Shop, Distributive and Allied Employees Association
[2019] FWCA 4713
•5 JULY 2019
| [2019] FWCA 4713 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Shop, Distributive and Allied Employees Association
(AG2019/777)
| Retail industry | |
| Deputy President Clancy | MELBOURNE, 5 JULY 2019 |
Application for termination of the Prouds Retail Employees Enterprise Agreement 2011 – Application dismissed.
Prouds Jewellers Pty Ltd T/A Prouds the Jewellers (Prouds) conducts a business selling jewellery. With associated brands Angus & Coote and Goldmark Jewellers, it has more than 450 retail stores throughout Australia and approximately 3000 of its employees are covered by the Prouds Retail Employees Enterprise Agreement 2011 (the Agreement).
On 20 March 2019, an application (the Application) was filed pursuant to s.225 of the Fair Work Act2009 (the Act) to terminate the Agreement.
The Application was filed by the Shop, Distributive and Allied Employees Association (SDA), an employee organisation covered by the Agreement. Accompanying the Application was a statutory declaration made by Mr Gerard Dwyer, National Secretary/Treasurer of the SDA, together with a comparison document.
On 21 March 2019, I issued the Directions as follows:
· Prouds was to provide a copy of the following documents to all employees covered by the Agreement by 4:00PM on Tuesday, 2 April 2019 by posting them on the staff notice board at each workplace and emailing to employees:
· the Directions;
· the Application;
· Form F24C – Statutory declaration dated 20 March 2019 made by Mr Dwyer; and
· Prouds Retail Employees Enterprise Agreement 2011 (AG2011/10552) and GRIA Comparison Summary filed by the SDA on 20 March 2019.
· If Prouds and/or any employee covered by the Agreement wished to file material in response to the application regarding their views, their circumstances and the likely effect that termination of the Agreement would have on them, advice was to be given to my chambers, in writing, by 4:00PM on Thursday, 18 April 2019.
· The SDA was to file any material in support of its application to terminate the Agreement and any material in reply to the material filed by the employer and/or any employee covered by the Agreement, by 4:00PM on Friday, 3 May 2019.
· The matter was to be listed for a two day hearing on both 13 May 2019 and 14 May 2019.
I subsequently varied the Directions, providing Prouds until 4:00PM on Tuesday 23 April 2019 and the SDA until 4:00PM on Tuesday 7 May 2019 to file their material.
The initial material filed for Prouds by its lawyers, FCB Group, on 23 April 2019 indicated a new, replacement agreement (Replacement Agreement) had been put to its employees for feedback, with a ballot to be conducted from 1 to 5 May 2019.
In response, I requested advice on 8 May 2019 as to the outcome of the ballot and asked the parties whether they considered the application could be dealt with on the papers. Mr Nick Tindley of FCB Group advised that Prouds employees had voted to approve the Replacement Agreement and Prouds considered the application could be dealt with on the papers. However, Mr Tindley also advised that Prouds requested the opportunity to file a submission in reply to the material filed by the SDA.
The SDA also advised it was content to have the application dealt with on the papers and sought the opportunity to respond to the submissions in reply foreshadowed by Prouds.
Therefore, on 8 May 2019 I made further Directions requiring Prouds to file submissions in reply which addressed the outcome of the ballot for the Replacement Agreement by noon on 10 May 2019 and the SDA to file submissions in response by noon on 14 May 2019.
The responses to my Directions dated 21 March 2019 and further Directions dated 8 May 2019 are such that I have the following material to consider:
· Outline of Submissions of Prouds dated 23 April 2019, together with a witness statement of Mr Steven McDonald, its Group Chief Financial Officer, dated 23 April 2019;
· Outline of Submissions from the SDA dated 7 May 2019 with a comparison table of entitlements under the Agreement and the General Retail Industry Award 2010 (the Award);
· Reply Submissions from Prouds dated 10 May 2019, attaching a document it said was delivered by the SDA to employees at a number of its stores ahead of the ballot for the Replacement Agreement and copies of messages it says the SDA posted on Facebook to encourage its employees to vote against the Replacement Agreement; and
· Submissions in Response from the SDA dated 14 May 2019.
