Sony DADC Australia Pty Limited T/A Sony DADC Australia Pty Limited

[2013] FWC 7636

[2013] FWC 7636

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318—Transfer of instrument

Sony DADC Australia Pty Limited T/A Sony DADC Australia Pty Limited
(AG2013/10629)

Storage services
COMMISSIONER BULL	SYDNEY, 19 DECEMBER 2013

Application in relation to a transfer of business - transferrable instrument - application that the transferrable instrument not cover transferring employees.

[1] On 26 September 2013, Sony DADC Australia T/A Sony DADC Australia Pty Limited (the Applicant) lodged an application in the Fair Work Commission (the Commission) for an Order under s.318(1) of the Fair Work Act 2009 (the Act) which relates to instruments covering a new employer and transferring employees in the context of a transfer of business.

Background

[2] The Applicant submits that on 13 September 2013, it entered into a Heads of Agreement with Entertainment Distributors Company Pty Ltd (EDC) to purchase its business and assets and will then conduct and carry on the distribution of physical entertainment products currently fulfilled by EDC in Australia.

[3] In its originating application filed in the Commission on 26 September 2013, the Applicant stated that the current completion date for the transaction was 1 October 2013. The Commission was advised on 2 October 2013, by the Applicant’s legal representative, that although the completion of the transaction between EDC and the Applicant had not yet occurred, they understood that the parties were currently operating their respective businesses as if the transaction had taken place.

[4] On 27 September 2013, the Commission requested further information from the Applicant via its legal representative, with respect to the application and in particular, the views of the employees and the respective employee organisations, being the Australian Workers’ Union (AWU) and the National Union of Workers (NUW).

[5] Correspondence was received from the Applicant in this respect on 30 September, 2 and 3 October 2013.

[6] On 4 October 2013, my Associate phoned the Applicant’s legal representative with respect to the transaction between the Applicant and EDC, concerning the date on which the transaction occurred.

[7] On 8 October 2013, the Applicant advised the Commission in writing that the transaction had not been completed and it was anticipated that the completion of the transaction would occur during the week commencing 14 October 2013.

[8] The Applicant submitted that while the transaction had not yet been completed, it requested that the Commission still make the Order pursuant to s.318(1)(a) of the Act that the Entertainment Distributors Company Pty Ltd and the AWU Enterprise Agreement 2011 1 (EDC Agreement) will not cover the Applicant and each EDC transferring employee on and from the date that the EDC transferring employees become employees of the Applicant, that is, when the transaction occurs. The Applicant further submitted that the restriction in s.318(4) of the Act anticipates this situation in any event.

[9] On 8 October 2013, the Commission wrote to the Applicant advising that pursuant to s.311(1)(b) of the Act which states:

“311 When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

311(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) ...

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) ...

(d) ...”

(My emphasis)

that on the basis that the proposed transferring employees had not been employed by the new employer a transfer of business had not occurred pursuant to the Act.

[10] The Applicant was advised that the Commission would not issue an Order until it was advised that the requirement under s.311(1)(b) of the Act had been met.

[11] On 4 December 2013, my Chambers phoned the Applicant via its legal representative as the Commission had not heard from the Applicant in relation to the application since 8 October 2013.

[12] On 5 December 2013, the Applicant wrote to the Commission to advise that the transaction was close to being finalised and requested that the file remain open until 13 December 2013.

[13] As my Chambers did not hear from the Applicant on 13 December 2013, my Associate sent an email to the Applicant on 16 December 2013, advising it that the application would be dismissed if these Chambers did not hear from the Applicant with respect to the application by 17 December 2013.

[14] The Commission received correspondence from the Applicant on 17 December 2013, advising that the transaction had occurred and attached a copy of the Asset Sale Agreement that had been agreed to between the Applicant and EDC.

[15] The Applicant submits that there are 44 transferring employees that will be covered by the Entertainment Distributors Company Pty Ltd and the AWU Enterprise Agreement 2011 2 (EDC Agreement) which was approved by the Commission on 7 September 2011. The EDC Agreement had a nominal expiry date of 1 July 2013.

[16] Section 312(1) of the Act defines the meaning of a transferable instrument. Pursuant to s.312(1)(a) the EDC Agreement is a transferable instrument for the purposes of the Act.

[17] The Applicant and its employees, other than the transferring employees, that are engaged in the same scope of work are covered by the Sony DADC Australia Pty Limited Distribution Enterprise Agreement 2012/2013 3 (Sony DADC Agreement).

[18] The Applicant seeks that the Sony DADC Agreement cover the transferring employees and the EDC Agreement not cover the Applicant and the transferring employees.

The legislation

[19] Part 2-8 of the Act describes when a transfer of business occurs and provides for the transfer of enterprise agreements, certain modern awards and certain other instruments if there is a transfer of business from one employer to another employer.

