Shop, Distributive and Allied Employees Association

[2021] FWCA 5293

[2021] FWCA 5293

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

Shop, Distributive and Allied Employees Association
(AG2021/4761)

IPCA ENTERPRISE AGREEMENT 2014

Fast food industry
DEPUTY PRESIDENT CLANCY	MELBOURNE, 26 AUGUST 2021

Application for termination of the IPCA Enterprise Agreement 2014.

[1] An application was filed by the Shop, Distributive and Allied Employees’ Association (SDA), on behalf of Employee X, seeking the termination of the IPCA Enterprise Agreement 2014 1 (the Agreement) pursuant to s.225 of the Fair Work Act 2009 (Act). The Agreement passed its nominal expiry date of 13 May 2019.

[2] The employer parties to the Agreement are listed in Schedule 1 of the Agreement (the Employers). The SDA confirmed that each Employer which is not deregistered was served a copy of the Form F24B application and the Form F24C statutory declaration made by the SDA’s Mr Gerard Dwyer. Assistance with service was also provided by Subway Systems Australia Pty Ltd.

[3] Directions I issued on 7 May 2021 were sent via Express Post to the various registered addresses of the Employers, and required:

•  the Employers to provide a copy of the Form 24B and the Form F24C statutory declaration to each of their employees via email and place a copy on a noticeboard at each workplace that is used for communications with staff.

•  the Employers to lodge with the Commission and serve on all of their employees any material and witness statements upon which they relied, including material which addresses whether it is or is not contrary to the public interest for the Commission to terminate the Agreement, material which expresses the views of the Employer regarding the application to terminate the Agreement and material which describes the circumstances of the Employer, including the likely effect that the termination of the Agreement would have on them. Further, I required any submissions from the Employers on the impact of the Agreement no longer applying to them and the Fast Food Industry Award 2010 instead setting the terms and conditions of employment, were invited.

•  any employee who wished to do so to send to the Commission, the SDA and their employer any material addressing the same issues.

•  the SDA to lodge with the Commission, and serve on the Employers, any reply material.

•  each of the Employers to provide to all of their employees via email, any material upon which the employee applicant relied in reply.

•  the Employers to provide the Commission and the SDA with an email address so that all subsequent correspondence and material could be sent to them by email.

•  any employee who wished to be kept updated in this matter to confirm this by email to my Chambers.

[4] The level of engagement from the Employers was near non-existent. While the Agreement listed 40 Employers as parties, by the time of the Application, this appeared to have reduced to 37. No response to the Application was made by 16 employers. Of the 21 employers who confirmed receipt, only 4 provided a substantive response. A further 4 employers responded by stating that they no longer operate a business covered by the Agreement.

[5] A Hearing took place on 23 August 2021. The SDA, together with any employer and employee covered by the Agreement had the opportunity to address the application and any material that had been filed. Mr Angelo Pardo appeared for the SDA but there was no appearance from any employer or employee covered by the Agreement, notwithstanding my direction in advance that the Employers provide a copy of the Notice of Listing to each of their employees via (as applicable) email, intranet, staff notice board, or any other usual mode of staff communication.

Legislation

[6] Section 225 of the Fair Work Act 2009 (Cth) (the Act) provides as follows:

“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.”

[7] Section 226 of the Act states:

“226 When the FWC 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.”

Consideration

Section 225 of the Act

[8] I am satisfied that the two threshold requirements set out in s.225 of the Act have been met.

[9] Firstly, the Agreement has passed its nominal expiry date of 13 May 2019. Secondly, having regard to the Statutory Declaration by Employee X and the copies of payslips provided to my Chambers, I am satisfied that the Applicant (Employee X), who wished to remain anonymous, was an employee covered by the Agreement at the time the application was made. That Employee X was no longer an employee when the hearing took place has no bearing on whether the application was validly made. 2

Section 226(a) of the Act

[10] As regards s.226(a) of the Act and the manner in which the public interest is to be assessed, the Full Bench in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd 3(Aurizon)cited various passages from the Full Bench of the Australian Industrial Relations Commission’s decision in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 20004(Kellogg) which had concerned the corresponding, but not identical, provision from the Workplace Relations Act 1996. Relevantly, these passages included:

