Staffi Pty Ltd
[2010] FWA 4360
•11 JUNE 2010
[2010] FWA 4360 |
|
DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 26 - Application to resolve an issue between a transitional instrument and the National Employment Standard
Staffi Pty Ltd
(AG2010/8844)
Application by Casts' Foodstore Holdings Pty Ltd
(AG2010/8846)
Stephens Supermarkets Pty Ltd
(AG2010/8847)
SUPA IGA MURGON UNION COLLECTIVE AGREEMENT 2009
SUPA IGA GLADSTONE TOOLOOA UNION COLLECTIVE AGREEMENT 2009
STEPHENS SUPERMARKETS PTY LTD UNION COLLECTIVE AGREEMENT 2009
Wholesale and retail trade | |
SENIOR DEPUTY PRESIDENT RICHARDS | BRISBANE, 11 JUNE 2010 |
Summary: whether employer can make application to set aside or vary severance pay entitlements after the bridging period – Regulation 2.02 of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009– does an entitlement to redundancy arise from s.119 of the Fair Work Act 2009 or from the transitional instrument – whether s.120 and s.122 of the Fair Work Act 2009 apply - preconditions to application under Schedule 3, Item 26 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 not made out.
[1] This decision concerns three applications made under Schedule 3, Item 26 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“the TPCA Act”).
[2] The Applicants are Staffi Pty Ltd, Casts' Foodstore Holdings Pty Ltd and Stephens Supermarkets Pty Ltd (“the Applicant companies”). Each Applicant company operates one or more supermarkets.
[3] Employees of five of the seven stores operated by the Applicant companies are covered by workplace agreements made under s.329 of the Workplace Relations Act 1996.
[4] The Applicant companies seek to vary the following instruments:
- Stephens Supermarkets Pty Ltd Union Collective Agreement 2009 Agreement ID: AC323068 (which binds Stephens Supermarkets Pty Ltd);
- Stephens Supermarkets Pty Ltd (Meat) Union Collective Agreement 2009 Agreement ID: AC323069 (which binds Stephens Supermarkets Pty Ltd);
- Supa IGA Gladstone Toolooa Union Collective Agreement 2009 Agreement ID: AC323039 (which binds Casts' Foodstore Holdings Pty Ltd);
- Supa IGA Gladstone Toolooa (Meat) Union Collective Agreement 2009 Agreement ID: AC323041 (which binds Casts' Foodstore Holdings Pty Ltd);
- Supa IGA Murgon Union Collective Agreement 2009 Agreement ID: AC323038 (which binds Staffi Pty Ltd); and
- Cast Retail Certified Agreement 2005 – CA123 of 2005 (Queensland) (which binds Staffi Pty Ltd).
[5] The Shop, Distributive and Allied Employees Association (“SDA”) appeared as “a party bound” (under the terms of the agreements) to each of the agreements.
[6] Each of the agreements cited above are transitional instruments for purposes of Schedule 3, Item 2(3) of the TPCA.
[7] Mr Graeme Cassady, Chief Financial Officer of Cornetts’ IGA Supermarkets and a director of each of the Applicant companies deposed in his affidavit affirmed on 4 June 2010 that:
- the Applicant Companies became part of the Cornetts group on 19 April 2010 via a share sale;
- subsequent to the share sale, the Cornetts group commenced an internal restructure and wishes to transfer the employees engaged by the Applicant companies to new companies by way of a business sale; and
- the proposed transfer may give rise to a redundancy entitlement for the employees of the Applicant companies.
REASONS FOR THE APPLICATION
[8] The redundancy provisions in each of the above agreements place no bar upon an employee receiving a redundancy entitlement upon a transfer of business taking place.
[9] Each of the agreements contains clauses in the following terms or in terms which are similar to the following terms:
“In addition to the period of notice prescribed for ordinary termination in Clause 4.1.2(a), and subject to further order of the Commission, an Employee whose employment is terminated for reasons set out in Clause 4.2.1(a) shall be entitled to the following amounts of severance pay
[...]
