Sub Employment Pty Ltd

[2013] FWC 2194

[2013] FWC 2194

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.319—Transferable instrument

Sub Employment Pty Ltd
(AG2013/5607)

Fast food industry
COMMISSIONER CRIBB	MELBOURNE, 12 APRIL 2013

Application for an order re instrument covering new employer and non-transferring employees in agreements.

[1] An application has been made by Sub Employment Pty Ltd (the new employer, the applicant) for an order under section 319 of the Fair Work Act 2009 (the Act) in relation to the instrument that covers the new employer and non-transferring employees, following a transfer of business. The new employer is seeking an order under s.319(1)(b) of the Act that the enterprise agreement that covers the new employer will also cover the non-transferring employees, namely, all of the new employer’s employees who will perform the transferring work (whether they be transferring employees or non transferring employees).

[2] On 25 February 2013, the applicant purchased the business of the old employer, Tammylyn Pty Ltd. Within three months of their termination, selected employees of the old employer were re-employed by the new employer. It was stated that the work that the transferring employees perform for the Applicant is the same or substantially the same as the work that the transferring employees performed for the old employer.

[3] The transferring employees are covered by the IPCA (VIC) Enterprise Agreement 2012 (the Enterprise Agreement) which was approved by the Fair Work Commission on 23 April 2012. The non-transferring employees are presently covered by the Fast Food Industry Award 2010 which is a modern award within the meaning of section 314(1)(d) of the Act.

1. Transfer of business and of the Enterprise Agreement

[4] The application is premised on the basis that Sub Employment Pty Ltd is already covered by the Enterprise Agreement. This in turn relies upon the proposition that there has been a transfer of business and that the Enterprise Agreement has transmitted along with the transferring employees as a result of the operation of the Act.

[5] I will deal firstly with this proposition.

(a) Transfer of business

[6] The Act provides as follows in relation to transfer of business:

“311 When does a transfer of business occur

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

(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) the employment of an employee of the old employer has terminated;

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

(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.

New employer ceases to outsource work to old employer

(5) There is a connection between the old employer and the new employer if:

(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and

(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.

New employer is associated entity of old employer

(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.”

[7] In this case, the selected transferring employees were re-employed by the new employer within three months after the termination. The work that the transferring employees perform for the new employer is the same or substantially the same as the work performed for the old employer. Further, there is a connection between the old employer and the new employer in that all of the business assets owned by the old employer were transferred to an associated entity of the Applicant as of 25 February 2013. Further, as of 25 February 2013, the associated entity of the Applicant owns some or all of the assets that the old employer owned. Accordingly, pursuant to section 311 of the Act, there is a transfer of business and the employees of the old employer are transferring employees within the meaning of the Act.

(b) Enterprise Agreement

[8] The Enterprise Agreement is a transferable instrument by virtue of section 312(1)(a) of the Act. Section 313 of the Act provides for the transferable instrument (the Enterprise Agreement) to, in effect, transfer to the new employer (Sub Employment Pty Ltd) along with the employees who are transferred.

[9] Therefore, Sub Employment Pty Ltd (the new employer) and transferring employees are already covered by the Enterprise Agreement.

2. Whether the Enterprise Agreement should cover the non-transferring employees

[10] With respect to whether the Enterprise Agreement should also cover the non-transferring employees, section 314 of the Act makes provision for a transferable instrument to automatically cover other employees in certain circumstances.

[11] Section 314 of the Act provides as follows:

“314 New non-transferring employees of new employer may be covered by transferable instrument

(1) If:

(a) a transferable instrument covers the new employer because of paragraph 313(1)(a); and

(b) after the transferable instrument starts to cover the new employer, the new employer employs a non-transferring employee; and

(c) the non-transferring employee performs the transferring work; and

(d) at the time the non-transferring employee is employed, no other enterprise agreement or modern award covers the new employer and the non-transferring employee in relation to that work;

then the transferable instrument covers the new employer and the non-transferring employee in relation to that work.

(2) A non-transferring employee of a new employer, in relation to a transfer of business, is an employee of the new employer who is not a transferring employee.

(3) This section has effect subject to any FWA order under subsection 319(1).”

[12] Sub Employment Pty Ltd is covered by the Fast Food Industry Award 2010 which is a modern award within the meaning of section 314(1)(d) of the Act. As some or all of the non-transferring employees were engaged prior to the Enterprise Agreement covering the new employer, the broader coverage of the Enterprise Agreement to the “new” employees, as contemplated by section 314 of the Act, does not operate. However, the operation of section 314 is subject to section 319 of the Act (section 314 (3)).