Summary of Prouds’ Submissions dated 23 April 2019
As regards the requirements of s.225 of the Act, Prouds does not dispute that the Application has been validly made.
1. Section 226(a) of the Act
Prouds made no submissions addressing the consideration as to whether terminating the Agreement is or is not contrary to the public interest.
2. Section 226(b) of the Act
Section 226(b)(i) – the views of the employees
Prouds submitted that while it can be presumed the SDA has members who are covered by the Agreement:
· the SDA has not filed any materials that would enable the Commission to reach a conclusion as to the views of employees; and
· in the absence of any evidence of the views of employees, the Commission should conclude that this consideration does not support termination.
Section 226(b)(i) - the views of relevant employee organisation
Prouds acknowledged the SDA supports termination of the Agreement but otherwise made no submission in relation to this factor.
Section 226(b)(i) - the views of Prouds
Its submission that the Commission should dismiss the Application confirms Prouds does not support the Application.
Section 226(b)(ii) - the circumstances of employees and the likely effect of termination
Prouds submitted the comparison summary attached to the Application sets out all of the detriments and none of the benefits to employees of the Agreement and that this was unsurprising, given the SDA’s support for the Application. It submits it is not possible for the Commission to reach a conclusion about the impact on employees based on the information in that summary and it is the responsibility of the SDA, given it purports to represent the industrial interests of employees covered by the Agreement, to lead evidence of the impact on those employees if the Agreement is to be terminated.
Section 226(b)(ii) - the circumstances of Prouds and the likely effect of termination
Prouds submitted the impact of the termination on it would be predominantly related to the administrative burden that would arise and the desirable outcome of avoiding the implementation of operational and system changes on multiple occasions.
In this regard, Prouds outlined it had been involved in bargaining with the SDA for the Replacement Agreement but negotiations reached an impasse in March 2019. As a result, Prouds decided to put the Replacement Agreement directly to its employees to enable them to decide whether they agreed to the terms contained within it. The ballot for the Replacement Agreement was to be conducted from 1 to 5 May 2019.
Prouds submitted it was reasonable to assume the Replacement Agreement would be approved by the relevant employees and then lodged with the Commission for approval by approximately mid-May 2019. If approved, Prouds suggested the Replacement Agreement would come into effect sometime in July 2019, given the Commission’s timeliness benchmarks.
Prouds submitted that if the Application is granted, the evidence of Mr McDonald establishes that it will be required to reconfigure its payroll systems, implement operational changes to reflect the changing labour cost structure, provide training and instruction to its managers to enable them to understand the new pay and conditions structure and operate within it on an ongoing basis. Additionally, it submitted it will be required to undertake a process of engagement with employees so that they understand the reasons why operational changes have been implemented.
Prouds advanced the proposition that it is almost certain that it will then, within a short timeframe, be required to undertake a similar process related to the commencement of the Replacement Agreement. As such, Prouds submits it would be contrary to the requirements of s.225 and inconsistent with the objects of the Act generally (particularly Part 2-4) to impose such a requirement in the circumstances for the following reasons:
· The proximity in time between a termination of the Agreement taking effect and the commencement of the Replacement Agreement weighs against the Commission exercising its discretion to terminate the Agreement. While the Commission may, subject to receiving evidence of this from the Applicant, be able to conclude that the termination of the Agreement will result in positive benefits to employees, that benefit is, in the circumstances, likely to be very limited. Prouds submitted it cannot be contested that the Replacement Agreement will necessarily bring about a better outcome for the relevant employees than the Award because of the operation of the Act. The Commission should therefore balance the very limited, short term benefit of the termination of the Agreement against the substantial detriment that the termination would have on Prouds.
