Shahin Enterprises Pty Ltd as Trustee for Shahin Family Trust

[2018] FWCA 833

[2018] FWCA 833

FAIR WORK COMMISSION

DECISION

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 16 - Application to terminate collective agreement-based transitional instruments

Shahin Enterprises Pty Ltd as Trustee for Shahin Family Trust
(AG2018/303, AG2018/304, AG2018/305, AG2018/306, AG2018/307, AG2018/308)

SHAHIN PART TIME CASUAL COLLECTIVE AGREEMENT NOVEMBER 2007
[AC311139]
SHAHIN FULL TIME COLLECTIVE AGREEMENT NOVEMBER 2007
[AC311137]
SMOKEMART AND GIFTBOX SA
[AC323896]  [AC328588]
SMOKEMART AND GIFTBOX VIC
[AC323900]  [AC328593]
SMOKEMART AND GIFTBOX NSW
[AC323899]  [AC328592]
SMOKEMART AND GIFTBOX QLD
[AC323901]  [AC328594]

Retail industry
COMMISSIONER HAMPTON	ADELAIDE, 1 MARCH 2018

Applications for termination of various collective agreements.

1. The applications

[1] This decision concerns six applications by Shahin Enterprises Pty Ltd as Trustee for Shahin Family Trust (Shahin Enterprises) pursuant to Item 16 of Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act), and as a consequence, s.225 of the Fair Work Act 2009 (the FW Act). The applications seek to terminate six collective agreements which fall into two broad categories. The first category involves two instruments which presently apply to a large number of retail service stations generally operating under the umbrella of the “On the Run” brand; namely the

•  Shahin Part Time Casual Collective Agreement November 2007, and

•  Shahin Full Time Collective Agreement November 2007.

[2] For convenience, I will refer to the above agreements as the “On the Run Collective Agreements”.

[3] The second category of instruments presently apply to a number of retail shops operating under the brand name of Smokemart and Giftbox in various States of Australia; namely the

•  Smokemart and Giftbox SA Collective Agreement,

•  Smokemart and Giftbox Vic Collective Agreement,

•  Smokemart and Giftbox NSW Collective Agreement; and

•  Smokemart and Giftbox Qld Collective Agreement.

[4] For convenience, I will describe the above agreements as the “Smokemart and Giftbox Collective Agreements”.

[5] The Collective Agreements were all approved under the former Workplace Relations Act 1996 (the WR Act)and are collective agreement-based transitional instruments for the purposes of the Transitional Act. 1 The On the Run Collective Agreements have nominal expiry dates of 21 November 2012, whilst the Smokemart and Giftbox Collective Agreements have nominal expiry dates of 28 July 2014.2

[6] The various Collective Agreements cover approximately 3250 employees across 220 sites engaged in specific roles at retail service stations and shop assistants in retail shops, including those who perform the role of shop managers and assistant managers.

[7] The applications were listed and heard together on 21 February 2018. In the lead up to the hearings, comprehensive directions were made by the Commission requiring Shahin Enterprises to file submissions and evidence supporting the applications and establishing a process to provide an opportunity for all employees to seek further information, express additional views, or raise any concerns directly with the Commission. Many employees made contact with the Commission and sought clarification, and one employee lodged a written objection to the application. I will return to the detail of these views later in this decision.

[8] Mr Ridings of EMA Consulting represented Shahin Enterprises, with permission. 3 The applications were supported by comprehensive written submissions4 and evidence5 confirming, amongst other matters, the extent of information provided to the employees in the lead up to and following the applications, the operations of the various businesses, the difference between the Collective Agreements and the relevant modern awards, and the operational and other changes that would be necessary to successfully introduce and comply with those modern awards.

[9] The Shop, Distributive and Allied Employees Association (SDA) is not covered by the Collective Agreements but has members who are subject to both categories of instruments and provided a statement to the Commission at the hearing of this matter. That statement supported the application on the basis that this would mean that the employees would fall to coverage of more contemporary instruments with significantly better pay and conditions overall. I will also return to the detail of that position shortly.

2. The immediate statutory parameters for the applications

[10] Without overlooking the object of the FW Act in s.3, and other provisions that establish the context for these applications, the immediately relevant provisions are set out below.

[11] Item 16 of Schedule 3 of the Transitional Act provides:

“16 Collective agreement-based transitional instruments: termination by the FWC

(1) Subdivision D of Division 7 of Part 2-4 of the FW Act (which deals with termination of enterprise agreements after their nominal expiry date) applies in relation to a collective agreement-based transitional instrument as if a reference to an enterprise agreement included a reference to a collective agreement-based transitional instrument.

(2) For the purpose of the application of Subdivision D to an old IR agreement, the agreement’s nominal expiry date is taken to be the end of the period of the agreement.”

