Shop, Distributive and Allied Employees Association
[2020] FWCA 5519
•19 OCTOBER 2020
| [2020] FWCA 5519 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
(AG2020/1732)
Fast food industry | |
DEPUTY PRESIDENT COLMAN | MELBOURNE, 19 OCTOBER 2020 |
Application to terminate the IPCA (NSW) Enterprise Agreement 2011
[1] This decision concerns an application filed by the Shop, Distributive and Allied Employees Association (SDA) to terminate the IPCA (NSW) Enterprise Agreement 2011 (Agreement) pursuant to s 225 of the Fair Work Act 2009 (Act).
[2] The Agreement applies to various franchisees of Subway stores in New South Wales. It was made further to a single interest employer authorisation issued on 5 January 2011. 1 Clause 2 of the Agreement states that it applies to the employers listed in Schedule 1, and the employees of those employers covered by the classifications in Schedule 2. Those classifications comprise ‘sandwich artist’, ‘senior sandwich artist’, and ‘restaurant supervisor/manager’. The nominal expiry date of the Agreement was 21 July 2015.
[3] The SDA is not covered by the Agreement. It makes the application on behalf of an employee covered by the Agreement, referred to in the application as ‘Employee X’ (Applicant). The application stated that the Applicant did not wish to be identified unless there were a request from an employer or the Commission. No employer make such a request. However, I asked the SDA to identify to the Commission the employee’s employer, and to submit evidence of the employee’s employment with that employer. The SDA provided a statutory declaration sworn by Employee X identifying the employer and attaching pay slips. I am satisfied that the Applicant is an employee covered by the Agreement and that the application was properly made in accordance with s 225(b) of the Act.
[4] At a directions hearing on 9 July 2020 the SDA advised the Commission that its searches of the registers of the Australian Securities and Investments Commission indicated that some thirty of the companies appearing in Schedule 1 to the Agreement were no longer registered. It said that it was reasonable to assume that many of those businesses had been sold and were now operated by other entities which may have become covered by the Agreement as a result of the transfer of business provisions in Part 2-8 of the Act.
[5] On 14 July 2020 I issued a statement and directions. I noted that it appeared likely that the businesses of some of the employers appearing in Schedule 1 had been acquired, and that acquiring entities may have become covered by the Agreement by operation of the transfer of business provisions in the Act (‘transferee employers’). I further noted that, in considering whether to grant the application to terminate the Agreement, the Commission is required by s 226 to take into account the views of the employees, each employer, and each union covered by the agreement and their circumstances, including the likely effect that the termination of the agreement will have on them. I stated that the Commission was concerned to afford an opportunity for transferee employers, and any of their employees that might be covered by the Agreement, to provide to the Commission any views and submissions in respect of the application to terminate the Agreement. I stated that to this end, the Commission had contacted the Subway franchisor, Subway Systems Australia Pty Ltd (Subway), which had agreed to provide the statement and directions by email to all current Subway franchisees in New South Wales, thereby drawing this application to the attention of transferring employers.
[6] My directions required any employers covered by the Agreement to provide to any of their employees covered by the Agreement a copy of the statement and directions. The directions noted that employees could access all relevant material in relation to the application on a newly established webpage identified in the directions (paragraph 7(G)). Employers and employees covered by the Agreement were invited to indicate their views about the application and to make any submissions. The Applicant’s final submissions were to be lodged by 25 September 2020.
[7] The SDA filed written submissions on behalf of the Applicant, as well as a detailed document comparing the terms of the Agreement to the Fast Food Industry Award 2010 (Award). Two employers filed brief written submissions. No submissions were received from employees. No person expressed a wish to present oral submissions. Therefore, in accordance with paragraph 7(H) of my directions, I will determine the application on the papers.
[8] Section 225 of 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.”
[9] 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.”
‘Not contrary to the public interest’
[10] I will first address the question of whether I am satisfied that termination of the Agreement is ‘not contrary to the public interest’ (s 226(a)).