“The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.” 5

[11] It is also relevant to highlight the Full Bench in Aurizon concluded that it cannot be expected that the terms and conditions of an agreement will continue unaltered in perpetuity after it has passed its expiry date. This is because the Act contemplates the terms and conditions of an agreement may be altered by making a new agreement or by terminating the existing agreement. 6

[12] As was also recognised in Aurizon, s.226 of the Act is not limited to circumstances in which an agreement no longer applies to any employee. The Act clearly contemplates an agreement that still applies to employees being terminated and prescribes a safety net upon termination in such circumstances. The prescribed safety net is not a prior agreement and nor are undertakings mandatory. Rather, the prescribed safety net is the relevant modern award created during the Award Modernisation process and the National Employment Standards (NES). In this case, the relevant modern award is the Fast Food Industry Award 2010 (the Award).

[13] Having regard to the Application, the termination of the Agreement would not lead to an absence of award coverage for the employees. The Award provides for “proper industrial standards” within the meaning given to that term by Kellogg and in circumstances where there was no material before me suggesting otherwise, I am satisfied it is not contrary to the public interest to terminate the Agreement.

Section 226(b) of the Act

[14] The approach to assessing appropriateness by taking into account all the circumstances, as enunciated by the Full Bench in Aurizon, is to have reference to the construction of s.226 and the contextual matters that bear upon that construction, as well as giving specific consideration to the matters identified in ss. 226(b)(i) and (ii):

“All of the circumstances also need to be taken into account in considering whether termination of the agreements is appropriate. In particular the views of employers and employees covered by the agreement, their circumstances, and the impact of termination need to be taken into account. The requirement in s. 226(b) to take into account all of the circumstances including those set out in s. 226(b)(i) and (ii) is a requirement to take the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement. In assessing appropriateness by taking into account all of the circumstances, we approached the task by reference to the construction of s. 226 and the contextual matters that bear upon that construction dealt with earlier as well as giving specific consideration to the matters identified in s. 226(b)(i) and (ii).” 7 (My emphasis, reference omitted)

[15] I intend to adopt this approach and note that the construction of s.226(b) of the Act is such that it is open to me to take into account matters such as the views of the SDA and Employee X.

Section 226(b)(i)

[16] In terms of s.226(b)(i), I note that there is no employee organisation covered by the Agreement but, as the passage from Aurizon outlined above indicates, it is open for me to consider the views of the SDA. While I have noted the SDA supports the termination of Agreement, I do not consider much turns on this.

[17] As for employees covered by the Agreement, all I have before me is an email dated 22 August 2021 from an individual purporting to be an employee, although it is unclear which employer he or she works for. I can however discern from the text of the email that this particular individual supports termination of the Agreement. As for the remaining employees, I am satisfied they have been on notice that the Application was before me through the Directions I issued on 7 May 2021 and the various requirements outlined therein. I am also satisfied that the employees had reasonable periods of time to file material should they have wished to do so. In the Directions, I outlined that the impact of the Agreement being terminated would be the Awardsetting the terms and conditions of employment and a hyperlink to the Award was provided.Ultimately, apart from the email I received on 22 August 2021, no submissions from any other employees have been received. The application does not seem to have moved employee sentiment either way and neither the SDA nor the Employers appear to have been able to persuade any of the various employees to support their position in relation to the application. In these circumstances, I consider I can do no more than accord neutrality to the views of all but one employee when considering the application.

[18] Employee X was no longer an employee at the time of the hearing. I have been forwarded an email by the SDA from Employee X dated 22 August 2022. Employee X contends the Agreement failed to provide necessary employee protections and has not kept up with the Award rates of pay. Employee X outlined the following:

“During my time at Subway I was

•  Paid less than the award amount for the level classification I was employed as (level 2).

•  I never received or was offered to use annual leave during time off,

•  rostered hours were constantly changed irrespective of my part-time employment status,

•  and employees were pressured into working and staying at work while sick even during the height of the Covid-19 pandemic.

My former employer never paid overtime even though they were required to under the Enterprise Agreement. The above stated reasons are why the enterprise agreement needs to be abolished and replaced by the Fast Food Industry Award.”

[19] I accept that Employee X was unhappy with aspects of the Agreement while a Subway employee and this was the motivation for filing the application.

