Sofala Pty Ltd T/A LSR Network Movies

[2013] FWCA 8433

[2013] FWCA 8433

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

Sofala Pty Ltd T/A LSR Network Movies
(AG2013/8629)

THE LEISURE SALES AND RENTAL ENTERPRISE AGREEMENT 2004

Tasmania
COMMISSIONER LEE	MELBOURNE, 6 NOVEMBER 2013

Application for termination of The Leisure Sales and Rental Enterprise Agreement 2004.

[1] This matter involves an application made by the Sofala Pty Ltd trading as LSR Network Movies (the Applicant) for termination of The Leisure Sales and Rental Enterprise Agreement 2004 (the Agreement) pursuant to section 225 of the Fair Work Act 2009 (the Act) and Sch.3, Item 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act).

[2] The agreement is a collective agreement-based transitional instrument (pursuant to Item 2(5)(c) of Schedule 3 to the Transitional Act) and has a nominal expiry date of 21 July 2012.

[3] The matter for determination is whether or not to grant the application to terminate the Agreement.

Background to the application

[4] This application was lodged with the Commission on the 21 August 2013. The application contained no information relevant to the factors I must consider in section 226 of the Act. I wrote to the Applicant setting out the requirements of the legislation and asked the Applicant to provide further information by way of a statutory declaration outlining how the requirements of section 226 of the Act had been met.

[5] I subsequently received a statutory declaration from Mr. Adrian Peters, owner, which stated;

“Both the employers and the employees of L.S.R Network Movies are in agreement with the application to terminate the “Leisure Sales and Rental Enterprise Agreement 2004” as per the submitted application.”

[6] My associate wrote to the Applicant on 20 September 2013 advising that I had considered the statutory declaration and advised that I required further information in order to be satisfied the requirements of the Act had been met. I listed the matter for telephone conference in order that I could discuss my concerns with the Applicant.

[7] After my discussion with the Applicant in conference, I issued a Statement and Directions, directing the Applicant to take the following action in order that I could obtain information on the views and circumstances of employees:

“[9] The views and circumstances of employees are to be obtained by the Applicant company immediately forwarding or handing to employees and posting on relevant notice boards the following notice;

“An application has been made by Sofala Pty Ltd. T/A LSR Network Movies to terminate The Leisure Sales and Rental Enterprise Agreement 2004.

The matter has been allocated to Commissioner Lee of the Fair Work Commission for determination.

If the application to terminate The Leisure Sales and Rental Enterprise Agreement 2004 is successful, your minimum employment entitlements will be regulated by the applicable modern award, the General Retail Industry Award 2010. This will have an effect on your terms and conditions of employment.

Commissioner Lee, when determining whether to terminate the agreement, is required to take into account the views of employees covered by the agreement.

If you have any views about the application to terminate the agreement, please advise the Commissioner by email at [email protected] or by calling [phone]. Views are to be provided to the Fair Work Commission by close of business Friday 11 October 2013.”

[8] I also directed the Applicant to provide a statutory declaration as soon as possible after 11 October 2013, containing the following information:

“ advice as to when the notice was distributed to staff;

• Any public interest considerations that may be relevant to section 225(a) of the Act (For example the effect the termination of the agreement will have on the viability of the business);



• Information as to the likely effect the termination will have an employees (For example, is it likely the termination of the agreement will affect the remuneration of employees)”

[9] On 15 October 2013, I received a copy of a statutory declaration from Mr Adrian Peters for the Applicant in the following terms:

“As requested the notice (q) was distributed to the 3 remaining staff members, and displayed on staff notice board from Sat 5.10.13 until Friday 11.10.13.

I believe that termination of the agreement will assist to keep the business viable therefore ensuring continuing employment for existing staff. Considering the reduction in income in the video library trade and the reduction of staff by natural attrition, I consider that operating under the General Retail Award will afford the business the opportunity to increase the hours offered to current staff therefore keeping the remuneration stable.”

[10] My Chambers has not received any emails or any phone calls from any employee of the Applicant expressing any view about the application to terminate the agreement despite the posting of the notice as directed.

The Law to be Applied

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

“Item 16 Collective agreement-based transitional instruments: termination by FWA

(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 Act provides as follows;

“Subdivision D—Termination of enterprise agreements after nominal expiry date

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.”

[13] I dealt with the approach to be taken to assessing public interest as well as the meaning of the word “appropriate” within the context of these provisions in my decision in Victorian Canine Association T/A Dogs Victoria 1and for convenience reproduce that consideration here.

“[8] Guidance on how the public interest is to be assessed in the context of s.226(a), as well as the requirement that termination of the agreement is appropriate (s.226(b)), was considered in the decision of Vice President Lawler in Tahmoor Coal Pty Ltd (Tahmoor).

[9] When considering the requirement that the termination not be contrary to the public interest his Honour refers to a decision of the Full Bench in Re Kellogg Brown and Root Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 where it was observed:

“[22] The absence of any reference to the interests of the negotiating parties in s.170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include.

[23] 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.”

[10] His Honour Vice President Lawler concludes, “[t]hus, the public interest involves something distinct from the interests of the parties although they may be similarly affected”. The termination of a given agreement may be in the public interest, may be contrary to the public interest or may be neutral in terms of the public interest. Section 226(b)(i) of the Act directs attention to whether termination would be contrary to the public interest.

[11] In Tahmoor, His Honour considers the meaning of the word “appropriate” in the context of section 226 of the Act. He concludes that judicial interpretations of the word do not deal with the problem that reasonable minds may differ, indeed sharply, on what is appropriate in any given set of circumstances, and further that, “[i]t goes without saying that what is effectively a discretion conferred by s.226 must be exercised judicially, that is, in accordance with the intent of the legislation and any principles emerging from the authorities, and not on the basis of any personal whim or ideologicial predisposition.”