[11] The ‘public interest’ refers to matters that might affect the public as a whole, such as the achievement or otherwise of the object of the Act, employment levels, inflation, and the maintenance of proper industrial standards.2 The public interest is distinct in nature from the interests of the parties, though those interests may be simultaneously affected. 3 The object of the Act set out in s 3 is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians. The object is to be achieved, among other things, by ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions, and by achieving productivity and fairness through an emphasis on enterprise-level collective bargaining. Section 578 requires that in performing functions or exercising powers, the Commission must take this object into account.
[12] The Applicant submitted that the terms of the Agreement have fallen below the minimum conditions in the Award in various respects. It was said in particular that the Agreement’s wage rates no longer compensated employees for the lower penalty rates, vis-à-vis the Award, for working evenings, weekends and public holidays. The Applicant contended that employees were worse off under the Agreement than the Award, and that the termination of the Agreement would therefore have a beneficial effect on employees. The Applicant also contended that the Commission should take into account that the Agreement passed its nominal expiry date over five years ago.
[13] Neither of the two employer submissions, which I consider further below, directly addressed the public interest consideration. However I have taken their submissions into account in considering the question of the public interest.
[14] Section 226(a) does not require the Commission to be satisfied that the termination of an enterprise agreement is in the public interest. Instead it sets a lower requirement. The Commission must be satisfied that it is not contrary to the public interest to terminate the agreement. Having regard to all the circumstances, I cannot identify any considerations that would support a conclusion that terminating the Agreement would be contrary to the public interest. I am satisfied in the present case that it is not contrary to the public interest to terminate the Agreement. The first limb of s 226 is therefore made out.
‘Appropriate’
[15] I am required to consider whether it is ‘appropriate’ to terminate the Agreement, taking into account all the circumstances, including the views of the employees, each employer and each employee organisation covered by the Agreement, and the circumstances of those employees, employers and organisations, including the likely effect that the termination will have on each of them.
[16] The view of the Applicant is that the Agreement should be terminated. The views of other employees are not known. There are no organisations covered by the Agreement. The SDA does not proffer its own views but makes submissions on behalf of the Applicant.
[17] The Applicant contended that the termination of the Agreement would confer material advantages on employees, and that it is appropriate that employees enjoy the full benefit of the award safety net. The Applicant’s submission attached a detailed comparative analysis of the terms and conditions of employment under the Agreement with those under the Award. The analysis shows that the Award contains conditions which are superior to the Agreement variously in respect of wages and penalties (including penalties for overtime, weekend work and public holidays), and also a range of allowances. Few conditions of the Agreement are superior to those of the Award. In my view the conditions of employment under the Award are overall more favourable to employees than those of the Agreement. This is relevant to the consideration of the ‘circumstances’ of employees covered by the Agreement and the ‘likely effect that the termination will have’ on them, for the purpose of s 226(b)(ii). It is a consideration that supports a conclusion that it is appropriate to terminate the Agreement. Another such consideration is the fact that the Agreement passed its nominal expiry date some 5 years ago. 4
[18] Two employers have expressed views and made submissions on the application to terminate the Agreement. Lakewatch Pty Ltd submitted that it did not favour termination of the Agreement, because of the operational benefits which the Agreement provides to its business. It said that the Agreement had established a ‘level playing field’ because staff are ‘compensated in their normal hourly rate for any necessity to work what are normally seen as penalty hours’. It said that the Agreement allowed the company to attract staff who will work standard weekday hours instead of just weekends. However, it is not clear why the company could not provide a ‘level playing field’ if the Award were to apply, by sharing loaded shifts among workers.