Where the Employer decides that the Employee no longer wishes the job the Employee has been doing to be done by anyone, and this is not due to the ordinary and customary turnover of labour, and that decision may lead to termination of employment …”
[10] The agreements also include a clause in the following terms, or in terms to the same effect as:
“The Company in a particular redundancy case may make application to the Commission to have the general severance pay prescription varied if the Company obtains acceptable alternative employment for an employee.”
[11] Ordinarily it might be anticipated that the employer in each instance would make an application for an exemption from the general severance pay entitlement on grounds that adequate alterative employment had been obtained by the employer in each instance.
[12] But the capacity for an employer to make such an application under the transitional provisions of the TPCA Act appears to be confined to applications that were able to be made during the bridging period only. This is because of the operation of Regulation 2.02 of the Regulations to the TPCA Act, which read as follows:
2.02 Redundancy pay applications — transitional instrument
(1) For subitem 7 (1) of Schedule 2 to the Act, this regulation applies if:
(a) an employer would be obliged under a transitional instrument to pay redundancy pay for the redundancy of an employee; and
(b) a term of the instrument permits the employer to make a redundancy pay application to the Australian Industrial Relations Commission or to a State industrial tribunal.
(2) If the employer makes a redundancy pay application during the bridging period:
(a) the functions of receiving and determining the redundancy pay application are conferred on FWA; and
(b) a provision in the instrument has effect as if the references in it to the Commission or a State industrial tribunal were references to FWA.
[...]
[13] The Fair Work Act 2009 (“FW Act”) bestows upon the regulations wide power to affect the operation of the FW Act and the TPCA Act. 1
[14] Arguably, an application in effect might be facilitated through an application under s.739 of the FW Act, but the conditions precedent for such an application do not exist in the current circumstances. Other issues may arise as to the effectiveness of such machinery for dealing with matters of this kind (such as any conditionality in a disputes resolution clause).
[15] The view of the SDA was that notwithstanding that in each instance the employees of the above companies will be offered new employment in the new business on the substantially similar terms and conditions as they currently enjoy, with their continuity preserved and their service recognised, they may also be entitled to redundancy pay.
[16] And further, the employer cannot make application for the exemption from the obligation to pay redundancy pay as the scope to make such an application was confined (by the operation of Regulation 2.02) to the bridging period.
[17] I will return to this latter matter subsequently.
[18] The original applications all sought to amend the various transitional instruments with the purpose, broadly stated, of defining the scope for the employer to avoid an obligation to pay redundancy pay in the context of a transfer of business.
[19] The detail of the Applicants’ initial contentions is more complex than I have stated thus far and I will return to them in detail.
JURISDICTION
The jurisdiction of Fair Work Australia (“FWA”) to determine the application before it requires the preconditions under Schedule 3, Item 26 of the TPCA Act being satisfied.
[20] Schedule 3, Item 26 to the TPCA Act states:
“26 Resolving difficulties about application of this Division
(1) On application by a person coveredby a transitional instrument, FWA may make a determination varying the transitional instrument:
(a) to resolve an uncertainty or difficulty relating to the interaction between the instrument and the National Employment Standards; or
(b) to make the instrument operate effectively with the National Employment Standards.
(2) A variation of a transitional instrument operates from the day specified in the determination, which may be a day before the determination is made.”
[21] Is there an uncertainty or a difficulty relating to the interaction of the transitional instrument and the National Employment Standards (“NES”) that excites the jurisdiction of FWA?
[22] A “difficulty” is a term of broad meaning, as an FWA Full Bench recently observed in relation an issue about the entitlement to public holidays under an transitional instrument and the NES:
“[13] In our view this situation can be described as a difficulty in the nature of an unanticipated consequence. The instruments were formulated on the basis that they would exhaustively deal with public holiday entitlements. They left no room for the observance of State gazetted additional holidays unless the parties use the additional day for that purpose. The terms of the instruments have operated in that way for some years. The enactment of the NES has operated to increase the actual entitlements under the instruments, even though those entitlements are in excess of the minimum entitlements of the NES.