[12] His Honour further states that the objects of the Act are clearly relevant to a judicial exercise of the power in section 226. If termination will promote the objects of the Act then that is a material factor in favour of considering termination appropriate and if termination will work against the objects of the Act then that is a material factor against considering termination appropriate” 2 (footnotes omitted)

[14] I will apply these principles in this determination.

Consideration:

[15] The application to terminate the Agreement was made by the employer who is covered by the Agreement, consistent with section 225(a) of the Act.

[16] The agreement was made in 2004. There is no specific date of operation in the terms of the Agreement. The agreement expired on 21 July 2012. The Agreement has thus been in operation for approximately 9 years. The Agreement covers all of the employees in a small video library business in Burnie, a small town on the North West coast of Tasmania.

[17] Mr. Peters has provided evidence that termination of the Agreement will assist to keep the business viable during a period of significant decline for the video library trade. While no evidence was provided as to the current state of the video library industry, it is clearly observable that the video/dvd library business is in a period of significant decline and has been for some time. Paul Wiegard, chair of the Australian Home Entertainment Distributors Association, was quoted in October 2011 as stating that '[o]ver the past 12 months we've seen 180 to 200 stores close”. 3

[18] I have considered the terms of the Agreement relative to the terms of the General Retail Industry Award 2010 (the modern award) as the employees will be covered by that modern award in the event that the Agreement is terminated.

[19] The Agreement provides for wage rates that are payable for all hours worked, Monday to Saturday inclusive, irrespective of the time of day worked. All rates in the Agreement are described as casual rates and the Agreement allows for casual employment only. Work on a Sunday attracts an additional penalty of 22%. The Agreement states that there are no “ordinary” or “overtime” hours under the agreement.

[20] The rates of pay in the Agreement are less than those in the modern award when the casual loading is included with the modern award rates. However, the rates were set in 2004 and under clause 5.3 were to be increased by “any increases to ordinary time wages as specified by the Miscellaneous workers award”. Assuming that those increases have been applied in the manner specified in the Agreement, the rates of pay in the Agreement exceed those in the modern award.

[21] The agreement covers casual employees only. Under the modern award casuals are not entitled to the late night penalty rate, they receive a 10% loading on the casual rate for Saturdays, Sundays are paid as double time on the permanent pay rate (no casual loading) and casual employees are not entitled to overtime under the award.

[22] Accordingly, if the Agreement is terminated, it is likely that there will be reductions of varying levels on the remuneration of the employees. The impact will vary depending on the types of rosters employees work and the classification of the employee. Modelling undertaken by the Fair Work Commission enterprise agreements team, indicates that a casual experienced employee (modern award classification retail employee level 1) working 4pm to 10pm, Thursday to Sunday (24 hours total), will be 5.6% better off under the terms of the Agreement than under the modern award. A senior employee and a supervisor working the same hours would be 13.9% better off under the terms of the Agreement (than under the award). Alternatively an entry level employee would be 0.42% better off under the award than under the Agreement (although I note that the entry level classification applies only for the first 152 hours (76 hours for a junior) of employment for a new employee).

[23] The likely effect on employees described above, has to be weighed against the pressure on the viability of the business. The Applicant submitted during the telephone conference that terminating the Agreement would enable him to continue to operate the store for a period of perhaps a year. Without the termination he expected that he would need to close the store within a short period of time. The Agreement has been in place for approximately 9 years and has been expired for over one year. There will be a reduction in remuneration for most employees of approximately 5% .The views of employees have been sought through the posting of a notice advising of the proposed termination and that it will impact on their terms and conditions of employment. No views from employees have been forwarded to my chambers.

[24] Having considered all of the information provided, I am satisfied, in accordance with s. 226(a) of the Act, that it is not contrary to the public interest to terminate the Agreement. I am persuaded by the fact that there is rapid decline occurring in the video library market and accept that maintaining the viability of the business for a longer period, to the extent that it continues to provide employment, is not contrary to the public interest.

[25] In considering whether it is appropriate to terminate the Agreement, I have sought the views of the employees and the employer and considered the circumstances, including the likely effect the termination will have on each of them. There is a reduction in remuneration for employees in the order of 5-6 per cent for a typical employee. This needs to be weighed against the employer’s view that the viability of the business is at stake. I do not have any view from employees to consider.

[26] I have considered the objects of the Act in considering whether termination is appropriate. In this matter I have had particular consideration of section 3 of the Act, which sets out the objects of the Act. Of particular relevance is section 3(g) of the Act;

“Section 3 Object of this Act

3. The object of this Act is to provide a balance framework for cooperative and productive workplace relations that promotes national economic prodperity and social inclusion for all Australians by:

...

(g) acknowledging the special circumstances of small and medium sized businesses.”

[27] I do not think that the termination will work against other objects of the Act. Accordingly, I am satisfied, in accordance with s. 226(b) that it is appropriate to terminate the Agreement having regard to the circumstances of the matter. I am therefore required by s. 226 of the Act to terminate the Agreement.

[28] The termination of the Agreement shall operate from the date of this decision.

COMMISSIONER

 1   [2013] FWC 4260

 2   Victorian Canine Association T/A Dogs Victoria, [2013] FWC 4260, [8] - [12]

 3   Sacha Molitorisz, “DVD stores become victims of the internet”, The Sydney Morning Herald, (online), 4 October 2011, < by authority of the Commonwealth Government Printer

<Price code C, AG871124  PR543817>