[12] Subdivision D of Division 7 of Part 2-4 of the FW Act states:

“225 Application for termination of an enterprise agreement after its nominal expiry date

If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:

(a) one or more of the employers covered by the agreement;

(b) an employee covered by the agreement;

(c) an employee organisation covered by the agreement.

226 When FWA must terminate an enterprise agreement

If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:

(a) the FWC is satisfied that it is not contrary to the public interest to do so; and

(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:

(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and

(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.

227 When termination comes into operation

If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”

[13] Shahin Enterprises is eligible to bring these applications and they have been validly made under s.225 of the FW Act.

3. The relevant modern awards

[14] Given the operation of the FW Act 6 and the coverage of the instruments concerned, the termination of the On the Run Collective Agreements would mean that the relevant parties would become subject to the terms of the Vehicle Manufacturing, Repair, Service and Retail Award 2010 (the Vehicle award).

[15] On the same basis, the termination of the Smokemart and Giftbox Collective Agreements would mean that the relevant parties would become subject to the terms of the General Retail Industry Award 2010 (the General Retail award).

[16] I note that there is no enterprise agreement made under the FW Act in place to cover any of these workplaces and no bargaining for such is presently underway.

4. The terms of the Collective Agreements

[17] I have considered the terms of each of the Collective Agreements as part of my assessment of the potential impact of their termination. The two categories of agreements are broadly consistent in their general terms and conditions; however, each category and each agreement does differ in certain respects.

[18] Without canvassing all of the terms of the Collective Agreements, those instruments were designed to operate in the context of the WR Act and as such provide what might be described as partially loaded rates which apparently compensated for some of the penalty and additional payments traditionally found in most awards. The Collective Agreements do contain some additional payments for work at various times and on Sundays, for instance. The Collective Agreements were also was drafted to rely upon the then Australian Fair Pay and Conditions Standard (AFPCS) and other leave provisions applicable at that time.

[19] Significantly, in the context of a comparison with the modern awards, the Collective Agreements specify maximum average hours of 38 per week and some daily parameters. However, they also provide for voluntary overtime and what would be described as very flexible roster and hours of work arrangements in ordinary time. Further, there are few parameters associated with part-time employment.

[20] I note that as a result of the operation of the Transitional Act and certain provisions of the FW Act, in terms of the rate of pay and basic conditions of employment, the net result of the current Collective Agreements is:

•  The employer is presently bound to pay the employees the base rate of pay provided by the relevant modern award (or the agreement rate where it is higher) but not the penalties and other additional payments provided by that award; 7 and

•  The terms of the National Employment Standards (NES) are applicable in lieu of the former AFPCS to the extent that the NES is more favourable. 8

[21] This means, amongst other elements, that the termination of the Collective Agreements will result in the full range of late night and other shift payments, and the Sunday and Public Holiday penalty payment provisions of the relevant modern award applying for the first time.

[22] I note also that Shahin Enterprises has adjusted some of the rates in the Collective Agreements beyond that necessary to meet the minimum obligation of those instruments and the FW Act.

[23] When the various pay rates provided by each of the Collective Agreements are compared to the various categories and pay rates provided by the two modern awards concerned, there is only one category of employee where those pay rates are not higher in the modern award. In most cases, particularly on afternoon and evening shifts, Sundays and Public Holidays, the modern awards rates are significantly higher. The casual loading under the Collective Agreements is 20% whereas the loading under both modern awards is 25%. The category of rate where the beneficial nature of the modern award does not apply is where part-time employees are working only morning shifts between Monday and Saturday, where the rate in the Vehicle award is presently marginally lower. This arises because the agreement rates concerned are partially loaded rates covering some “shift” penalties which do not operate under the Vehicle award at that time of day.

5. The positions and circumstances of the parties

[24] In large part I have set out the circumstances of each of these applications earlier in this decision.

[25] Shahin Enterprises contends that the termination of the Collective Agreements would not be contrary to the public interest. The terminations would not undermine collective bargaining and would support the objects of the FW Act and modern awards objective. This, it contends, is so given that the minimum provisions of the modern awards concerned, which apply across the community, would also be applied here.

[26] Shahin Enterprises contends that the overall terms and conditions of employment are superior under the two modern awards and that there are many benefits to employees that would arise. It also states that the terminations will lead to cost increases and some additional complexity; however, the termination of the Collective Agreement was appropriate given all of the circumstances including the public interest considerations set out above.

[27] The evidence before the Commission also illustrates the extensive measures that Shahin Enterprises has made to inform the employees about the applications and the consequences, and to permit them to form a view. This has been supplemented by the process established by the Commission as set out earlier in this decision.

