S & N Smith Investment Pty Ltd T/A The Coffee Club At Smithfield, Cairns Central And Redlynch
[2024] FWCFB 176
•21 MARCH 2024
| [2024] FWCFB 176 |
| 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
S & N Smith Investment Pty Ltd T/A The Coffee Club At Smithfield, Cairns Central And Redlynch
(AG2023/4902)
S AND N INVESTMENTS PTY LTD COLLECTIVE AGREEMENT 2007
| Hospitality industry | |
| DEPUTY PRESIDENT ROBERTS COMMISSIONER PERICA COMMISSIONER LIM | SYDNEY, 21 MARCH 2024 |
Application to extend the default period for S AND N INVESTMENTS PTY LTD COLLECTIVE AGREEMENT 2007
Introduction
On 5 December 2023, S & N Smith Investment Pty Ltd (Applicant) made an application under item 20A(4) of Sch 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) to extend the ‘default period’ for the S and N Investments Pty Ltd Collective Agreement (Agreement). The application seeks to extend the default period to 6 December 2027.
The Agreement was made in 2007 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’.
The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay)Act 2022 (Cth) (SJBP Act) to provide for the automatic termination of all remaining transitional instruments. Pursuant to subitems 20A(1) and (2) of Sch 3 to the Transitional Act, the Agreement was to terminate on 6 December 2023 unless the default period is extended by the Commission.
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 referred to in the SJBP Act 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[1] (Suncoast) 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)(a), to extend the default period if the Commission is satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so. Put briefly, subitem (7) applies if, at the time of the application, the applicant is bargaining for a replacement agreement. Subitem (8) applies to individual agreement-based transitional instruments. Subitem (9) applies if, as at the time the application is made, it is likely the award covered employees covered by the Agreement, viewed as a group, would be better off overall if the Agreement continued to apply than if the relevant modern award or awards applied (BOOT test).
The Commission must also extend the default period under subitem (6)(b) if satisfied it is reasonable in the circumstances to do so.
The application is made pursuant to subitem 6(a) on the basis that the employees covered by the Agreement would be better off overall if the Agreement continued to apply to them rather than if the relevant modern award applied and it is otherwise appropriate in the circumstances to extend the default period.
Background
The Applicant operates Coffee Club franchises in Smithfield, Cairns Central and Redlynch in Queensland. It employs approximately 44 employees under the Agreement. Of this number, three are employed on a full-time basis, 18 are employed on a part-time basis, and 23 are employed as casuals. If the Agreement did not apply, the Restaurant Industry Award 2020 (the Award) would apply to the employees.
The Applicant submits that the employees would be better off overall under the Agreement compared to the Award in the following ways:
(a)Employees are paid an all-inclusive hourly rate for every hour worked Monday-Sunday. This means they are paid above award level wages as ‘the all-inclusive rate is calculated based on employees working only either a Saturday or Sunday and on average five public holidays per year.’
(b)Most of the employees are part-time and thus accrue annual leave. A change to the Award would mean a decrease in their hourly rate, which would result in accrued annual leave hours being paid out at a lower rate.
(c)Casual employees are, as a matter of practice, paid a 25% loading, although the Agreement provides for a loading of 20%.
(d)Superannuation contributions are calculated and paid on the all-inclusive hourly rate, rather than base rate.
(e)The Applicant has applied the Fair Work Commission’s minimum wage increase each year to the all-inclusive hourly rate paid to employees.
The Applicant submits that the Agreement has passed several compliance audits conducted by the Fair Work Ombudsman and contracted consultancies. The Applicant also submits that they are a family business that has been operating for over 21 years and that the last few years have been strenuous, leading the Applicant to close two of their businesses last year.
The ‘Better Off Overall Test’
There is a lengthy list of issues with the Agreement. The major issues can be summarised as follows:
(a)The Agreement provides a table with all-inclusive hourly rates applicable to employees which are loaded rates that are paid in lieu of ordinary hours, overtime, weekends, annual leave loading, meal allowances, public holidays, any other relevant award allowances and any other penalty rates. The agreement does not provide for how the all-inclusive rates are calculated.