[…]
[15] The jurisdictional prerequisite of a ‘difficulty’ is a broad one. So much is clear from the scheme of the provisions and the parliamentary debates leading to their enactment. In our view, the circumstances clearly give rise to a difficulty which may be resolved by a determination varying a transitional instrument under item 26 of Schedule 3 to the Transitional Act.” 2
[23] The uncertainty or difficulty in the applications before me were said to arise from the operation of s.120 and s.122 of the FW Act. Section 122 of the FW Act reads as follows:
120 Variation of redundancy pay for other employment or incapacity to pay
(1) This section applies if:
(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(b) the employer:
(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.
(2) On application by the employer, FWA may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that FWA considers appropriate.
(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.
122 Transfer of employment situations that affect the obligation to pay redundancy pay
Transfer of employment situation in which employer may decide not to recognise employee’s service with first employer
(1) Subsection 22(5) does not apply (for the purpose of this Subdivision) to a transfer of employment between non-associated entities in relation to an employee if the second employer decides not to recognise the employee’s service with the first employer (for the purpose of this Subdivision).
Employee is not entitled to redundancy pay if service with first employer counts as service with second employer
(2) If subsection 22(5) applies (for the purpose of this Subdivision) to a transfer of employment in relation to an employee, the employee is not entitled to redundancy pay under section 119 in relation to the termination of his or her employment with the first employer.
Note: Subsection 22(5) provides that, generally, if there is a transfer of employment, service with the first employer counts as service with the second employer.
Employee not entitled to redundancy pay if refuses employment in certain circumstances
(3) An employee is not entitled to redundancy pay under section 119 in relation to the termination of his or her employment with an employer (the first employer) if:
(a) the employee rejects an offer of employment made by another employer (the second employer) that:
(i) is on terms and conditions substantially similar to, and, considered on an overall basis, no less favourable than, the employee’s terms and conditions of employment with the first employer immediately before the termination; and
(ii) recognises the employee’s service with the first employer, for the purpose of this Subdivision; and
(b) had the employee accepted the offer, there would have been a transfer of employment in relation to the employee.
(4) If FWA is satisfied that subsection (3) operates unfairly to the employee, FWA may order the first employer to pay the employee a specified amount of redundancy pay (not exceeding the amount that would be payable but for subsection (3)) that FWA considers appropriate. The first employer must pay the employee that amount of redundancy pay.
[24] Sections 120, 122(2) and 122(3) of the FW Act are referable to an entitlement under s.119 of the FW Act, which sets out the entitlements that arise in relation to a given period of service.
[25] As such, it was argued that s.120 and s.122 of the FW Act are applicable to circumstances in which an employee is or would have been entitled to a redundancy payment set out under s.119 of the FW Act. That is, the provisions only have relevance where the source of the employee’s entitlement is s.119 of the FW Act, and not from some other source, such a transitional instrument.
[26] From what source do the employees derive their entitlement to redundancy?
[27] Schedule 3, Item 23 of the TPCA Act reads as follows:
23 The no detriment rule
(1) To the extent that a term of a transitional instrument is detrimental to an employee, in any respect, when compared to an entitlement of the employee under the National Employment Standards, the term of the transitional instrument is of no effect.
Note 1: A term of a transitional instrument that provides an entitlement that is at least as beneficial to an employee as a corresponding entitlement of the employee under the National Employment Standards will continue to have effect.
Note 2: Division 3 (which contains other general provisions about how the FW Act applies in relation to transitional instruments) is also relevant to how the National Employment Standards apply in relation to employees to whom transitional instruments apply.
Note 3: References to the National Employment Standards include a reference to the extended parental leave provisions and the extended notice of termination provisions (see sections 746 and 761 of the FW Act).
(1A) If there is a dispute about the application of this item which must be resolved by FWA in accordance with item 26, FWA may compare the entitlements which are in dispute:
(a) on a ‘line-by-line’ basis, comparing individual terms; or
(b) on a ‘like-by-like’ basis, comparing entitlements according to particular subject areas; or
(c) using any combination of the above approaches FWA sees fit.
(2) Subitem (1) does not affect a term of a transitional instrument that is permitted by a provision of the National Employment Standards as it has effect under item 24.