[19] The company further submitted that, had the Award applied to employees’ employment during the pandemic, the business would have closed, but this was not further explained. It is possible that this contention is connected to the higher cost associated with the application of the Award. However, the Award is the safety net for this sector. Any contention that the Award does not provide an affordable cost base for labour rates is a submission that should be made in the context of national wage case or modern award review proceedings. An award is presumed to be an appropriate safety net of employment conditions. The company also contended that it had had difficulty hiring part-time employees during the pandemic as many are receiving JobSeeker payments in excess of what they would usually earn by working. However, it is difficult to see the link between this submission and the termination of the Agreement. It would seem that if anything, the more generous conditions applicable under the Award would assist the company in attracting workers.
[20] Lakewatch contended that the termination of the Agreement should be deferred until the pandemic is over, and that in the meantime the Commission should determine a new loading on the ‘Option A’ rates in the Agreement. I return below to the question of the day on which termination of the Agreement should take effect. However, the Commission has no power to vary the Agreement.
[21] A second employer submission was received from the operator of a Subway franchise in Erina Fair in Sydney. The franchisee expressed opposition to the termination of the Agreement, and in particular to the timing of the application. The company referred to the significant pressures it had faced due to the COVID-19 pandemic, including a 45% decline in sales over the last 6 months compared to the previous year. It asked the Commission to ‘delay any changes to a more appropriate time’.
[22] Underlying the two employer submissions was a concern about the prospect of a change to the regulation of employment at a time when business, and in particular small business, faces unprecedented challenges because of COVID-19 and government responses to curtail its transmission. Nevertheless, I am not persuaded that there are significant operational difficulties that will be occasioned by the termination of the Agreement. Some adjustment will clearly be required. But in my view, a consideration that is of particular significance is the fact that employees covered by the Agreement are worse off overall than if the Award, which is the safety net, were to apply to them. It is not necessary to recite the detail of this analysis. This conclusion is clearly to be drawn from a comparison of the two instruments, a task helpfully facilitated by the SDA’s comparison document.
[23] Taking into account the views of the persons referred to in s 226(b) that have been presented to the Commission, and the circumstances of those persons, as well as the effect that termination will have on each of them, I consider it appropriate to terminate the Agreement.
The operative date of the termination
[24] Section 227 provides that, if an enterprise agreement is terminated under s 226, the termination ‘operates from the day specified in the decision to terminate the agreement.’ The Applicant submitted that, in the absence of a good reason why termination should be deferred, a decision that the Agreement be terminated should operate forthwith. In my opinion it is reasonable that, in specifying a day for the purpose of s 227, an appropriate period of time should be allowed for the employers to prepare their businesses to apply the Award to their employees’ employment, taking into account the difficult business environment that exists at the present time. This period should be long enough to allow for changes to payroll and administrative arrangements, and for consideration to be given to the potential cost implications associated with the application of the Award. I consider that it is appropriate to allow a period of four weeks from the date of this decision before the termination of the Agreement commences to operate.
[25] There is nothing unusual about affording a period of time between the date of the decision to terminate an agreement and the operative date of the termination. This is evidently what the prospectively exercisable discretion in s 227 is intended to accommodate. It is to be expected that new conditions of employment will apply following the termination of an enterprise agreement and it is foreseeable that preparations will need to be made in order to implement them. The Commission commonly exercises its discretion to allow a period of time between the decision and the specified date. For example, in Aurizon the Full Bench granted a period of just under four weeks. 5
Conclusion
[26] In relation to the application that has been made under s 225, I am satisfied that it is not contrary to the public interest to terminate the Agreement, and I consider that it is appropriate to do so taking into account all the circumstances. I am therefore required by s 226 to terminate the Agreement, and I do so.
[27] The termination will operate from 16 November 2020.
DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
<AE886935 PR723607>
1 PR505638
2 Re Aurizon Operations Limited[2015] FWCFB 540 at [129]
3 Re Kellogg Brown and Root Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2004 PR955357 at [23]
4 See Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union [2010] FWA 2434 at [31]
5 [2015] FWCFB 540 at [181]
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