, then the rates payable under this Agreement shall be increased to match these rates.
Clauses in similar terms to those set out above have been considered in two recent matters relating to applications to extend the default period for agreements applying in the transport industry in South Australia.[3] In both of those matters the Full Bench noted the lack of clarity in the terms of the agreements in relation to the rates of pay that are actually payable under the agreements and the mechanism for adjusting those rates over time. A similar difficulty arises here.
The Applicant submitted that the method of calculating the rates payable was presented to the Commission when the Agreement was submitted for approval. They said the method was based on a calculation of hours typically worked each day, Monday to Saturday, up to a maximum of 63 hours per week and taking into account overtime penalties that would apply to those hours under the respective awards. Under this method, the number of hours worked (63) is expressed as the number of hours payable at the ordinary time rate (in this case 82 hours) which is then multiplied by the award hourly rate. The payment of a meal allowance is included[4] and the resultant total amount is divided by 63 to produce the Flat Hourly Rate referred to in clause 9.1. The Applicant provided the Commission with a spreadsheet setting out this methodology and taking into account award increases to demonstrate the current rate payable under the Agreement for the Level 8 transport classification. As can be seen from clause 9.2 above, the details of this methodology are not contained in the text of the Agreement itself.
The Applicant also submitted that the rates of pay payable under the Agreement had been adjusted throughout the life of the Agreement in response to Annual Wage Review decisions. We presume that clause 6.2 referred to above is relied upon to bring about this adjustment. Clause 6.2 is, in our view, ambiguous. However, we are prepared to assume the view as to the effect of the clause as advanced by the Applicant, that is that the methodology described in the preceding paragraph is applied to the award rates as those rates are adjusted from time to time, to produce the Flat Hourly rates payable under clause 9.1 of the Agreement.
The Applicant provided a table setting out the current award rates and Flat Hourly Rates payable under the Agreement for each relevant employee classification. The table also included the rates that were in fact being paid to those classifications which in each case exceeded both the award rates and the Flat Hourly Rates. We note that the Flat Hourly Rates in this document were different to the Flat Hourly Rates that the Applicant included in the application as being the rates currently payable under the Agreement. This was later explained as being the result of the use of an outdated amount for the meal allowances being included in the table of rates provided.
Better Off Overall Analysis
The Commission’s Agreements Analysis Team prepared a written assessment of the Agreement for the purpose of comparing the wages and entitlements in the Agreement with those contained in the relevant awards. A copy of this analysis was provided to the Applicant who was given an opportunity to make further comments or submissions about the analysis. The analysis adopted the approach described above to determine the amounts currently payable to the various classifications under the Agreement.
The Agreements Analysis Team modelling was based on initial information provided by the Applicant that drivers and operators under the Agreement typically worked 12 hours per day, up to 6 days per week and that mechanics typically worked an average of 10 hours per day, up to 5 days per week. That modelling demonstrated that drivers and machine operators in construction and quarrying classifications were not better off under the Agreement by amounts of between $149.83 per week to $155.02 per week. However, mechanics were better off by $212.66 per week. The Applicant subsequently advised that employees typically worked 11.5 hours on 3 days of the week, 11 hours on 2 days and 6.5 hours on Saturdays (i.e. 63 hours per week). On this work pattern, the modelling shows that in the case of drivers, they would be $31.13 per week better off under the Agreement and in the case of operators in construction and quarrying they would be $39.58 and $44.74 per week respectively better off under the Agreement. In the case of mechanics, the modelling shows that they would be $245.26 per week better off under the Agreement although we note the Applicant’s advice at the directions hearing that mechanics typically worked shorter hours than the other classifications.
In relation to casual employees, the Applicant said that these employees were engaged occasionally under the Transport Award. At the directions hearing it was accepted that the Applicant employed a small number of casual employees. The Applicant argued that these employees were better off under the terms of the Agreement since they received the Flat Hourly Rates in addition to the specified loadings for ordinary hours and overtime. While it may be the case that casuals receive the payment of the Flat Hourly Rates as a matter of practice, we do not accept that the Agreement provides for this payment. Clause 9.7 clearly provides for payment at the base rates of pay only. We therefore regard the provisions of the Agreement relating to casuals as a neutral consideration in the overall assessment.