· One of the objects of Part 2-4 of the Act is “to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits”.[1] Terminating the Agreement, and thereby requiring Prouds to implement substantial payroll and operational changes for a short period of time before the Replacement Agreement comes into effect, is not consistent with this object.
· The object of the Act includes “achieving productivity and fairness through an emphasis on enterprise-level collective bargaining”[2] and “providing workplace relations laws that…are flexible for business”[3] and the termination of the Agreement would not, in the circumstances, be consistent with this object.
Having regard to these matters, Prouds submitted it is open to the Commission to conclude:
· the absence of evidence of the views of employees counts against the termination of the Agreement;
· the absence of evidence of the impact on employees counts against the termination; and
· the impact of the termination on the employer counts strongly against the termination, in particular given the likelihood of the Replacement Agreement coming into effect.
Prouds submitted the Application should therefore be dismissed on the basis of such conclusions but if the Commission determined that it was appropriate to terminate the Agreement, the termination should not come into effect until a period of no less than three months after the date of such determination, which was reasonable in the circumstances.
Witness Statement of Mr Steve McDonald
In his witness statement, Mr McDonald said there are approximately 3000 Prouds employees who are covered by the Agreement. He said the payroll and time & attendance systems of Prouds used for these employees are currently configured for the terms, conditions and rates of pay contained within the Agreement and aligning them with the Award would require changes.
Mr McDonald said Prouds does not have the ability internally to make changes to these systems to the extent that would be required if the Agreement was terminated. As such, external consultants would be required to undertake and assist with reconfiguring the systems and testing them. Mr McDonald set out a range of factors that led him to estimate that it would take a minimum of six weeks to complete the necessary reconfiguration, and not without a level of pressure and stress on the staff involved. He said the reconfiguration process would require a great deal of time and effort from Prouds’ payroll, human resources and operations management teams. These teams would be required to undertake a range of reviewing and training tasks. Some of these tasks would be generalised and some would involve identifying individual arrangements that would need to be recognised and preserved in the payroll and time & attendance systems. Mr McDonald said in addition to these system changes, Prouds would also be required to review its retail operations, including labour allocations, on a store by store basis in order to prepare for the changes to its labour cost base that would be occasioned by termination of the Agreement and its replacement with the Award.
Mr McDonald estimated that completing the combination of these tasks would take no less than two months, and more likely closer to three, in order to ensure Prouds was confident it was able to operate in compliance with the Award.
Mr McDonald also gave evidence in relation to the negotiations for the Replacement Agreement. He said the SDA advised Prouds on 12 March 2019 that bargaining was at an impasse and that it saw no utility in further bargaining unless Prouds was prepared to accept items which the SDA wanted included in the Replacement Agreement. Mr McDonald said Prouds accepted the SDA’s position that no further negotiations could be conducted and decided to put the Replacement Agreement to a vote. He outlined the intended voting process and that the ballot would be conducted from 1 to 5 May 2019.
Mr McDonald proffered that the approval process for the Replacement Agreement could take between two and four months from the date of the making of an application for approval. He also suggested the (then) Directions for this Application rendered a decision on whether or not the Agreement was to be terminated was likely in late May or early June 2019. Mr McDonald suggested that if this was to occur, Prouds would be required to undertake two rounds of configuration, review and training within a period of between a few weeks and a few months.
The SDA did not require Mr McDonald for cross examination purposes.
Summary of the SDA’s Submissions dated 7 May 2019
1. Section 225 of the Act
The SDA submitted and I am satisfied that the two threshold requirements set out in s.225 of the Act are satisfied.
Firstly, the Agreement has passed its nominal expiry date. This was noted in the decision of Senior Deputy President Kaufman approving the Agreement.[4]
Secondly, the SDA is covered by the Agreement[5] and therefore the Application has been made by an employer, an employee or employee organisation that is covered by the Agreement.
