Sphere Healthcare Pty Limited T/A Sphere Healthcare Pty Ltd
[2021] FWC 2507
•5 MAY 2021
| [2021] FWC 2507 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.222—Enterprise agreement
Sphere Healthcare Pty Limited T/A Sphere Healthcare Pty Ltd
(AG2020/3326)
Pharmaceutical industry | |
DEPUTY PRESIDENT CROSS | SYDNEY, 5 MAY 2021 |
Application for termination of the Sphere Healthcare Pty Limited Enterprise Agreement 2018-2020.
[1] This is an application, filed by Sphere Healthcare Pty Ltd (Sphere), pursuant to s.222 of the Fair Work Act 2009 (Cth) (the Act) to terminate the Sphere Healthcare Pty Ltd Enterprise Agreement 2018 - 2020 (the Agreement). At the time of the application to terminate, the Agreement has not yet reached its nominal expiry date.
Legislation
[2] The relevant provisions of the Act governing this application are set out at ss.220-224 as follows:
“220 Employers may request employees to approve a proposed termination of an enterprise agreement
(1) An employer covered by an enterprise agreement may request the employees covered by the agreement to approve a proposed termination of the agreement by voting for it.
(2) Before making the request, the employer must:
(a) take all reasonable steps to notify the employees of the following:
(i) the time and place at which the vote will occur;
(ii) the voting method that will be used; and
(b) give the employees a reasonable opportunity to decide whether they want to approve the proposed termination.
(3) Without limiting subsection (1), the employer may request that the employees vote by ballot or by an electronic method.
221 When termination of an enterprise agreement is agreed to
Single-enterprise agreement
(1) If the employees of an employer, or each employer, covered by a single-enterprise agreement have been asked to approve a proposed termination of the agreement under subsection 220(1), the termination is agreed to when a majority of the employees who cast a valid vote approve the termination.
Multi-enterprise agreement
(2) If the employees of each employer covered by a multi-enterprise agreement have been asked to approve a proposed termination of the agreement under subsection 220(1), the termination is agreed to when a majority of the employees of each individual employer who cast a valid vote have approved the termination.
222 Application for the FWC’s approval of a termination of an enterprise agreement
Application for approval
(1) If a termination of an enterprise agreement has been agreed to, a person covered by the agreement must apply to the FWC for approval of the termination.
Material to accompany the application
(2) The application must be accompanied by any declarations that are required by the procedural rules to accompany the application.
When the application must be made
(3) The application must be made:
(a) within 14 days after the termination is agreed to; or
(b) if in all the circumstances the FWC considers it fair to extend that period—within such further period as the FWC allows.
223 When the FWC must approve a termination of an enterprise agreement
If an application for the approval of a termination of an enterprise agreement is made under section 222, the FWC must approve the termination if:
(a) the FWC is satisfied that each employer covered by the agreement complied with subsection 220(2) (which deals with giving employees a reasonable opportunity to decide etc.) in relation to the agreement; and
(b) the FWC is satisfied that the termination was agreed to in accordance with whichever of subsection 221(1) or (2) applies (those subsections deal with agreement to the termination of different kinds of enterprise agreements by employee vote); and
(c) the FWC is satisfied that there are no other reasonable grounds for believing that the employees have not agreed to the termination; and
(d) the FWC considers that it is appropriate to approve the termination taking into account the views of the employee organisation or employee organisations (if any) covered by the agreement.
224 When termination comes into operation
If a termination of an enterprise agreement is approved under section 223, the termination operates from the day specified in the decision to approve the termination.”
Background Facts
[3] On 8 February 2021, directions were issued to program the manner in which the Application was to proceed to hearing (the Directions). The parties complied with the Directions. In particular:
(a) On 19 January 2021, Sphere filed an Outline of Submissions, a statement of Chintal Patel, Human Resources Officer, and a statement of Kerry Jiang, Group Human Resources Manager, all dated 19 January 2021;
(b) On 9 February 2021, the Australian Workers Union (the AWU) filed an Outline of Submissions, and a statement of Ms Leah Tucker, the Organiser of the AWU responsible for Sphere; and
(c) On 15 February 2021, Sphere filed an Outline of Submissions in Reply.