[20] It is clear that 4 of the Employers oppose the Agreement’s termination. Each of them expressed the view that termination of the Agreement should be “postponed” or “delayed” due to current challenges their respective businesses are confronting because of the COVID-19 pandemic and 2 of these 4 employers advised they are in the process of preparing replacement Agreements and therefore required time to transition to new arrangements. A further 4 employers covered by the Agreement have advised they no longer operate a business covered by the Agreement.

[21] The balance of the Employers did not respond either way and again, in these circumstances, I consider I can do no more than accord neutrality to their views.

Section 226(b)(ii)

[22] As there are no organisations covered by the Agreement, there are no circumstances for me to take into account in this respect.

[23] Direct evidence from current employees is limited to the one purported employee who responded in the email dated 22 August 2021 I have referred to above. This emailed account, which I acknowledge is untested, indicates the author’s motivation for supporting termination in favour of the Award because of the following:

“•  Getting below minimum wage and being underpaid for hours worked (overtime not paid or documented even when staff clock out much later than finishing time)

•  Not being able to use annual leave or paid sick leave

•  When calling in sick we are responsible for finding a staff member to cover our shifts (if not available, we are pressured/ coerced into working when sick)

•  Not being paid the correct penalty rates on Sundays

•  Not approving leave requests, and

•  Not acknowledging overtime and being paid for it”

[24] As to the likely effect of the termination of the Agreement on this purported employee, the information provided is such that I consider it is open to me to infer this individual would not be worse off should the Agreement be terminated, leaving the Award to apply.

[25] Assessing the likely effect of termination of the Agreement on the Employers and the employees more broadly requires evaluating the impact of the Award applying instead of the Agreement. I have noted that clause 26 of the Agreement provides for a ‘Guarantee of Earnings’, stating:

“The Employers will, at all times, pay Employees no less than the nominated Minimum Wage Rate Schedule in this Agreement, as adjusted by any minimum wage decision of the Fair Work Commission, to ensure that the Wage Rates specified therein meet or exceed the minimum base rate of pay prescribed under the Fast Food Industry Award 2010 or its successor.”

[26] While clause 26 of the Agreement requires that the wage rates in the Minimum Wage Rate Schedule of the Agreement at least equal the minimum base rate of pay prescribed under the Award, I have no information or data before me that confirms the rates of pay that each employer covered by the Agreement currently pays their employees. The information before me from Employee X and the purported employee suggests that they were not being paid at rates that met or exceeded the minimum base rate of pay prescribed under the Award. However, even if I was to assume compliance with clause 26 of the Agreement is occurring elsewhere, there is still a question as to whether the employees are better off overall than if the Award applied to them. The SDA submissions included a comparative analysis of the rights, entitlements and benefits of the Agreement vis-à-vis the Award. 8 The SDA submitted this analysis supports termination of the Agreement. None of the 4 employers who responded to the application argued that the comparisons outlined by the SDA were not accurate.

[27] I have noted that the Award:

•  provides for a range of allowances that are not contained in the Agreement and some of these may be relevant to the workplaces of the employees (e.g. meal allowance and laundry allowance).

•  provides for standard penalty rates whereas the Agreement provides for different penalty rates depending on which particular “Minimum Wage Rate Schedule” the Employers nominates for their employees.

•  guarantees 25% loading for casuals whereas none of the Agreement casual loadings equate to 25%.

•  provides for a standard public holiday penalty rate of pay and a public holiday overtime rate of pay, whereas the Agreement does not.

•  includes a right to request casual conversion whereas the Agreement does not.

•  provides for annual leave loading whereas the Agreement does not.

•  does not permit an employee to be required to work 7 consecutive days at ordinary time rates and provides for overtime after five consecutive days (or six in one week and four in the week following) rather than after 7 consecutive days of work.

•  provides leave to deal with Family and Domestic Violence whereas the Agreement does not.

•  provides that variations in working hours for part time employees are to be agreed in writing whereas the Agreement does not.

[28] While the 4 employers who have engaged with the application seek postponement or delay of any termination of the Agreement, they have presented no specific evidence outlining the manner in which they engage and pay their employees. As such, assessing the likely impact the termination of the Agreement would have on them is challenging.