2. Section 226(a) of the Act
In relation to s.226(a) of the Act, the SDA submitted that it is not contrary to the public interest to terminate the Agreement. The SDA referred to the Full Bench of the Australian Industrial Relations Commission’s observation in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/ Offshore Facilities Certified Agreement 2000 (Kellogg):
“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.”[6]
The SDA submitted that in considering the public interest and the maintenance of proper industrial standards, it should be noted that the Agreement has continued operation for almost four years beyond its nominal expiry date and relied on the statement for Vice President Lawler in Tahmoor Coal Pty Ltd,[7] “I respectfully agree with his Honour that it is not intended by the legislation that agreements should remain in place indefinitely and that it is unreasonable to lock an expired agreement in place indefinitely”,[8] as support for a conclusion that it is not contrary to the public interest to terminate the (nominally expired) Agreement.
Section 226(b) of the Act
Section 226(b)(i) - The views of the employees and each employee organisation covered by the agreement
As an employee organisation covered by the Agreement, the SDA supports the termination of the Agreement.
Noting that no views of employees regarding the termination of the Agreement have been made known, the SDA firstly submitted the most which could be held from this is that it is a neutral consideration and then, that as an employee organisation, it is entitled to represent its views as those of its members.
Section 226(b)(ii) - The circumstances of the employees, employers and organisations including the likely effect that the termination will have on them
The SDA had contended, through Mr Dwyer, that while covered by the Agreement, the Prouds employees suffer a disadvantage when compared with the rates of pay and conditions of employment under the Award and the termination of the Agreement will have a beneficial impact on their terms and conditions.
In its submissions dated 7 May 2019, the SDA developed this contention, submitting the conditions in the Agreement had fallen well below the minimum terms in the Award and its analysis of the rights, entitlements and benefits of the Agreement vis-à-vis the Award in its comparison table of entitlements under the Agreement and the Award, supports the termination of the Agreement.
In relation to working hours, rostering and breaks, the SDA submitted there are protections and benefits under the Award that have no equivalent protection in the Agreement. It submitted that employees are worse off if working during late night trading and Saturdays because no additional penalty rates apply under the Agreement, and outlined that Sunday penalty rates are less under the Agreement than those under the Award. The SDA also highlighted that pursuant to the Award, a casual employee is to be paid the hourly rate payable to a full-time employee and an additional 25% loading, while pursuant to the Agreement, the casual loading is 22%.
The SDA further submitted that the Agreement conditions were inferior in relation to annual leave loading and that it lacks the following Allowances present in the Award:
· laundry allowance;
· Broken Hill allowance;
· special clothing;
· excess travelling costs;
· recall allowance;
· transfer of employee; and
· travelling time reimbursement.
The SDA however acknowledged that the public holidays penalty rate was higher under the Agreement and it was superior in terms of the first aid and higher duties allowances.
Relying on Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union,[9] the SDA submitted the Agreement was not to continue indefinitely and the longer it was after its expiry, the stronger the case for termination, noting that the Agreement is now almost four years beyond its expiry. The SDA submitted the importance of applications such as this being dealt with expeditiously, particularly in circumstances where the Agreement conditions have fallen well below the minimum terms in the Award,[10] which it alleges is the case in this Application.
The SDA responded to particular submissions of Prouds as follows:
· the suggestion of Prouds that the impact of termination of the Agreement on it is a consideration that counts strongly against termination, is unsafe; and
· the impact of transition is not sufficient to keep a long expired agreement on foot.
Other considerations
The SDA submitted that to the extent the Agreement contains terms and conditions now less advantageous than the safety net offered by the Award, the effect of maintaining the Agreement would be to in fact circumvent s.3(b) of the Object of the Act.[11]
Summary of Reply Submissions from Prouds dated 10 May 2019
Prouds advised the ballot for the Replacement Agreement had been conducted and its outcome should “strongly” influence the Commission’s consideration of the Application because:
· The Commission is entitled to draw inferences as to the views of the employees relevant to the Application from the ballot outcome; and
· The ballot outcome brings sharply into focus and provides certainty in relation to the impact of termination of the Agreement on Prouds.