[4] The hearing of the matter occurred on 2 March 2021. In the hearing an Agreed Statement of Facts was tendered. Thereafter the parties filed the following written submissions:
(a) The AWU filed the Respondent’s Final Submissions (the AWU Submissions) on 9 March 2021; and
(b) Sphere filed the Applicant’s Final Submissions (the Applicant’s Submission) on 16 March 2021.
[5] The Agreed Statement of Facts, and the evidence relied on by each party, disclosed the following facts. Sphere had been experiencing financial difficulties since early 2019, and entered into external administration in around August 2019. In around December 2019, Yes Family 2 Pty Ltd (Yes Family) acquired Sphere from the administrator. The Agreement continued to apply to the employees of Sphere, notwithstanding the change in ownership and control of the company.
[6] The combined effects of the COVID 19 pandemic and Sphere’s financial difficulties, forced Sphere to undergo a company restructure and make some fifteen roles redundant in around mid-April 2020. After those redundancies had taken place, Sphere had a remaining workforce of approximately 140 employees (the Employees).
[7] On 9 July 2020, Sphere’s factory at Moorebank was destroyed by a large fire. The factory building was severely damaged and the factory was no longer operational. This resulted in a complete stoppage of the Sphere’s business operations, and there was no work for its employees to perform. On 10 July 2020, Sphere stood down the majority of its employees in accordance with clause 15.1 of the Agreement.
[8] On 14 August 2020, following a period of consultation; Sphere formally advised all of its remaining employees that their roles would be made redundant. The employees’ employment was terminated in a staged process, and by 25 September 2020, all employees’ employment had been terminated by reason of redundancy
[9] On 21 September 2020, Sphere re-engaged five of its former employees under fixed term contracts, originally for approximately six weeks, to undertake decommissioning work of the Sphere’s machinery and equipment at its Moorebank factory (the Voting Employees). This was necessary to remove or uninstall salvageable equipment and machinery prior to the demolition of the factory. The Voting Employees were re-engaged in either ‘Warehouse/Storeperson’ or ‘Maintenance’ classifications and covered by the Agreement.
[10] On 13 October 2020, Sphere, through Mr Patel met with the Voting Employees notifying them that Sphere was proposing to terminate the Agreement, and they would shortly be provided with formal written notice of the process, including details of how the vote would occur.
[11] Following the meeting and on 13 October 2020, Mr Patel sent a written notice by email to each of the Voting Employees (the Notice). The Notice set out:
(a) the date and time of the proposed vote (11am on Wednesday 21 October 2020);
(b) that the vote would be via show of hands at Sphere’s Moorebank factory;
(c) potential impacts to the Voting Employees if the Agreement were to be terminated; and
(d) the relevant contact person should any of the Voting Employees have any questions be Mr Patel.
[12] Mr Jiang also notified Ms Tucker of the AWU on the same day of the Sphere’s proposed termination of the Agreement.
[13] The Voting Employees were:
(a) engaged under fixed term contracts; and
(b) were provided with an undertaking by Sphere to maintain any terms that were more beneficial under the Agreement, if the Agreement were terminated during their employment.
[14] On 21 October 2020, all the five Voting Employees voted in favour of the termination of the Agreement. The Voting Employees completed the decommission work on around 6 November 2020, and their employment therefore came to an end on that date.
[15] The application to terminate to the Agreement was lodged by Sphere with the Fair Work Commission (the Commission) on 4 November 2020. On 6 November 2020, the Commission wrote to Sphere requesting that it email the Voting Employees enquiring as to whether or not they agreed to terminate the Agreement (the Responses), and provide the Commission with the Responses. Sphere provided the Commission with the Responses on 9 November 2020.
[16] On 23 December 2020, the AWU notified the Commission that it opposed the termination of the Agreement on the basis that “the business may open up again on that site.”
[17] Sphere says it does not have any plans to recommence operations in the immediate future, and at the very least not within 12 months. Were Sphere to so recommence operations it submitted would be a different business model, however it was clear that there was no certainty as to what that model would involve. Upon questioning by the Commission in the hearing, Sphere conceded that it was reasonable to assume that were Sphere to recommence operations, it would seek to re-employ former employees of Sphere.
