Spano Enterprises (Qld) Pty Ltd trading as Spano’s Supa IGA Stafford Spano Investment (Qld) Pty Ltd trading as Supa IGA Stanthorpe Spano T & N Properties Pty Ltd trading as Spano’s IBA Mermaid Waters

[2023] FWCFB 241

[2023] FWCFB 241

FAIR WORK COMMISSION

DECISION

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

Sch. 7, Item 30(4) - Application to extend default period for enterprise agreements made during the bridging period

Spano Enterprises (Qld) Pty Ltd trading as Spano’s Supa IGA Stafford
Spano Investment (Qld) Pty Ltd trading as Supa IGA Stanthorpe
Spano T & N Properties Pty Ltd trading as Spano’s IBA Mermaid Waters

(AG2023/4120)

JWF HOLDINGS COLLECTIVE AGREEMENT (TRANSFERRING INSTRUMENT)

SPANO’S SUPA IGA STAFFORD (THE RETAILERS ASSOCIATION) EMPLOYEE COLLECTIVE AGREEMENT 2009

SPANO’S IGA STANTHORPE (THE RETAILERS ASSOCIATION) EMPLOYEE COLLECTIVE AGREEMENT 2009

SPANO’S IGA MERMAID WATERS (THE RETAILERS ASSOCIATION) EMPLOYEE COLLECTIVE AGREEMENT 2009

Retail industry
DEPUTY PRESIDENT WRIGHT DEPUTY PRESIDENT ROBERTS DEPUTY PRESIDENT SLEVIN	SYDNEY, 6 DECEMBER 2023

Application to extend the default period for the JWF Holdings Collective Agreement (transferring instrument), Spano’s Supa IGA Stafford (the Retailers Association) Employee Collective Agreement 2009, Spano’s IGA Stanthorpe (The Retailers Association) Employee Collective Agreement 2009, Spano’s IGA Mermaid Waters (The Retailers Association) Employee Collective Agreement 2009. Not reasonable to extend the default period in the circumstances – application dismissed.

1. The Spanos Group comprising Spano Enterprises (Qld) Pty Ltd trading as Spano’s Supa IGA Stafford, Spano Investment (Qld) Pty Ltd trading as Supa IGA Stanthorpe, and Spano T & N Properties Pty Ltd trading as Spano’s IBA Mermaid Waters (Spanos) has applied, pursuant to item 20A(4) of Sch 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (Cth) (Transitional Act), to extend the default period for the JWF Holdings Collective Agreement (transferring instrument), Spano’s Supa IGA Stafford (the Retailers Association) Employee Collective Agreement 2009, Spano’s IGA Stanthorpe (The Retailers Association) Employee Collective Agreement 2009, and Spano’s IGA Mermaid Waters (The Retailers Association) Employee Collective Agreement 2009 (Agreements).

1. The application seeks to extend the default period of each Agreement to 30 April 2024.

1. The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) to provide for the automatic termination of all remaining transitional instruments. Pursuant to items 20A(1) and (2) of Schedule 3 to the Transitional Act, the Agreement will terminate on 6 December 2023 (the end of the default period) unless it is extended by the Commission. The main features of item 20A of Schedule 3 to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd.[1]

1. Relevantly, when an application is made under subitem (4) of item 20A of Sch 3 to the Transitional Act, the Commission is required to extend the default period under either subitem (6)(a) if satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so, or under subitem 6(b) where it is satisfied that it is reasonable in the circumstances to do so.

1. Spanos does not contend that any of subitems (7), (8) or (9) apply to the present circumstances. The applicant has not commenced bargaining towards a replacement agreement, and it is not suggested that the employees will be better off if the agreement continues to apply. Rather, the application is made on the basis that it is reasonable in the circumstances to extend the default period under subitem 6(b).

1. In Suncoast Scaffold Pty Ltd the Full Bench described the ‘reasonable’ criterion in item 20A(6)(b) of Sch 3 to the Transitional Act in this way:

[17] Subitem (6)(b) of item 20A constitutes an independent pathway to the grant of an extension.  The ‘reasonable’ criterion in the subitem should, in our view, be applied in accordance with the ordinary meaning of the word – that is, ‘agreeable to reason or sound judgment’. Reasonableness must be assessed by reference to the ‘circumstances’ of the case, that is, the relevant matters and conditions accompanying the case. Again, a broad evaluative judgment is required to be made.

1. In Qualipac Farms Unit Trust T/A Qualipacs Farms P/L[2] (Qualipac Farms) the Full Bench considered the purpose of the provisions for the extension of the default period to be relevant to the broad evaluative judgment that is required under subitem 6(b). Reference was made to the following extract from the explanatory memorandum:

Provision would be made for the FWC to (upon application) extend the default period to ensure the automatic sunsetting of zombie agreements does not operate harshly, including by leaving employees worse off.

1. Full Benches of the Commission have also said a number of times that the purpose of the sunsetting arrangements introduced by the SJBP Act[3]  is that zombie agreements are to be replaced by contemporary instruments made under the Fair Work Act 2009 (FW Act).

Background

1. The background surrounding this application is similar to the background in an application made by KarPay Pty Ltd (KarPay) in that the applicant operates a number of IGA supermarkets and seeks to extend the default period for its Agreements to accommodate the introduction of a new software system which will assist it to apply the terms of the General Retail Industry Award 2020 (the Award) once the zombie agreements terminate.

1. The Spanos Group operate its supermarkets using three corporate entities. There are four separate agreements. Spanos asserts that it has been making genuine attempts to modify its payroll and accounting systems to accommodate the Award entitlements but those efforts have not yielded the necessary results, and as a result Spanos will not be in an administrative position to transition to Award payments from 6 December 2023.