Prouds maintained its contention that the failure of the SDA to lead evidence of the views of the employees it represents weighs against termination and contended that the outcome of the ballot, when considered in light of the process I set down in the Application, is such that I can infer the views of the employees. In this respect, Prouds submits that employees were aware of the Application, were aware of the views of the SDA and were aware of the impact of the termination of the Agreement on them (i.e. they would be covered by the Award and the terms of the Award compared to the Agreement).
Prouds then submitted the same employees were presented with the opportunity to decide whether they wished to enter into the Replacement Agreement. It said that during the course of the ballot process the SDA actively sought to encourage employees to vote against the Replacement Agreement, produced a document which encouraged employees to vote against the Replacement Agreement which was delivered to a number of its stores and posted messages on Facebook encouraging employees to vote against the Replacement Agreement. Prouds said that the Replacement Agreement was approved despite these activities of the SDA and outlined the following details from the Ballot Declaration:
· 2904 employees were eligible to vote;
· 1910 employees cast a valid vote; and
· 1658 employees voted “Yes” to approve the Replacement Agreement.
Prouds submitted it is therefore open to the Commission to infer that the employees oppose the termination of the Agreement and instead wish to see the Replacement Agreement come into operation and that in the event the Commission draws an inference that employees do not support the termination of the Agreement, this factor should weigh heavily against termination.
In relation to the impact on it, Prouds submitted there was now certainty as a result of the ballot having been conducted and the Replacement Agreement having been approved by employees, such that the concerns it had raised in relation to the impact of making two sets of changes in close proximity to each other will be significant.
Prouds then responded to the submissions of the SDA outlined above at [43] and asserted the SDA had mischaracterised its submissions in relation to the impact of termination on Prouds. It charged the SDA with having sought to characterise the Prouds submission as one where Prouds complained about the impact of having to pay “Award minimums” when what it was doing was setting out the administrative and attached financial burden of transitioning to the Award, in the context of the pending implementation of the Replacement Agreement. Prouds stated it accepts the administrative and financial burden attached to effecting the transition to a modern award should not prevent an agreement from being terminated when it is long past its nominal expiry date but said that is not what it is seeking. Prouds contends it seeks to rely on what it submits is an important distinguishing feature of the Application: that a new agreement had been made and would shortly be filed with the Commission for approval.
Prouds contends the Application should be dismissed. In the alternative, Prouds contends the Commission should defer a final determination of the Application until after the Replacement Agreement has been considered for approval by the Commission. In that regard, Prouds confirms that it would consent to termination of the Agreement in the event that an application for approval of the Replacement Agreement is dismissed by the Commission.
Summary of SDA’s Submissions in Response dated 14 May 2019
In response to the criticism that its failure to bring forward evidence of the views of employees should weigh against the termination of the Agreement, The SDA submitted Prouds has not cited any authority in support of its position and that in the majority of applications made under s.225 of the Act, employees rarely make their views known, even in circumstances where directions issued by the Commission invite direct communication between employees and the Commission. In support of this, it relied on the application to terminate the Godfreys Employee Collective Agreement 2009[12] and submitted that based on what occurred in that application, the only proper inference open to be drawn from the “typical” employee response was that employees, rightly or wrongly, apprehend that involving themselves in applications of this kind may have potential adverse consequences for their continuing employment.
The SDA further submitted that the submission from Prouds that a lack of evidence in relation to views of employees means that it must be inferred that employees oppose termination, is unsafe and without precedent. The SDA relies on the decision in Gilhooley v Barnery Pty Ltd[13] in support of its proposition that a lack of such evidence is a neutral consideration.
In addressing the ballot for the Replacement Agreement, the SDA submitted the further submission of Prouds that the approval of the proposed Replacement Agreement permits the drawing of an inference as to the views of employees in relation to any application to terminate its predecessor is misconceived. The SDA countered the submission from Prouds that those who voted in favour of the new agreement must be taken to oppose the termination with the suggestion that the employees who failed to vote, or who voted against, the Replacement Agreement (1,246 employees or 43% of the eligible employees) should be accepted as evidence of the cohort of employees supporting termination of the Agreement.