(3) The regulations may make provisions that apply to determining, for the purpose of this item, whether terms of a transitional instrument are, or are not, detrimental in any respect when compared to entitlements under the National Employment Standards.
[28] The Revised Explanatory Memorandum in relation to this item relevantly states:
Item 23 – The no detriment rule
[...]
95. The item ensures that, when the NES commences, an employee to whom a transitional instrument applies retains the benefit of comparable and more favourable terms and conditions in the transitional instrument.
[...]
[29] In the circumstances before me, when the redundancy entitlements under the transitional instruments are compared to those under s.119 of the FW Act, different outcomes apply to different employees depending on their length of service.
[30] In effect, therefore, it was put to me that because of the operation of Schedule 3, Item 23 of the TPCA Act, some employees will have as the source of their entitlement to redundancy the transitional instrument, and others will have as the source their entitlement s.119 of the FW Act.
[31] This situation arises because in some respects the NES in relation to redundancy is more beneficial than the transitional instrument but in other respects, depending on the period of service, less so.
[32] However, where an employee derives their entitlement to redundancy from s.119 of the FW Act, s.120 and s.122(2) of the FW Act operate so as to not entitle the employee from redundancy pay in certain circumstances where there is a transfer of employment.
[33] An implication of the Applicant’s position, therefore, is that employees whose source of entitlement to redundancy is referable to the transitional instrument may be entitled to severance pay without conditionality (because their entitlement would not be subject to s.120 and s.122 of the FW Act), whilst those other employees whose entitlement is referable to the NES (by way of s.119 of the FW Act) would not (because their entitlement would be subject to s.120 and s.122 of the FW Act).
[34] If I were to accept the submission of the Applicants, the operation of the transitional instruments and the NES has the effect of creating two different classes of employees, whose entitlements to redundancy differ in relation to the same workplace under the same transitional instrument.
[35] Again, this is because an employee with an entitlement to a redundancy standard that is referable to s.119 of the FW Act (because it is more beneficial than the standard set out in the transitional instrument) would be subject to the conditionality of s.122(3) of the FW Act. An employee under the transitional instrument, however, might receive a lesser entitlement under s.119 of the FW Act, but that entitlement would not be conditional on the operation of s.122(3) of the FW Act.
[36] If these submissions were accepted, then a finding that there was an uncertainty or difficulty in relation to the interaction of the transitional instrument and the NES would follow.
[37] And because the jurisdiction under Schedule 3, Item 26 of the TPCA Act would be enlivened, I should act under the terms of the schedule to remove the uncertainty and difficulty to which the interaction of the NES and the transitional instrument give rise.
CONSIDERATION
[38] Much depends in this case on the meaning of Schedule 3, Item 23 of the TPCA Act.
[39] It appears to me that the issues that have given rise to this application turn on whether an employee who has a more beneficial entitlement under a transitional instrument derives the source of the totality of their entitlement exclusively from the transitional instrument.
[40] This appears to me to be the central premise to the applications.
[41] In my view, the better construction of Schedule 3, Item 23 of the TPCA Act is that the transitional instrument applies only to the extent that it provides a comparable or more beneficial entitlement, and not at the expense of the NES.
[42] Important consequences follow from this conclusion.
[43] Firstly, in my view, the NES at all times applies to an employee, and an employee at all times derives an entitlement in this case from s.119 so far as it establishes the entitlement to a minimum redundancy payment.
[44] Consequently, a term of a transitional instrument only applies to the extent to which it is comparable or more beneficial than the NES. That is, a term of the transitional instrument can apply to the extent it is comparable or more beneficial than the NES.
[45] It follows then, in the circumstances before me, that an employee, after the commencement date 3, at all times derives a minimum or safety net entitlement to redundancy pay from s.119 of the FW Act.
[46] As a corollary of this, in so far as all employees so derive a minimum entitlement from s.119 of the FW Act, then s.120 and s.122 of the FW Act have effect in relation to those employees.