(b)The all-inclusive rates referred to in the Agreement are below the Award rates. Clause 3.8 of the Agreement says that the rates of pay shall be assessed by the employer annually and may be increased where appropriate in consideration of the minimum wage set by the Australian Fair Pay Commission. The clause also says that where the rates in the Agreement are less than the Australian Pay and Classification Scales (APCS), then any increases to the APCS shall increase rates in the Agreement. The combined effect of these provisions is unclear however we note that item 13 of Schedule 9 of the Transitional Act has the effect that the base rate of pay payable under the Agreement is to be no less than the base rate of pay payable under the Award.
(c)Given the base rates of pay in the Agreement would be no less than the Award, full-time and part-time employees would be worse off given the lack of annual leave loading and allowances. Should they work at times when they would otherwise receive weekend, overtime or public holiday penalties, they will also not be better off overall.
(d)The Agreement provides for a 20% loading for casual employees compared to the 25% loading in the Award.
(e)The Agreement is largely silent on terms and conditions that are otherwise set out in the Award.
(f)There are several terms in the Agreement that are inconsistent with the National Employment Standards (NES). These include clauses which allow the employer to withhold monies due to an employee if the employee fails to give notice or abandons their employment, clauses that provide for the accrual of leave in a fashion that is inconsistent with the NES, a clause that limits the amount of carer’s leave an employee can take and a clause that allows the employer to deduct monies from an employee’s final termination pay.
We have considered the Agreement as a whole, including clauses of the Agreement that are more beneficial than the Award such as:
(a)The Agreement provides a higher minimum engagement period for casual employees of three hours, compared to two hours in the Award.
(b)The Agreement provides higher percentages for junior employees under the age of 19 years old.
The Applicant was given the opportunity to respond to the above issues. The Applicant’s response can be summarised as being that the Applicant affords employees better wages and conditions than those provided for in the Agreement. The Applicant also submitted that the Agreement is silent on terms and conditions to allow for flexibility, and that it was not intended to leave out safeguards or less beneficial terms.
Consideration
Based on the above, we cannot be satisfied that the employees, viewed as a group, would be better off overall if the Agreement continued to apply to them than if the Award applied. The operation of the all-inclusive wage rates in the Agreement in lieu of various award provisions such as overtime, weekend penalty rates, leave loading and allowances means employees would not be better off if the Agreement continues to apply to them. We also note that a majority of employees are employed as casuals and that the casual loading provided for in the Agreement is less than that in the Award. We observe that the relevant comparison for the purpose of assessing whether employees would be better off is between the terms of the Award and those of the Agreement, not what is or has been paid as a matter of practice. We conclude that subitem (9) of item 20A of Sch 3 does not apply here.
For completeness we would add that we do not consider that it would be otherwise appropriate to extend the default period. The Full Bench in Northern Inland Credit Union Limited[2] noted that the application in that matter was not accompanied by any proposal to transition within a reasonable period of time to a contemporary employment arrangement consistent with the FW Act and the current circumstances of the employees involved. We are of the view that the statutory intention behind the SJBP amendments is that transitional instruments approved many years ago under previous iterations of the legislation are to sunset and be replaced by modern industrial instruments made under the FW Act unless there are cogent reasons why that should not occur[3]. Here the Applicant sought the maximum available extension for an instrument that was made some 16 years ago, and which contains ambiguities, outdated references and conditions of employment and potential inconsistencies with the NES. We do not consider it would be appropriate to grant the extension sought in those circumstances.
The application is dismissed.
As our decision is to refuse to extend the default period under subitem 20A(6) of Sch 3 and our decision is made after the sunset date in the Transitional Act, subitem (11)(e) provides that we must extend the default period to the day of this decision or specify a day that is not more than 14 days after the day of this decision. We have decided that, to enable the Applicant to make the necessary administrative arrangements to give effect to the sunsetting of the Agreement, the default period is extended to 4 April 2024.
DEPUTY PRESIDENT
[1] [2023] FWCFB 105 (‘Suncoast Scaffolding’).
[2] [2023] FWCFB 120
[3] See Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified Agreement 2004-2007 [2023] FWCFB 137, at [32].
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