Sedgman Operations Employment Services Pty Ltd

[2016] FWC 7100

[2016] FWC 7100

FAIR WORK COMMISSION

DECISION

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

Sedgman Operations Employment Services Pty Ltd
(AG2016/5634)

SEDGMAN EMPLOYMENT SERVICES PTY LTD BOWEN BASIN FRONT LINE EMPLOYEE ENTERPRISE AGREEMENT 2014-2016

Coal industry
DEPUTY PRESIDENT ASBURY	BRISBANE, 4 OCTOBER 2016

Application for an order relating to transferrable instruments.

Background

[1] Sedgman Operations Employment Services Pty Ltd (Sedgman Operations) applies for orders relating transferrable instruments. Sedgman Operations is a wholly owned subsidiary of Sedgman Pty Limited (Sedgman). Sedgman Operations is the employer of 14 employees and is covered by the Sedgman Coal Agreement 2015 (Sedgman Coal Agreement). The Sedgman Coal Agreement covers work on black coal mine sites throughout Australia.

[2] Sedgman Employment Services Pty Ltd (Sedgman Employment) is also a wholly owned subsidiary of Sedgman. Sedgman Employment employs 21 employees who work at a coal handling plant located at Red Mountain in Queensland (the Red Mountain employees). Sedgman Employment also employs 28 employees through the Bowen Basin area.

[3] The work performed by the Red Mountain employees is covered by the Sedgman Employment Services Pty Ltd Bowen Basin Front Line Employee Enterprise Agreement 2014-2016 (Sedgman Bowen Basin Agreement). Twenty-eight other employees of Sedgman Employment are engaged throughout the Bowen Basin and are also covered by the Sedgman Bowen Basin Agreement.

[4] The Sedgman Bowen Basin Agreement includes a ‘Retention Allowance’ that is currently received by 19 of the 21 Red Mountain Employees. The Retention Allowance is between $26,661.57 and $29,250.88 per annum.

[5] The Red Mountain Employees are engaged in work that is the subject of a contract between Sedgman and a joint venture between Peabody Energy and BHP Mitsui Coal. This contract was due to expire on 30 September 2016. Negotiations for a new contract have proceeded on the basis that Sedgman will need to significantly reduce costs at Red Mountain in order to retain the contract.

[6] From March 2016 to May 2016, Sedgman Operations has consulted with the Red Mountain Employees about the need for a reduction in costs arising out of negotiations for the renewal of the contract. As a result of that consultation a proposal has been agreed by employees. That proposal is as follows:

“a) [Sedgman Employment] would make a new enterprise agreement with only the Red Mountain Employees and covering only the work they do at Red Mountain – the Sedgman Red Mountain Agreement 2016 (Red Mountain Agreement);

b) Importantly, to facilitate the necessary reduction in operation costs, the Red Mountain Agreement would not contain the retention allowance;

c) If the Red Mountain Employees transferred over to [Sedgman Operations], then both the [Sedgman Bowen Basin Agreement] and the Red Mountain Agreement would transfer too, however, the Red Mountain Agreement would not apply until after the [Sedgman Bowen Basin Agreement] nominally expired (10 February 2017), which would be too late to save the Contract which was due to expire on 30 September 2016 (this is by virtue of the combined effect of sections 58 and 313 of the FW Act);

d) The Red Mountain Employees therefore conditionally agreed to transfer over to Sedgman Operations – the conditions being that this application was made by Sedgman Operations and succeeded in obtaining orders to the effect that the Red Mountain Agreement would cover the work done by the Red Mountain Employees and that the [Sedgman Bowen Basin Agreement] would not cover those employees doing that work; and

e) If this Applications succeeds, the Red Mountain Employees who used to receive the Retention Allowance under the [Sedgman Bowen Basin Agreement] would be entitled to a reduced Retention Allowance but as a contractual entitlement rather than one found in an enterprise agreement.”