[28] The SDA made the following submission to the Commission 9:

“MR CAGNEY:  The SDA as you already know has covered employees in retail and fast food and we represent employees at On the Run and Smokemart.  We support the termination of the six agreements that are the subject of this application.  We think it's appropriate that the Commission make the order that the applicant is seeking.  The agreements are expired and they bear no resemblance to the modern awards which cover employees of the applicant, and it's appropriate employees get access to the benefits of the appropriate modern award.

The vast majority of employees employed by the applicant will be better off if these enterprise agreements are terminated.  We do note though from materials filed by the applicant that some employees will be disadvantaged or may be disadvantaged as a result of the proposed move to the relevant modern award.  Some of those people such as part-time day shift workers will be paid under the vehicle award are SDA members, and we hope in the discussions that the applicant has with those employees, and all employees for that matter, that they recognise employees years of service and hard work and remunerate them appropriately.

It would not be a good outcome if those employees were to suffer a reduction in take home pay as a result of the proposed transition.  The modern award provides minimum rates of pay and the company as it has done in it's On the Run business has a discretion to increase those rates of pay.

On the issue of a delay termination we accept the explanation given by the applicant that it will require a substantial shift in how it runs its business.  We understand that will take time and the Commission should take that into account in making its decision in relation to this application.”

[29] As outlined earlier, an employee has objected to the application as it would impact upon their particular employment conditions and those of other employees in those circumstances. 10 That employee is apparently covered by the Shahin Part Time Casual Collective Agreement November 2007 and is engaged in that category of part-time employment where the rate in the Vehicle award is presently marginally lower than the rate being paid. The concerns raised by that employee were that:

•  Employees in that category would stand to lose pay given the lower award rate for such shifts;

•  The time of day should have no bearing upon the rate of pay and that others working afternoon and evening shifts do not work any harder; rather the pay should increase with loyalty and service; and

•  Any changes should only impact upon employees hired after the termination of the agreement. 11

[30] Shahin Enterprises acknowledged that there are a number of employees working in that category of part-time employment (morning shifts in the On the Run business). This was estimated to be up to 60 employees; however, the actual number would depend upon roster arrangements, which change from time to time. Shahin Enterprises also contends that the employees concerned will be consulted about their working arrangements upon termination of the Collective Agreements, which will include agreeing part-time hours for the first time. Further, the employees concerned will have an entitlement to overtime for work beyond the agreed hours and would benefit from significantly increased pay at other times, including Public Holidays.

[31] I have taken the position and circumstances of this category of part-time employee into account, along with those of the employees more generally, when considering whether the relevant Collective Agreement should be terminated.

6. Consideration and conclusions

[32] I have set out the positions and circumstances of the parties, including the effect that the termination will have, earlier in this decision. Under s.226(b) of the FW Act, the Commission must consider and take into account these matters. This involves the Commission treating those considerations as a matter of significance in the decision making process, 12 and I have done so in this case.

[33] Turning to the considerations of s.226(b)(i) of the FW Act, the employer has made the applications and seeks the termination of each agreement; the employees, with one exception, support, or at the very least are not opposed, to the application. Although the SDA is not an employee organisation covered by the Collective Agreements, it has supported the termination on behalf of its relevant members. An employee has opposed the termination of one of the Agreements and I have had regard to all of those views and the reasoning underpinning them. In terms of the objection, the differential rates of pay for working at different times is provided in both modern awards and is reflective of the prevailing standards and the modern awards objective. 13 In terms of the difference in initial pay rates, this is a relevant factor; however, I must also consider the overall impact of the termination and the significantly beneficial operation of the relevant modern award for all employees, including in many other respects, provisions applying to that class of part-time employee.

[34] The termination of the Collective Agreements will mean that the more contemporary conditions and provisions of the relevant modern award will apply to the parties. Further, the problematic interaction between the present instrument and the operation of the FW Act will be removed. This is pertinent as some terms of the present agreement are affected by the overriding impact of certain minimum standards and other provisions of the FW Act and cannot be applied on their face. The termination may also lead to some staffing and other business changes as discussed earlier and this must be taken into account as part of the overall assessment. All of these matters are relevant to the considerations provided by s.226(b)(ii) of the FW Act.

[35] There is presently no bargaining for a new enterprise agreement taking place; and none has been foreshadowed.

[36] In all of the circumstances I am satisfied that the termination of each of the Collective Agreements would not be contrary to the public interest. 14 I am also satisfied that their termination is appropriate having regard to the likely effect of that action and the views and circumstances of the parties.

[37] As a result of these findings, the Commission is obliged by the operation of s.226 of the FW Act to terminate the Collective Agreements.

7. The date of effect

[38] Under s.227 of the FW Act, the termination operates from the day specified in the decision to terminate the agreement. This means that there is a general discretion given to the Commission to determine when the termination takes effect.