The SDA proffered there may be any number of cogent reasons why employees may have voted in favour of the Replacement Agreement whilst nonetheless supporting the termination of its predecessor. It suggested some employees may have acted in desperation to secure terms and conditions that, while unsatisfactory, were at least more current than those provided for under the Agreement it seeks to be terminated.
The SDA’s position was that in the absence of any compelling evidence as to the numbers of employees that fall into either grouping, the Commission should conclude that the views of employees is a neutral consideration and that this ought to be a factor which weighs considerably less in the balance than those factors which focus upon the extent to which the Agreement has long since ceased to maintain a safety net standard of terms and conditions commensurate with the terms and conditions offered by the Award.
The SDA highlighted the concession of Prouds that the fact that there are or may be administrative or financial consequences in transitioning from an agreement to an underpinning award is not, and can never be, a reason why a long-expired agreement providing for terms and conditions of employment falling well below Award safety net standards should not be terminated. It asserted Prouds has had the economic and financial advantage of avoiding safety net employment conditions at the expense of its employees for long enough and should not be further indulged.
The SDA rejects the proposition that the Application should be deferred or adjourned pending the determination of the application to approve the Replacement Agreement for the reasons that any application for approval may not succeed or may take some to determine, particularly if it is opposed. It noted that while Prouds has indicated that it consents to the Application if its application for approval of the Replacement Agreement is dismissed, there was neither a make-good commitment nor any comfort offered to the employees who would be prejudiced by such consequent delay. It says any such further delay would continue to deprive employees receiving penalty rates and other Award benefits they are presently denied.
The SDA submitted the Replacement Agreement is largely on all fours with the Award, incorporating all Award penalties and most Award allowances as they currently apply. It said the main monetary difference between the Award and the Replacement Agreement is an additional 1 cent per hour and that transitioning to the Award as an interim step ahead of transitioning to the Replacement Agreement, which largely mirrors its terms, would have little, if any, adverse impact. The SDA argues that a preliminary transition to the Award will facilitate and assist any later transition to the Replacement Agreement and the submissions of Prouds in relation to the impact of making two sets of changes in close proximity to each other lacks merit.
The SDA indicated it reserves its rights in relation to the application for approval of the Replacement Agreement or any other replacement agreement.
The SDA concluded by submitting that the Commission should proceed to terminate the Agreement without delay because it is long past its nominal expiry date and the employees are entitled to safety net protections they are not currently receiving.
Consideration
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.
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.”
Section 225 of the Act
As outlined in paragraphs [30]-[32] above, I am satisfied that the two threshold requirements set out in s.225 of the Act are satisfied.
Section 226(a) of the Act
As regards to 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[14] (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 2000[15] (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.”[16]
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.[17]
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 General Retail Industry Award 2010 (which I have referred to as the Award).
In this application, the termination of the Agreement would not lead to an absence of award coverage for the employees as the Award provides for “proper industrial standards” within the meaning given to that term by Kellogg. Having regard to this, I am satisfied it is not contrary to the public interest to terminate the Agreement and I note that neither party disputes this.
Section 226(b) of the Act
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).”[18] (My emphasis, reference omitted)
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 bargaining, ballot result and application for Commission approval relating to the Replacement Agreement and give them due weight.
Section 226(b)(i)
In terms of s.226(b)(i), it is clear that the SDA supports the termination of the Agreement. However, I do not accept the SDA’s proposition that as an employee organisation, it is entitled to represent its views as those of its members and regardless, I make the observation that there is no evidence before me to indicate how many Prouds employees are SDA members.
It is also clear that Prouds opposes termination of the Agreement, with an alternative position that urges the deferral of any determination of the Application until after the consideration of the application for approval of the Replacement Agreement.