The public holiday provisions are set out in clause 17 of the Agreement. The clause provides for the payment of public holidays not worked at the base rate. When an employee works on a public holiday, they receive either a payment for the day at the base rate and paid time off on an hour for hour basis, or an additional amount at the rate of either 150% or 200% of the base rate, depending on the public holiday worked. The Applicant submitted that the provisions were equivalent to those provided for in the awards.
In our view that submission does not pay adequate regard to a number of differences between the Agreement provisions and those of the relevant awards. First, the Transport Award provides for an additional penalty of 250% and 300% for time worked outside ordinary hours on public holidays and for casual employees working on public holidays. The Construction Award and the Quarrying Award provide a 275% penalty for casual employees. Second, the Manufacturing Award provides for a minimum payment of 3 hours for time worked on a public holiday. The Agreement provides for payment for hours worked only. Third, the Agreement provides for paid time off on an hour for hour basis as an alternative to the additional payment at penalty rates. In that case employees would receive payment effectively at single time for time worked on a public holiday. Overall, we consider the Agreement provisions relating to public holidays inferior to the equivalent provisions in the awards.
Clause 18.3 of the Agreement provides:
18.3 The employee shall be paid any unused accrued annual leave when their employment ceases, provided that they have had at least one month of continuous service and that they were not dismissed as a result of their behaviour or performance before completing 12 months continuous service. Leave loading is not payable on unused Annual Leave entitlements when they are paid out at the end of the employees’ employment.
The awards do not include the above limitations on payment of accrued and untaken annual leave. Moreover, the Transport Award and the Construction Award expressly provide for the payment of leave loading on accrued annual leave paid on termination of employment.
Under clause 18.5 the company may require an employee to take some, or all, of their accrued annual leave with 14 days’ notice. Each of the awards include clauses[5] relating to employer directions to take leave which include various safeguards for employees such as minimum remaining accrued leave entitlements and minimum periods of leave to be taken. We regard the annual leave provisions of the Agreement as being less beneficial than the equivalent provisions in the awards. The Applicant sought to provide an undertaking to the Commission to address any shortcomings in the annual leave clause of the Agreement. The Transitional Act does not make any provision for the acceptance of undertakings for the purposes of applications to extend a default period. We do not take this undertaking into account in our assessment of the Agreement.
We also note that the Transport, Manufacturing and Quarrying Awards include provisions that ensure that where an employee leaves during a redundancy notice period the employee is entitled to receive the redundancy entitlements (but not payment for the remainder of the notice period itself) that they would have received had they remained in employment until the expiry of the notice period. [6] The Agreement does not include a similar clause. Further, those employed in construction classifications also do not have the benefit of the industry specific redundancy scheme in clause 41 of the Construction Award. That clause, which was developed to deal with the particular circumstances of those covered by the Construction Award, contains a much broader definition of redundancy[7] than is contained in the Agreement and an entitlement to payment for those with less than 12 months service where the redundancy as defined is occasioned otherwise than by the employee.[8]
Clause 10.3 of the Agreement provides that the meal allowance is included in the Flat Hourly Rate, but otherwise there are no separately identifiable allowances referred to in the Agreement. We note however that clause 2 of the Agreement incorporates the terms of a former federal award and a number of state awards preserved as Notional Agreements Preserving a State Award.[9] Those awards include allowances. However, given that the federal award no longer applies, there can be no allowances from that award incorporated into the Agreement. Consequently, employees of the Applicant who would qualify for allowances under clause 19 of the Transport Award would not receive those allowances under the Agreement.
Consideration
In Suncoast Scaffolding the Full Bench observed that the application of the better off overall test in Item 9 of Item 20A in Schedule 3 required a broad evaluative judgment based upon an overall comparison of the terms of the transitional instrument and the relevant award(s) in their application to the cohort of award covered employees. We apply the same approach here.