[39] I consider that this determination should have regard to all of the relevant circumstances including those assessed in asessing whether the agreement should be terminated. That is, the determination of the date of effect must be an overall assessment having regard to all of the relevant circumstances taking into account the needs and particular circumstances of the parties. Further, public interest considerations may also have a role to play and each matter must be determined in its own circumstances.

[40] Shahin Enterprises sought a four month transitional period given the impact of the termination of the Collective Agreements. It provided comprehensive evidence about that impact, which arises from the fundamentally different approach adopted by the Collective Agreement to defining ordinary hours and related arrangements, and from the nature and number of business operations involved. Those impacts include:

•  The need to introduce and test new and fundamentally different payroll and rostering systems covering something in the order of 900 different pay codes;

•  The requirement to meet and consult with something in the order of 3,200 employees across 200 worksites and four States about their rosters and other arrangements, including establishing the agreed part-time hours for those employees involved; and

•  The requirement to train payroll, rostering staff, management and supervisors about the different requirements of the relevant modern award, at least to the extent that it impacts upon decisions and consultations that they will undertake in any transition period and ongoing.

[41] I note that Shahin Enterprises has made these applications and has begun preparations. This is to its credit. The comprehensive evidence before the Commission does support the view that the (further) significant period of transition is required. This includes the notion that the employer in circumstances such as this should be given a reasonable opportunity to ensure that they will be complying with the relevant modern awards upon termination of the Collective Agreements. 15 In this case, the changes arising from the transition to the modern awards concerned requires a significant and far-reaching change management exercise across multiple businesses and worksites.

[42] The factors outlined above must be weighed against the fact that the Collective Agreements are below the minimum safety net determined by the Commission in some respects and the continuing impact of any delay upon the employees covered by the agreements, and the community more generally, is also a relevant and important contrary consideration. In this regard, I note also that a delay of the order sought by Shahin Enterprises will mean that any increase in the relevant modern award rates, which would be expected to arise from the annual wage review conducted by the Expert Panel, 16 may reduce or eliminate the differential in rates for the class of part-time morning employees discussed earlier in this decision. Any such increase would operate from 1 July 2018, absent exceptional circumstances.17

[43] On balance, I consider that a delay in the termination until the end of June 2018 is appropriate and reasonable in all of the particular extenuating circumstances of these applications.

[44] As a result of this decision, the following Collective Agreements are hereby terminated:

•  Shahin Part Time Casual Collective Agreement November 2007,

•  Shahin Full Time Collective Agreement November 2007;

•  Smokemart and Giftbox SA Collective Agreement,

•  Smokemart and Giftbox Vic Collective Agreement,

•  Smokemart and Giftbox NSW Collective Agreement; and

•  Smokemart and Giftbox Qld Collective Agreement.

[45] The termination of the Collective Agreements will take effect at 11.59 pm on Saturday 30 June 2018.

[46] I have requested Shahin Enterprises to provide access to this decision as part of any written communications that it will provide to employees as a result of my determination.

COMMISSIONER

Hearing details:

Adelaide

2018

February 21.

Appearances:

C Ridings with P Chesser, of EMA Consulting, with permission with P Pilouras, of Shahin Enterprises Pty Ltd as Trustee for Shahin Family Trust, the applicant.

B Cagney for the Shop, Distributive and Allied Employees Association.

 1 Item 2(5)(c)(i) of Schedule 3 of the Transitional Act.

 2   The exact date for the expiry operates by reference to the date upon which the then Workplace Authority “approved” the instruments and this has been provided to the Commission in each case.

 3 Permission was given under s.596 of the FW Act on the basis that the complexity and nature of the applications meant that they could be dealt with more efficiently with representation.

 4   Exhibits A1, A2 and A3.

 5   Witness Statements - exhibits A4, A5, A6, A7, A8 and A9.

 6 Sections 47 and 48 of the FW Act.

 7 Item 13 of Schedule 9 of the Transitional Act.

 8 Item 23 of Schedule 3 of the Transitional Act.

 9   Transcript PN63-66

 10   The submissions of the employee were provided to the applicant employer and the SDA in an anonymised form with all personal and workplace details also redacted.

 11   Statement dated 18 February 2018.

 12   See Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 and Nestle Australia Ltd v Federal Commissioner of Taxation (1987) 16 FCR 167 at 184.

 13 Section 134 of the FW Act.

 14   The application of the public interest test was canvassed by the then AIRC in Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 and by the Full Federal Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126.

 15   See also Re Shop, Distributive and Allied Employees Association[2017] FWCA 5703 at [7] where the Commission has taken into account the desirability of allowing employers a transitional period to deal with the consequences of the termination of multiple agreements.

 16 Under Part 2-6, Division 3 of the FW Act.

 17 Section 286 of the FW Act.

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