As for employees covered by the Agreement, I was presented with no direct evidence. I am however satisfied the employees of Prouds were on notice that the Application was before me, through my Directions dated 21 March 2019. These were required to be emailed to the employees by Prouds and posted on the staff notice board at each workplace. I am also satisfied the employees had a reasonable period of time to file material, should they have wanted to do so. In the Directions dated 21 March 2019, I also outlined that the impact of the Agreement being terminated would be the Award setting the terms and conditions of their employment, set out the (then) Award Wage Rates and encouraged the employees to further consult the Award for other information outlining employment terms and conditions that might also apply to them, if the Agreement was terminated.
Ultimately, no submissions from any employees were filed in the Commission. For whatever reason, the Application does not seem to have moved employee sentiment either way and neither the SDA nor Prouds appear to have been able to persuade any of the 3,000 or so employees to support their respective positions in relation to the Application.
It may be the employees do not appreciate the possible implications of the Application being granted or alternatively, they simply do not care. Either way, in the circumstances of this case, I consider I can do no more than accord neutrality to the views of the employees in relation to the Application itself.
Section 226(b)(ii)
As to the SDA as an organisation covered by the Agreement, there was nothing put before me going to the circumstances I should take into account regarding the likely effect of the termination on the SDA.
As to the likely effect of the termination of the Agreement on the employees, there is no direct evidence from any employee before me.
A review of the Agreement reveals it has two classification levels, Sales Assistant and 3IC. Comparing the descriptions of these classifications in the Agreement against the classifications in the Award leads me to conclude that they are, respectively, the equivalent of the Retail Employee Level 1 and 3 classifications. The last increase to the base rates of pay pursuant to the Agreement before it reached its nominal expiry date of 28 July 2015, took effect on 1 June 2014. From that time, clause 23.4 of the Agreement operated, such that if the minimum wages in the Award exceeded those in the Agreement, Prouds was to ensure the wages of employees did not fall below the rates of pay prescribed in the Award.
A review of the increases to the Award rates of pay since 1 June 2014 indicates that even without any increases unilaterally awarded by Prouds after that time, the Agreement wage rates would have remained above the Award rates until 1 July 2017. I consider it is open to me to conclude that by virtue of the operation of clause 23.4 of the Agreement and s.206 of the Act, and having regard to the proposed rates of pay that would apply if the Replacement Agreement is approved,[19] the Prouds employees have at all material times been paid wages at least to the level of the rates of pay prescribed in the Award.
As outlined in paragraphs [39]-[40] above, the SDA highlighted other conditions in the Agreement it asserts have fallen below the minimum terms and conditions of the Award. I have noted that some of these went to working hours, rostering and breaks. There was also the absence of annual leave loading, penalty rates for evening and Saturday work, together with the lower Sunday penalty rate and lower casual loading under the Agreement (22%). I have also noted the differences in allowances that apply under the Award against those in the Agreement. Against these considerations, it is apparent the public holiday penalty rate was higher under the Agreement and it was also superior in terms of the first aid and higher duties allowances.
The SDA asserts the terms and conditions of employment in the Agreement have fallen “well below” the Award safety net and submits the termination of the Agreement will therefore have a beneficial impact on the employees covered by it. However, without any evidence either from Prouds or its employees as to the arrangements in place in the 450 retail stores that might intersect with these Award entitlements, I am unable to accurately discern the extent to which Prouds employees might have been disadvantaged when it comes to some of these conditions. Nonetheless, if any of the Award terms and conditions amongst those I have outlined could have applied to Prouds employees, I am satisfied that all things being equal in their application, I can conclude that their impact would have been beneficial, particularly in more recent years. While I am not persuaded that, in the absence of evidence as to the actual working conditions, I should conclude the terms and conditions of employment in the Agreement have fallen “well below” the Award safety net, I am certainly content that the Prouds employees would not be worse off should the Agreement be terminated and the Award left to apply to them.