[20] Sections 317 and 318 of the Act provide that the Commission may order that a transferable instrument not cover the new employer and transferring employees.

[21] Pursuant to s.318(3) of the Act, in considering whether the order should be made the Commission must take into account the following matters:

“318 Orders relating to instruments covering new employer and transferring employees

...

(3) In deciding whether to make the order, FWC must take into account the following:

(a) the views of:

(i) the new employer or a person who is likely to be the new employer; and

(ii) the employees who would be affected by the order;

(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;

(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement;

(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;

(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;

(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;

(g) the public interest.”

Applicant’s submissions

[22] In support of its application, the Applicant provided an affidavit of Ms Joan Jreij, Human Resources Manager dated 26 September 2013. The Applicant submits that the transferring employees will perform the same or substantially the same work as they performed for EDC using the assets previously owned by EDC but acquired by Sony DADC as part of the transaction.

[23] The Applicant states it will be making offers to the transferring employees on terms which it considers are no less favourable on an overall basis and that where entitlements provided by the EDC Agreement are more beneficial than the respective entitlements provided by the Sony DADC Agreement, those entitlements will be preserved so that the transferring employees are not disadvantaged.

[24] The Applicant identified the following entitlements that they will continue to recognise with respect to the transferring employees:

a) Minimum rates of pay (Appendix 2 to the EDC Agreement)

b) Redundancy payments (clause 9.2 of the EDC Agreement)

c) Employees with 20 years continuous service will accrue 5 weeks of annual leave per year of completed service for each year of service thereafter (clause 18.1 of the EDC Agreement)

[25] Further, the Applicant submits that the transferring employees were in the process of negotiating a 3% increase to the minimum rates of pay contained in the EDC Agreement. The Applicant states that it will provide the transferring employees with the 3% wage increase from 1 October 2013.

[26] Overall, the Applicant submits that the transferring employees will not be disadvantaged by the Order in relation to their terms and conditions of employment. As previously stated, the Applicant will continue to recognise a number of entitlements set out under the EDC Agreement and submits that when those entitlements are considered alongside the entitlements that the transferring employees will receive under the Sony DADC Agreement, the transferring employees will not be disadvantaged.

[27] A comparative table of the differences of the less significant entitlements provided in the Sony DADC Agreement and the EDC Agreement were outlined in the affidavit of Ms Jreij.

[28] On 26 September 2013, Ms Jreij met with the transferring employees to inform them about the transaction and to offer them employment. A copy of the letter with respect to the offer of employment that was provided to the transferring employees was annexed to Mr Jerij’s affidavit. Further, a copy of the letter that was provided to the transferring employees informing them about this application was also annexed to the affidavit.

[29] On 30 September 2013, the Applicant provided to the Commission 37 signed copies of the transferring employees offers of employment that were provided to them at the meeting with Ms Jerij on 26 September. The seven outstanding signed copies were provided to the Commission on 2 October 2013.

[30] The Applicant submits that its intention is to amalgamate its current operations with those undertaken by EDC. However, pursuant to the Heads of Areement, the Applicant will not make any structural changes to EDC’s current operations before 1 January 2014. Accordingly, until that time the distribution operations of the Applicant and EDC will continue without change.

[31] The Applicant submits that operational inefficiencies would arise, such as administrative challenges and increased costs, should it need to administer both the Sony DADC Agreement and the EDC Agreement.

[32] I note that National Union of Workers (NUW) is covered by the Sony DADC Agreement. The Applicant has informed the Commission that the NUW has not been notified of this application as the NUW has no active involvement at the Erskine Park site covered by the transferring EDC Agreement.

[33] Further, I note that The Australian Workers’ Union (AWU) is covered by the EDC Agreement. The Applicant has provided a copy of the letter sent to the AWU informing the organisation of this application and to request their views.

[34] A letter was provided to the Commission dated 3 October 2013, from the AWU confirming its support. The AWU outlined that no employee will be disadvantaged by the transfer and that Ms Cherie Ambrose, an Organiser of the AWU had met with its members who will be affected by this application and apart from answering some questions regarding operational matters the members do not oppose the application.

Conclusion

[35] I am satisfied that the EDC Agreement is a transferable instrument as described in s.312(1)(a) of the Act and the circumstances described are a transfer of business within s.311 of the Act.

[36] I have considered all the factors required to be taken into account. I am of the view that it is appropriate and not contrary to the public interest to make orders in relation to the application of the Sony DADC Agreement to the transferring employees.

[37] For the reasons set out above an order [PR542728] will issue that the EDC Agreement will not cover the transferring employees during ay period of their employment with the Applicant and the Sony DADC Agreement will apply.

COMMISSIONER

 1   AE888034

 2   AE888034

 3   AE899358

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<Price code C, AE888034  PR542727 >