[7] All 21 Red Mountain Employees have accepted conditional offers of transfer of employment to Sedgman Operations. Sedgman Operations states that it has consulted with the Construction, Forestry, Mining and Energy Union (the CFMEU) regarding the proposal, and that the CFMEU has indicated that it does not oppose the proposal.

[8] Accordingly, Sedgman Operations applies pursuant to s.318 of the Fair Work Act 2009 (the Act) for an order relating to a transferrable instrument (the Bowen Basin Agreement) that would likely cover Sedgman Operations, as a new employer, and transferring employees. Sedgman Operations also applies pursuant to s.319 of the Act for an order that a transferrable instrument (the Red Mountain Agreement) that would likely cover it as a new employer will cover non-transferring employees.

[9] Sedgman Operations has sought the following orders under ss.318(1)(a) and 319(1)(b) of the Act:

● Pursuant to s.318(a) of the Act, the Commission orders that the Sedgman Employment Services Pty Ltd Bowen Basin Front Line Employee Enterprise Agreement 2014-2016 will not cover:

(i) Sedgman Operations Employment Services Pty Ltd; or

(ii) Employees of Sedgman Operations Employment Services Pty Ltd who transferred from Sedgman Employment Services Pty Ltd to Sedgman Operations Employment Services Pty Ltd.

● Pursuant to s.319(1)(b) of the Act, the Commission orders that the Sedgman Red Mountain Agreement 2016 will cover non-transferring employees of Sedgman Operations Employment Services Pty Ltd who perform the work covered by the Sedgman Red Mountain Agreement 2016.

Legislation

[10] Section 318 of the Act provides:

“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.

[11] Section 319 of the Act provides:

“Orders relating to instruments covering new employer and non-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 non-transferring employee because of subsection 314(1) does not, or will not, cover the non-transferring employee;

(b)  an order that a transferable instrument that covers, or is likely to cover, the new employer, because of a provision of this Part, covers, or will cover, a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;
(c)  an order that an enterprise agreement or a modern award that covers the new employer does not, or will not, cover a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer.

Note:          Orders may be made under paragraphs (1)(b) and (c) in relation to a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer, whether or not the non-transferring employee became employed by the new employer before or after the transferable instrument referred to in paragraph (1)(b) started to cover the new employer.

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 non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;
(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 non-transferring employee before the later of the following:

(a)  the time when the non-transferring employee starts to perform the transferring work for the new employer;
(b)  the day on which the order is made.”

[12] Section 50AAA of the Corporations Act 2001 (Cth) provides:

“50AAA Associated entities

(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(c) the interest is material to the associate.

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(c) the interest is material to the principal.

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[13] Sedgman Operations and Sedgman Employment are associated entities.

Relevant Considerations

[14] The application for orders relating to transferrable instruments is supported by an affidavit of Mr Jeremy King. Mr King is the Group Operations Manager for Sedgman. Mr King has given evidence regarding the negotiations for the renewed Red Mountain contract; consultation with the Red Mountain Employees; the differences between the Sedgman Bowen Basis Agreement and the Red Mountain Agreement; the conditional offers of employment to Red Mountain Employees; and discussion with the CFMEU. The CFMEU has not indicated opposition to the application, or sought to appear at the Hearing listed for today. In light of the fact that the CFMEU is bound by the Sedgman Bowen Basin Agreement, and that it is not clear that the CFMEU has been served with this application, I provide the CFMEU with an opportunity to advise whether it opposes the issuing of an Order. The CFMEU is to advise my Chambers by email by 4pm tomorrow if it opposes the Orders sought. If no correspondence is received, the Orders will issue without further notice.

[15] There are no apparent grounds on which a finding could be made that the orders sought in this Application would be contrary to public interest.

[16] I have considered the matters set out in ss.318(3) and 319(3) of the Act and, subject to any view the CFMEU may provide, I am satisfied on the basis of supporting documentation provided with the application and the additional material provided that the orders should be issued. Consequently, I am satisfied that the Application should be granted and in the event that the Orders are not opposed, Orders in the terms sought will be issued.

DEPUTY PRESIDENT

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