1. The attempts made are outlined in the application. They include attempts in late 2022 to purchase software that could assist in the process. Those attempts failed in February 2023 and the project was put on hold. Further attempts were made in June 2023 and Spanos believed it had reached a solution but that ultimately proved inadequate for Spanos’ needs. A further solution was found in October 2023. The system settled on was the same system that Karpay   has implemented. That system requires Spanos to program the new system which is still in BETA stage, transfer data from existing software to the new software, set up data for each of its employees, set up the software with cost centres for all locations across the Spano Group, train administrative employees on the new software, test the system, fix any faults and ‘go live’ with the system across all sites.

1. The application is made on the basis that Spanos needs time to put into full operation new payroll software that is capable of properly and efficiently administering the recording and management of employee entitlements under the Award. The contractor has advised Spanos that it will take 4 to 5 months for the software to become fully operational. Spanos submits that it has taken more than reasonable steps to prepare for its transition to the Award, but has been thwarted by its IT challenges along the way. It states further delays will occur over the festive season as the IT contractor operates on a skeleton staff and are unable to progress the work required on an urgent basis.

1. Spanos provided details of its workforce. It employs 276 shop assistants and 101 supervisors. The shop assistants are all engaged on a casual basis. The supervisory staff are employed on a permanent basis, most full time with some part time employees.  

1. All employees are paid at Award rates. On their face the Agreements provide rates of pay which are below the Award. In those circumstances item 13, Sch 9 of the Transitional Act operates such that the base rates of pay in the Agreement are deemed to be the same as the Award.

1. There are a number of terms in the Agreements which are less beneficial to employees than the Award. The Agreements have a greater span of hours impacting on the entitlements to penalties such as overtime. There is no minimum engagement for part time or casual employees. There is a lower loading for casuals of 23% rather than 25%. Part time employees are not paid overtime in circumstances where they agree to work additional hours. The Agreements are silent on shift penalties. There are lower weekend and public holiday penalties. Overtime rates on weekends are lower when overtime is more than 3 hours. The Agreements do not provide for all of the allowances present in the Award. The allowances that are present are lower than the Award allowances.

1. Spanos provided an analysis of the differences between the Agreements and the Award. That analysis explained that the flexibility associated with hours of work and not paying certain penalties allowed it flexibility in rostering. It also explained that it is paying the 25% casual loading rather than 23%. This arrangement is in excess of the requirement in the Agreement.

1. Three of Spanos’ supermarkets operate from 6.00 am to 9.00 pm with extended hours until 10.00 pm from January to April. The fourth supermarket operates from 5.30 am to 9.00 pm.  Spanos also provided sample timesheets. The timesheets show that employees’ shifts can start as early as 5.00 am and as late as 10.00 pm. The hours of work fall outside the ordinary hours in the Award and if the Award applied penalty rates would apply.

1. The information provided makes it clear that the employees will not be better off if the Agreement continues to apply than if the modern Award applies.

1. Spanos has not commenced bargaining for a replacement agreement.

Consideration

1. Spanos seeks an extension until 30 April 2024 on the basis that it is reasonable in the circumstances to do so.  As the Full Bench in Suncoast Scaffold Pty Ltd said, reasonableness must be assessed against the relevant matters and conditions in each case. A broad evaluative judgment is required. The Full Bench in Qualipac Farms said the purpose of the provisions requiring the extension of the default period are relevant to that judgment. That purpose is to ensure the automatic sunsetting of zombie agreements does not operate harshly including by leaving employees worse off and to have those agreements replaced by contemporary instruments. The Full Bench in ISS Health Services Pty Ltd[4], when considering the appropriateness of extending a zombie agreement where bargaining was occurring, took into account whether the extension was sought merely on the basis of convenience.

1. This matter has the same features as another application to extend the Karellas Investments Pty Ltd Employee Agreement. The reasoning in our decision in that matter applies equally here[5]. Spanos seeks an extension on the basis that it would like time to fully implement payroll software to assist it in applying the Award terms and conditions to its employees.

1. The application does not accord with the purpose of item 20A of Sch 3 to the Transitional Act. The employees are low paid employees many of whom are currently being paid less than they would be paid under the minimum terms and conditions provided for by the Award. Many of the employees are casual employees. The application is made in circumstances where Spanos is not proposing enter into a modern enterprise agreement to replace the zombie agreements.

1. As was the case in Karpay the application here is essentially a request to extend the zombie agreement to meet the administrative convenience of Spanos. In Karpay it was pointed out that the provisions of the SJBP Act providing for the automatic sunsetting of zombie agreements commenced operation in December 2022. The Act did not terminate the agreements immediately. It provided a 12 month grace period up to 6 December 2023. Spanos has had 12 months to make arrangements to replace its payroll software. While Spanos made some attempts to replace its software in late 2022 there is no explanation as to why that process faltered other than an assertion that applying the Award terms and conditions involve some complexity. The evidence does not suggest that the software finally settled upon is not able to be used now, albeit in an imperfect fashion.

1. Spanos’ administrative convenience argument must be weighed against the impact on employees of the extension. The employees will be worse off if the extension is granted. The employees should not have to continue to endure the substandard conditions contained in the Agreements simply to allow Spanos to implement new payroll software that it should have introduced before the default date in the legislation. An extension in these circumstances would be harsh on employees.

1. We are not satisfied that it is reasonable to extend the default period for the Agreement.

1. The application is dismissed.

DEPUTY PRESIDENT

[1] [2023] FWCFB 105 at [3] to [18].

[2] [2023] FWCFB 212 at [14]

[3] See for example Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified Agreement 2004-2007 [2023] FWCFB 137at [32]

[4] [2023] FWCFB 122 at [4].

[5] See KarPay P/L [2023] FWCFB 240.

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