[47] I have come to this view for a number of reasons, which are set out as follows:
- the words of the Schedule 3, Item 23 of the TPCA Act are couched in language that is suggestive of terms or parts of terms of transitional instruments having effect or not having effect, as the case may be, in interaction with the NES;
- Schedule 3, Item 26 of the TPCA Act does not modify the NES, only the operation of the transitional instrument;
- The Revised Explanatory Memorandum to the TPCA Act confirms that the NES operates as a minimum standard but that comparable or more favourable terms are derived from the relevant transitional instrument;
- The construction of Subdivision B, Division 11, Part 2-2 of the FW Act I have set out above also accords with the confined operation of Regulation 2.02 to the TPCA Act as set out in the Explanatory Statement, which reads:
“Regulation 2.02 – Redundancy pay applications – transitional instrument
[…]
10. The function of receiving and determining such applications is conferred on FWA. This function is only conferred in respect of applications made during the bridging period (ie between 1 July 2009 and 31 December 2009). From 1 January 2010, redundancy pay applications will need to be made under the National Employment Standards (NES).” [My emphasis]
[48] Regulation 2.02 of the TPCA Act needs only to apply for the bridging period because thereafter, following the commencement date, s.120 and s.122 of FW Act has application (because of the aforementioned reasons) in relation to transitional instruments.
[49] It also appears to me that an alternative construction to the above would yield an unreasonable outcome. This is because an employer under the transitional instrument that had an entitlement to vary or set aside or not pay redundancy pay in certain circumstances would lose that entitlement after the bridging period as per Regulation 2.02 of the TPCA Act.
[50] As a final consideration, I note that there may be a difference in the manner in which the NES interacts with a modern award or enterprise agreement and a transitional instrument. This is because s.55(6) of the FW Act suggests that a NES and a comparable entitlement in a modern award or enterprise agreement exist in “parallel”, though there is no scope for double dipping.
[51] If this were true in relation to a transitional instrument, an application to set aside or vary redundancy pay could be made under either the transitional instrument or the relevant NES. But Regulation 2.02 and the Explanatory Statement clearly intend otherwise and the TPCA Act appears to provide no contrary guidance. Further the Schedule 3, Item 23 of the TPCA Act makes no effort to replicate the language of s.56(6) of the FW Act.
CONCLUSION
[52] On my reasoning above, therefore, the transitional instruments before me will continue to operate in so far as they extend an entitlement to redundancy pay that is more beneficial than the NES, but s.120 and s.122 of the FW Act will nonetheless apply for reason that the NES applies.
[53] It would follow then the application under Schedule 3, Item 26 of the FW Act is unnecessary in so far as it seeks to address an uncertainty or difficulty in relation to the interaction of the transitional instrument and the NES.
[54] That is, on the basis of the construction I have proffered, in circumstances where there is a transfer of employment arising in this case from a business sale, s.122 of the FW Act (along with s.12 of the FW Act) must have application.
[55] This construction would appear to resolve the issue of uncertainty or difficulty that gave rise to this application. That is, no variation of the transitional instrument is warranted because the entitlement to which the Applicants seek access is available under the application NES.
[56] In light of this discussion, I will therefore dismiss the application before me on the basis that the jurisdictional preconditions to varying a transitional instrument implicit in Schedule 3, Item 26(1) of the TPCA Act are not made out (on the basis the difficulties cited by the various Applicants are resolved on the above construction of the FW Act, the TPCA Act and the Regulations to the TPCA Act).
SENIOR DEPUTY PRESIDENT
Appearances:
Ms A Petie of McCullough Robertson for the Applicants
Ms L Hogg of Sciacca's Lawyers & Consultants for the Shop, Distributive and Allied Employees Association
Hearing details:
2010.
Brisbane.
June, 7.
1 See Schedule 2, Item 7 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
2 Appeal by "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union & Ors against decision of Boulton J of 19 March 2010 [[2010] FWA 2055] – Re: OneSteel Wire P/L & Ors[2010] FWAFB 4017 (3 June 2010) at PNS 13-15
3 The NES commenced operation on 1 January 2010 as per s.2 of the FW Act 2009.
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<Price code C, AC323038 PR998186>
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