[29] One employer stated “the bottom line for all my concerns is that the termination of IPCA Enterprise Agreement 2014 around this time is going to impact more on the business outcome as well as increase financial pressure on my personal life. It might also result in job losses for the employees which I believe is not a positive sign.”

[30] Another employer asserted that the termination of the Agreement will likely require a significant restructure and foreshadowed the necessity to convert many part-time positions to casual employment, given the “restrictions” in clause 12.2 of the Award. As to this, I note that clause 12.2 of the Award provides:

“12.2 At the time of first being employed, the employer and the part-time employee will agree, in writing, on a regular pattern of work, specifying at least:

(a) the number of hours worked each day;

(b) which days of the week the employee will work;

(c) the actual starting and finishing times of each day;

(d) that any variation will be in writing, including by any electronic means of communication (for example, by text message);

(e) that the daily engagement is a minimum of 3 consecutive hours; and

(f) the times of taking and the duration of meal breaks.”

[31] The account of this employer, together with the account of Employee X raises the question of whether the Agreement in form and in practice results in part time employees being better off overall than if the Award applied to them.

[32] Dealing with the correspondence received from the 4 employers:

1) The first employer, which says they are in the process of preparing a replacement enterprise agreement, stated that “the last thing that we need now [having endured the challenges of COVID-19] is another major shock, financially and emotionally, resulting from the forced replacement of our Enterprise Agreement…If the termination cannot be delayed until the new agreement is approved, we require time to familiarise ourselves with the terms of the Fast Food Industry Award 2010 and change our internal systems so that there is a smooth transition onto the Award for our employees.” This employer advised that (as at 28 June 2021) it had engaged a law firm to assist in the preparation of a new agreement and the information related to it was being sent to employees. It is not apparent whether this employer has in fact subsequently completed the process of making a new agreement.

2) The second employer’s account, part of which I have outlined in [29] above, suggests that termination of the Agreement would result in an increase in their operating costs that might result in job losses. I have noted this employer’s account of the impact that COVID-19 has had on the business.

3) The third employer also outlines the impact that COVID-19 has had on the business, including the financial stress they are experiencing. The account however gives rise to an inference that operating under the Award would increase the operating costs of the business.

4) The fourth employer references the impact COVID-19 has had since March 2020. This employer has made application to the Commission for the approval of a new enterprise agreement. That application is currently under consideration by another Member of the Commission and the fourth employer seeks any termination of the Agreement to be delayed until the new agreement is approved so as to avoid having to comply with each of the Agreement, then the Award and then their new agreement within a short period of time.

Conclusion

[33] Having regard to the material before me and noting the Act contemplates the Award and NES applying as the safety net in the event of termination of the Agreement, I am satisfied that it is not contrary to the public interest to terminate the Agreement, and, notwithstanding the low level of engagement with the Application from both employees and the Employers, I consider it is appropriate in the circumstances of this case to terminate the Agreement.

[34] I have outlined above my conclusions regarding the views of the Employers and the employees covered by the Agreement. I have also noted the views of Employee X and the SDA. The accounts from Employee X (while an employee) and the purported employee raise questions regarding the way in which the Agreement regulates rostering and the overtime arrangements. The inference that can be drawn from their accounts is that employees being treated in a similar manner would be better off overall under the Award. More compelling is the SDA analysis and my review of the Agreement compared to the Award, which suggest employees covered by the Agreement are not better off overall than if the Award were to apply to them.

[35] I have had regard to the material from the 4 employers that made submissions that go to their circumstances and the likely effect the termination will have on them. I accept that these 4 employers are experiencing stressors and challenges due to the COVID-19 pandemic, but I am also mindful of the conclusions reached in the Commission’s most recent Annual Wage Review about the Fast Food Industry more generally:

“[257]We now turn to the Fast Food Industry Award 2010. At the outset we would observe that fast food businesses are, generally speaking, less likely to have been adversely affected by the pandemic than cafes and restaurants because the restrictions imposed to contain the virus have generally not prohibited take away food services.

[258]Turnover in Takeaway food services increased by 4.4 per cent over the year to April 2021 (Chart 9). Following a significant decline in turnover for Takeaway food services in March and April 2020, there was a rebound in May 2020 and another relatively strong outcome in the following month. Since then, monthly turnover has generally increased apart from a decline in August 2020 and the first 2 months of 2021.