Submissions of the AWU
[18] The AWU submitted that if a ballot was to take place it should have included an extended definition of employees, being the entire workforce who had been employed prior to retrenchment. The AWU submitted that would be consistent with the definition of employee in Australasian Meat Industry Employees Union v Belandra Pty Ltd (Belandra). 1 The AWU submitted that Belandra defines a situation that, where there is an expectation of re-employment, those former employees fit within the definition of employee. That is so even if they are not entitled to be made an offer of employment in the future. Paragraph [47] of Belandra identified that an employer was usually an employer with reference to its intention to re-employ the employees. The Applicant in this matter has not denied its intention to make offers of employment to former employees in circumstances where the business re-commences.
[19] Regarding fairness, the AWU noted that both the salary and redundancy provisions of the Agreement are superior to the Award. The consequence of a termination is a reduction in employee entitlements. The potential of unfairness in terminating agreements was said to be recognised in numerous decisions, even in decisions where the agreement was terminated. 2
[20] The AWU further referred to the decision of the Full Court of the Federal Court in Communications, Electrical, Energy, Information, Postal and Plumbing and Allied Services Union of Australia v Aurizon Operations Limited, 3 where the Full Court observed “the existence of the previously negotiated enterprise agreement should be a priori be regarded as providing particular encouragement to collective bargaining. Indeed, the legislation contemplates that at least generally once a new enterprise agreement has been made it will apply to those covered by it at least until its nominal expiry date. It has not expired yet.”
[21] In conclusion, the AWU submitted that in the event that the Moorebank site does not reopen there is no prejudice to the Applicant. If the Moorebank site does reopen, the principles under the Act of collective bargaining would be undermined by the termination of the Agreement.
Submissions of Sphere
[22] Sphere submitted that there was no contention that the requirements under sub-sections 223(a) through (c) of the Act have been met. The test with respect to section 223(d) is whether it is appropriate to approve the termination of the Agreement taking into account the views of the AWU. The Act does not define when it is ‘appropriate’ to terminate an agreement. However; the concepts of being appropriate includes concepts of ‘suitable’ or ‘proper in the circumstances.’
[23] Sphere noted that the circumstances in the current Application are:
(a) Sphere’s business was under considerable financial pressure since it was acquired in late 2019;
(b) due to circumstances beyond Sphere’s control, Sphere found itself in the position where it had no option but to make all of its employees redundant;
(c) Sphere subsequently re-engaged five of its former employees under fixed term contracts to undertake decommissioning work (the Employees);
(d) the Employees were asked to and all voted to terminate the Agreement;
(e) there are currently no employees who are covered by the Agreement;
(f) Sphere may or may not recommence operations in the future, but in any event is not in a position to do so for at least the next 18 months; and
(g) the Agreement is due to expire on 12 April 2021
[24] Sphere submitted that given that there are currently no employees covered by the Agreement and no business operations, termination of the Agreement will have no impact on a current workforce.
[25] While the AWU has criticised Sphere’s lack of specificity and detail regarding its reasoning for the proposed termination, Sphere submitted that it had been forthright and open about its motivation to terminate the Agreement. Since the fire, Sphere has not contemplated recommencing operations because it was simply not in a position to do so in the immediate future. Any plans to recommence operations are speculative and at a high-level overview.
[26] Reduced or loss of entitlements and return to modern award conditions is not a barrier to the termination of an agreement. Many agreements are terminated in circumstances where there is a diminution to employee entitlements. 4
[27] Sphere submitted that the fact that the Voting Employees were not impacted by the vote, due to the undertakings given to them by Sphere, did not invalidate the vote, nor render termination agreed to in the vote inappropriate. The Voting Employees were the only employees who were covered by the Agreement at the time of the vote, and it therefore followed that they would be the only employees to vote on the proposed termination. Sphere sought to distinguish Belandra on numerous bases.
[28] Sphere submitted that Section 221(1) of the Act is very clear in its wording, and provides that termination of an enterprise agreement is agreed to when a majority of employees who covered by the relevant enterprise agreement vote in favour of the proposed termination.
[29] Regarding the effect on the bargaining positions of the parties of termination of the Agreement, Sphere submitted as follows:
“The Applicant is not dismissive of the importance of the respective bargaining power of the parties. Rather it is the Applicant’s position that an application made under section 222 of the Act (such as this current Application) attaches a greater weight on there being an agreement to terminate. Notwithstanding that the bargaining power of the parties may be altered by the termination of the Agreement, it is not enough to persuade the FWC that it is inappropriate to terminate the Agreement – being the relevant test under section 223.”