Assessing the likely effect of termination of the Agreement on Prouds, it was not put and I am satisfied, having regard to what appear to be the conditions in the proposed Replacement Agreement,[20] the financial implications of termination in terms of labour costs, do not weigh against the termination of the Agreement. Prouds instead directed its submissions relating to the likely impact termination would have on it to the logistics of having to implement two sets of changes (the Agreement to the Award and then the Award to the Replacement Agreement) should the Agreement be terminated and the Replacement Agreement receive Commission approval in close proximity. In this regard, I note Mr McDonald’s evidence as to what would be involved for implementation of a single change in more than 450 stores, for approximately 3000 employees was unchallenged.
Conclusion
As outlined in paragraph [67] above, I am satisfied it is not contrary to the public interest to terminate the Agreement.
As to whether I consider it appropriate to terminate the Agreement, I have noted that while the SDA supports the Application and urges the termination of the Agreement without delay, no application was made by it until three and a half years after the Agreement’s nominal expiry date, notwithstanding the SDA was a party covered by it. I have also noted the position articulated by Prouds and the lack of engagement with the Application by the Prouds employees.
As to the likely effect of termination of the Agreement, while I am not persuaded I should conclude the terms and conditions of employment in the Agreement have fallen “well below” the Award safety net, I am prepared to conclude that all things being equal in their application, the Award terms would have been more beneficial in recent years and that the Prouds employees would not be worse off should the Agreement be terminated and the Award left to apply to them.
What ultimately sways the exercise of my discretion in determining the Application are some other of its distinguishing features. Running in tandem with the Application have been the process of bargaining, the positive vote and the application for Commission approval of the proposed Replacement Agreement,[21] which has recently been allocated to another Member of the Commission for consideration.
As to the positive outcome of the vote, two thirds of the nearly 3,000 eligible employees engaged in the voting process and the “Yes” vote approving the proposed Replacement Agreement was 87%. I consider it is open for me to conclude that the Prouds employees have been more motivated towards replacing the Agreement with a new one than weighing in on whether or not it should be terminated in favour of the Award.
As to the application for Commission approval of the Replacement Agreement, this in my view enlivens additional considerations firstly going to the logistical and administrative burden that would be imposed on Prouds which I consider to be not insignificant, should it be required to implement two set of changes in close proximity and secondly, to the utility of determining the Application at this time.
Section 226(b) of the Act requires me to take into account all of the circumstances, including those set out in s. 226(b)(i) and (ii) of the Act. As was held in Aurizon, this is a requirement to take all the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement. Weighing all the particular circumstances of this matter, I do not consider it is appropriate to terminate the Agreement at this time.
Accordingly, in having regard to the requirements of s.226 of the Act and the material before me, while I am satisfied that it is not contrary to the public interest to terminate the Agreement, I do not consider it is appropriate to terminate the Agreement and I therefore decline to grant the Application at this time. I therefore dismiss the Application and an order to this effect will be issued today.
DEPUTY PRESIDENT
<AE887146 PR710088 >
[1] Section 171(a) of the Act.
[2] Section 3(f) of the Act.
[3] Section 3(a) of the Act.
[4] [2011] FWAA 4982 at [4].
[5] Ibid at [3].
[6] Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 at 40.
[7] [2010] FWA 6468.
[8] Ibid at [54].
[9] [2010] FWA 2434.
[10] Gangell v Lobethal Abattoirs Pty LtdT/A Thomas Foods International[2018] FWCFB 4344.
[11] Section 3(b) of the Act states that the Object of the Act is achieved by “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders.”
[12] AG2017/5488.
[13] [2017] FWCA 3103 at [24].
[14] [2015] FWCFB 540.
[15] (2005) 139 IR 34.
[16] Ibid at 40.
[17] [2015] FWCFB 540 at [176].
[18] Ibid at [167].
[19] Attachment A to the Submissions of Prouds dated 10 May 2019.
[20] Ibid.
[21] AG2019/1633.
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