Chart 9: Monthly turnover, Takeaway food services

Source: Statistical report (version 12), 15 June 2021, Chart 3.19; ABS, Retail trade, Australia, April 2021.

Note: Data are expressed in seasonally adjusted terms.

[259]Employment in the Fast Food sector is dominated by the Major Fast Food Chains. As observed in a Full Bench decision published on 20 February 2019, McDonald’s, Hungry Jacks and Cravable Brands (Oportos, Red Rooster and Chicken Treat) (the Major Fast Food Chains) employ a substantial majority (about three-quarters) of all Fast Food industry employees. There is no evidence before us from the Major Fast Food Chains regarding any adverse impact on the operations as a consequence of the restrictions imposed to contain the pandemic.

[260]We acknowledge that an operative date of 1 July 2021 will mean that businesses covered by the Fast Food Industry Award 2010 will face two minimum wage increases in a 6 month period. But these businesses also had the benefit of no increase in minimum wages between 1 July 2020 and 1 February 2021. Further, the timing issue is, of itself, not sufficient to warrant a finding of exceptional circumstances in light of the turnover data. We are not persuaded that there are exceptional circumstances such as to warrant a later operative date than 1 July 2021 in respect of the Fast Food Industry Award 2010.” 9 (references omitted)

[36] I also accept that adjustment will be required as a result of the Agreement being terminated. While administrative changes to payroll systems and rostering systems will be required, these do not constitute insurmountable challenges. I am not persuaded by submissions that suggest the termination of the Agreement is not appropriate because the requirement to comply with the Award instead will have the effect of increasing costs for the Employers and this outcome should not be imposed due to the financial impact of the COVID-19 pandemic. The Act provides, in the context of an application under s.225, that the Award is the appropriate safety net in the event an agreement is terminated. Any assertion that the Award imposes unaffordable labour costs is one that should be made as part of the Annual Wage Review or an application to vary the Award.

[37] Further to these findings, the Act requires that I terminate the Agreement. 10

Operative Date of Termination

[38] Section 227 of the Act provides as follows:

“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.”

[39] Each of the four employers that responded urged a delay prior to any termination coming into operation. Their preferences range from until such time as a new agreement for their business comes into effect, to 6 months, to at least 2 years.

[40] The SDA relies on what was stated by the Full Bench of the Commission in Gangell v Lobethal Abattoirs Pty Ltd:

“We would also observe that the need to deal with an application expeditiously is particularly important in cases where, as here, there are assertions that employees to whom the agreement applies are at times earning less than under the relevant modern award.” 11

[41] The SDA submitted that in the absence of any demonstrated proper reason why termination should be deferred or delayed, any order that the Agreement be terminated should operate forthwith.

[42] Section 227 of the Act affords the Commission a discretion as to the operative date of a termination of an agreement. In my opinion it is appropriate to take into account the current difficult operating environment due to COVID-19 and specify a date from which the termination will operate that allows for a period of time for the Employers to prepare and make adjustments to their store budgets, rostering and payroll in order to apply the Award. As such, I believe it is appropriate to allow a period of approximately four weeks from the date of this decision before the termination of the Agreement commences to operate. I have taken into consideration the period of time that has elapsed since the Employers were first notified of the Application and I consider it likely that the employer with the application for approval of an agreement will have been advised of its outcome prior to the termination commencing to operate.

[43] The termination will operate from 27 September 2021.

DEPUTY PRESIDENT

Appearances:

A Pardo on behalf of the Shop, Distributive and Allied Employees’ Association.

Hearing details:

2021.

Melbourne (via Microsoft Teams):

23 August.

 1   [2015] FWCA 3178, PR567159.

 2   Australian Concert & Entertainment Security Pty Ltd T/A ACES Group vs David Mapledoram[2020] FWCFB 7032 at [15]-[16] and [25].

 3   [2015] FWCFB 540.

 4 (2005) 139 IR 34.

 5   Ibid at 40.

 6   [2015] FWCFB 540 at [176].

 7 Ibid at [167].

 8   Attachment A to the Submissions of the SDA dated 25 June 2021.

 9   [2021] FWCFB 3500 at [257] – [260].

 10   Fair Work Act 2009 (Cth), s.226.

 11   [2018] FWCFB 4344 at [23].

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