Consideration
[30] Pursuant to s.223 of the Act, in order to approve an application to terminate an enterprise agreement, I must be satisfied that the employees genuinely agreed to the termination of the Agreement and that there are no other reasonable grounds for believing that the employees have not agreed to the termination.
[31] Paragraph (a) of s.223 directs consideration to s.220 of the Act, which provides (at sub-sections (1) and (2)) as follows:
(1) An employer covered by an enterprise agreement may request the employees covered by the agreement to approve a proposed termination of the agreement by voting for it.
(2) Before making the request, the employer must:
(a) take all reasonable steps to notify the employees of the following:
(i) the time and place at which the vote will occur;
(ii) the voting method that will be used; and
(b) give the employees a reasonable opportunity to decide whether they want to approve the proposed termination.
[32] The Meanings of employee and employer for the purposes of Part 2 – 4 of the Act are outlined at s.170 as follows:
“Meanings of employee and employer
In this Part, employee means a national system employee, and employer means a national system employer.”
[33] Section 13 of the Act defines a “national system employee” as:
“Meaning of national system employee
A national system employee is an individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement. “
(Emphasis added)
[34] Part 2 – 4 of the Act, insofar as it deals with the approval of enterprise agreements by employees voting for such approval, refines the delineation of those employees by including the words “ … employed at the time who will be covered by the agreement”. Sections 180(2)(a) and 181(1) of the Act provide respectively:
“180 Employees must be given a copy of a proposed enterprise agreement etc.
…
(2) The employer must take all reasonable steps to ensure that:
(a) during the access period for the agreement, the employees (the relevant employees ) employed at the time who will be covered by the agreement are given a copy of the following materials:
(i) the written text of the agreement;
(ii) any other material incorporated by reference in the agreement; or
(b) the relevant employees have access, throughout the access period for the agreement, to a copy of those materials.
181 Employers may request employees to approve a proposed enterprise agreement
(1) An employer that will be covered by a proposed enterprise agreement may request the employees employed at the time who will be covered by the agreement to approve the agreement by voting for it.”
[35] The definition of “national system employee,” and the refinement of that definition by s 180(2)(a) and of s 181(1) of the Act, was considered by the Full Court of the Federal Court in National Tertiary Education Industry Union v Swinburne University of Technology and Anor (Swinburne). 5 Previously in Swinburne, the Full Bench of the Fair Work Commission had, relying on Belandra, found that the term “employed at the time” within the meaning of s. 181(1) encompassed sessional academic employees who were engaged during the previous academic year, and for whom there was a basis for the employer to believe those employees were likely to be engaged in the ensuing year, notwithstanding that they were not employed at the relevant time of the voting for the agreement.
[36] Jessup J, with whom White J agreed, held: 6
The foundational provision is s 172(2), which authorises an employer to make a single-enterprise agreement “with the employees who are employed at the time the agreement is made”. An “employee” is “an individual so far as he or she is employed, or usually employed” by a national system employer (s 13). Reading this definition into s 172(2), the employer may make the agreement with the individuals who are employed, or usually employed, by the employer, but only to the extent that they are actually employed at the time the agreement is made. So to read s 172(2) does not have the effect of ignoring so much of the definition of “national system employee” as refers to an individual who is usually, but not immediately, employed by the employer. Rather, it recognises the legislative intention of confining, from within a broad class which include individuals who are usually, but not immediately, so employed, the relevant group to those who are employed at the time the agreement is made.
[37] In conclusion, Jessup J and White J found: 7
Returning to the facts of the present case, the University included in those to whom requests were addressed ostensibly under s 181(1) everyone who had been employed, to any extent, in 2013. At the general level, the Commission endorsed that approach because it read the provision as including those who were “usually employed” as being within the expression “employees employed at the time”. For reasons I have given, that was a misreading of s 181(1). In the course of what became an adversarial proceeding under s 186, and largely as a result of the intervention of the Union, the “cohort”, as it was called, endorsed by the Commission underwent some excisions. But the Commission’s misapprehension of the requirements of s 181(1) affected the process at a more fundamental level than could be rectified by these excisions. Because of the wrong test which the Commission applied, it could not have been satisfied of the answer to the correct question, namely, whether a majority of those who were employed by the University at the time when it made its s 181 request, and who cast a valid vote, approved the agreement.