Having regard to the various matters set out above, we regard the question of whether the employees, viewed as a group, are better off overall if the Agreement applied than if the relevant awards applied to be relatively finely balanced, but only if the assumptions about the actual rates payable under the Agreement are accepted. With those assumptions in place, the weekly rates of pay payable under the Agreement for the various categories of employees are, in the case of a 63-hour working week, higher in the case of mechanics, and slightly higher for the other categories, than the comparable award rates. We note however that the modelling shows that any advantage, for drivers and operators at least, is reversed where the hours increase up to the 12 hours per day as considered in the initial analysis. In this respect we note the Applicant’s original advice that some drivers and operators typically worked beyond 63 hours per week. Against any benefit that exists under the Agreement relating to rates of pay, there are clearly other terms in the Agreement that are inferior to the corresponding terms in the awards.
On balance, we are of the view that it is likely that as at the time the application is made, the relevant employees covered by the Agreement, viewed as a group, would be better off overall if the Agreement applied to the employees than if the relevant modern awards applied. However, this is not a case where the employees are very obviously better off or better off by a significant margin. Overall, we think any additional benefit provided by the Agreement is minor and variable depending on the circumstances and patterns of work of the employees.
We then turn to consider whether it is otherwise appropriate in the circumstances to extend the default period for this agreement. We observe that a number of Full Bench decisions[10] have now pointed to the default position of the statutory scheme to automatically terminate transitional instruments on 6 December 2023 as suggesting a policy preference for employees covered by transitional instruments to be regulated by contemporary instruments made under the FW Act. In this case, the Agreement presents similar issues to those considered in both Quinn Transport and J.A. Tilley. This Agreement is over 13 years old. It lacks clarity, particularly in relation to the determination of the actual rates of pay that are payable according to its terms. The methodology for determining those rates and the adjustment of them over time does not appear on the face of the Agreement. That difficulty was highlighted by the different information in the Applicant’s own material as to the current rates payable under the Agreement. It is undesirable, in our view, for that type of uncertainty to continue.
We note that the Applicant seeks an extension for the maximum period of four years. There was no evidence of any proposal to transition to a contemporary industrial instrument.
We also observe that there was no evidence from any of the employees covered by the Agreement as to whether they supported any extension of the Agreement. There was also a submission by the Applicant that the rates that are actually paid to the employees exceed those provided for by the Agreement. In other words, the terms of the Agreement relating to wage rates are not consistent with the present circumstances of the employees covered by it. We consider it unlikely in circumstances where the employer is seeking the maximum extension to an agreement, and is presently paying in excess of what the agreement provides for, that the sunsetting of the Agreement would result in employees being actually worse off because the employer would revert to the relevant awards.
In all the circumstances we consider it appropriate that the parties consider negotiating a new agreement under the terms of the FW Act that is in clear terms, is underpinned by the relevant modern awards, and which reflects the existing situation of the employer and its employees. We do not consider it to be otherwise appropriate to extend the default period in this case.
There were no reasons advanced as to why it would be reasonable in the circumstances to extend the default period of this agreement and we are unable to identify any such reasons.
The application to extend the default period is dismissed.
DEPUTY PRESIDENT
[1] Item 2, Part 1 of Schedule 1.
[2] [2023] FWCFB 105.
[3] Application by Quinn Transport Pty Ltd T/A Quinn Transport Pty Ltd [2023] FWCFB 195; Application by DW & JA Tilley PTY LTD[2023] FWCFB 196.
[4] SC Heinrich & Co Pty Ltd Heavy Vehicle and Construction &Maintenance Agreement 2009 Clause 10.1.
[5] Road Transport and Distribution Award 2020 [MA000038] Clause 24.7; Building and Construction General On-site Award 2020 [MA000020] Clause 31.7, Cement, Lime and Quarrying Award 2020 [MA000055] Clause 22.6; Manufacturing and Associated Industries and Occupations Award 2020 [MA000010] Clause 34.9.
[6] Road Transport and Distribution Award 2020 [MA000038] Clause 31.2; Manufacturing and Associated Industries and Occupations Award 2020 [MA000010] Clause 46.2; Cement, Lime and Quarrying Award 2020 [MA000055] Clause 32.2.
[7] Building and Construction General On-site Award 2020 [MA000020] Clause 41.
[8] Ibid Clause 41.3.
[9] Referred to at items 2(2)(b) and 20(1) of Sch 3 to the Transitional Act.
[10] For example [2023] FWCFB 137, at [32].
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