[38] Unlike Sections 180(2)(a) and 181(1) of the Act, s.220(2) of the Act only requires an employer to take all reasonable steps to notify the employees of the time and place at which a vote will occur, the voting method that will be used, and give the employees a reasonable opportunity to decide whether they want to approve the proposed termination. As the provision does not specify that such employees be “employed at the time,” there is no amendment to the definition of “national system employee” in Section 13.
[39] In Swinburne,neither Jessup J nor White J expressed disapproval of Belandra, and Pagone J, in dissent, considered the analysis in Belandra as assisting in the determination of whether employees were “employed at the time,” The analysis of North J in Belandra remains relevant and applicable to the determination of whether particular employees are “national system employee(s).” His Honour there found: 8
The issue, then, is whether the facts of the present case demonstrate that Belandra was “usually an employer”? Mr Parry argued that in order to qualify as “usually an employer” there must be some proximity of employment. The person must have either been an actual employer just prior to the time in question, or must have employment of workers in prospect. He contended that Belandra had not been an actual employer since the fire in June 2001, and therefore, at the time of the alleged breach in September 2001, it had not been an actual employer for about two and a half months. Further, Belandra did not intend to be an employer in the future. It had no managers or supervisors, and it did not have any premises. In that sense, he submitted, Belandra had no operation in which it could employ people.
Whether a person is usually an employer is a question of fact to be determined in the light of all the circumstances in each case. There is no formula appropriate in all cases which can be used to answer the question. As to a past employment relationship, it may be relevant to know how long ago the person ceased to be an actual employer or to understand why the person ceased to be an actual employer. As to future employment, it may be relevant to know when such employment is to commence or resume, and the circumstances of any delay in commencing or resuming employment.
[40] The relevant consideration in this matter regarding whether all 140 employees made redundant are national system employees are:
(a) While Sphere had experienced financial difficulties, those difficulties were resolved in approximately December 2020, when Yes Family acquired the business of Sphere, with the existing Agreement intact;
(b) The COVID 19 pandemic impacted only upon the roles of 15 out of 155 employees of Sphere;
(c) The redundancies to the entire workforce occurred not as a result of financial difficulties or the COVID 19 pandemic, but due to the catastrophic fire that severely damaged the factory building so it was no longer operational;
(d) At the date of the vote to terminate the Agreement, all of the approximately 140 employees of sphere had been made redundant only between one and two months beforehand. Those 140 employees would be considered for re-employment were Sphere to recommence operations; and
(e) The Voting Employees were engaged under fixed term six to seven week contracts, and only those Voting Employees were provided with an undertaking by Sphere to maintain any terms that were more beneficial under the Agreement, if the Agreement were terminated during their employment.
[41] I consider that on 21 October 2020, Sphere was usually an employer of not just the Voting Employees, but of all 140 employees made redundant between 14 August 2020, and 25 September 2020. The employment of those employees had only recently ceased due to the catastrophic fire that severely damaged the factory building, and at least some of those employees were to be considered for re-employment were operations to recommence.
[42] Section 220(2) of the Act requires an employer to take all reasonable steps to notify employees of the time and place at which a vote will occur, the voting method that will be used, and give those employees a reasonable opportunity to decide whether they want to approve the proposed termination. Sphere only afforded that opportunity to the Voting Employees, and not all “the employees covered by the agreement” (s.220(1)). Accordingly, I am not satisfied that Sphere complied with subsection 220(2), and so cannot approve the termination of the Agreement (s.223 (a)).
[43] The application to terminate the Agreement is dismissed.
DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
<AE502761 PR729227>
1 [2003] FCA 910
2 Wollongong Coal Limited T/A Wollongong Coal v Construction Forestry Mining and Energy Union (CFMEU) [2020] FWCFB 3676, at [46]; Tahmoor Coal P/L Tahmoor Colleries Enterprise Agreement 2006 [2010] FWA 6468.
3 [2015] FCACA 126, at [24].
4 Drummond and Kindred Clothing Co T/A Drummond and Kindred [2020] FWCA 2727, at Paragraphs [81] to [84]; Dales and Meyers Operations Pty Ltd ATF Dale and Meyers Operations Trust T/A DTM Timber [2017] FWCA 6293
5 (2015) 232 FCR 246.
6 Ibid at [17].
7 Ibid at [27].
8 AMIEU v Belandra (2003) 126 IR 165, at [42] and [43].
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