Section 319

[13] Section 319 of the Act provides as follows:

“319 Orders relating to instruments covering new employer and non-transferring employees

Orders that FWA may make

(1) FWA may make the following orders:

(a) an order that a transferable instrument that would, or would be likely to, cover the new employer and a non-transferring employee because of subsection 314(1) does not, or will not, cover the non-transferring employee;

(b) an order that a transferable instrument that covers, or is likely to cover, the new employer, because of a provision of this Part, covers, or will cover, a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;

(c) an order that an enterprise agreement or a modern award that covers the new employer does not, or will not, cover a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer.

Note: Orders may be made under paragraphs (1)(b) and (c) in relation to a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer, whether or not the non-transferring employee became employed by the new employer before or after the transferable instrument referred to in paragraph (1)(b) started to cover the new employer.

Who may apply for an order

(2) FWA may make the order only on application by any of the following:

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

(b) a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;

(c) if the application relates to an enterprise agreement—an employee organisation that is, or is likely to be, covered by the agreement;

(d) if the application relates to a named employer award—an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (b).

Matters that FWA must take into account

(3) In deciding whether to make the order, FWA 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.

Restriction on when order may come into operation

(4) The order must not come into operation in relation to a particular non-transferring employee before the later of the following:

(a) the time when the non-transferring employee starts to perform the transferring work for the new employer;

(b) the day on which the order is made.”

[14] I will deal with each of the requirements of section 319 in turn.

CONSIDERATIONS

Section 319(3)(a)(i) - the views of the new employer

[15] The applicant wishes the Enterprise Agreement to apply to its non-transferring employees because it will avoid some employees being covered by one industrial agreement and receiving different (better) entitlements whilst other employees in the same workplace are covered by a different industrial agreement with lesser entitlements, all performing similar or the same work.

[16] Secondly, the employer stated that it would be an administrative challenge to apply two different industrial instruments to employees in one small workplace.

Section 319(3)(a)(ii) - the views of employees who would be affected by the order

[17] Attached to the witness statement of Mr Henderson, a Director of Sub Employment Pty Ltd, were signed employee acknowledgment forms by the two non-transferring employees which indicated that they wished to be covered by the IPCA (VIC) Enterprise Agreement 2012. The employees had been given a copy of the Enterprise Agreement and also the Fast Food Industry Award 2010.

Section 319(3)(b) - whether any employees would be disadvantaged by the order

[18] It was submitted by the applicant that the non-transferring employees will be entitled to better terms and conditions of employment under the Enterprise Agreement as compared to the Fast Food Industry Award 2010.

Section 319(3)(c) - expiry date of the enterprise agreement

[19] The nominal expiry date of the IPCA (VIC) Enterprise Agreement 2012 is 23 April 2016.

Section 319(3)(d) - any negative impact on the productivity of the new employer’s workplace

[20] The applicant submitted that the Enterprise Agreement would have a negative impact on the productivity of the workplace. This was because, having employees in a small workplace on two different industrial agreements which provide different entitlements, will lead to dissatisfaction amongst employees, in particular the non-transferring employees who receive lesser entitlements.

Section 319(3)(e) - the significant economic disadvantage to the new employer?

[21] It was stated by the applicant that there would be operational and administrative inefficiencies arising from having to administer the terms of an additional industrial instrument in a small workplace.

Section 319(3)(f) - degree of business synergy

[22] The applicant argued that there is little business synergy between the Enterprise Agreement and the Fast Food Industry Award 2010 as they provide for different minimum employment conditions.

Section 319(3)(g) - the public interest

[23] There is no evidence that the public interest is agitated in this matter.

CONCLUSIONS

[24] Taking into account each of the matters set out in section 319(3) of the Act, I am satisfied that the order sought should be granted.

[25] A separate order 1 will be issued to provide that the IPCA (VIC) Enterprise Agreement 2012 would also cover the non-transferring employees of Sub Employment Pty Ltd who perform similar or the same work as the transferring employees.

[26] In accordance with section 319(4) of the Act, the order takes effect in respect of each of the non-transferring employees on and from the date of this order, 12 April 2013, or the date when each of the non-transferring employees commences employment with Sub Employment Pty Ltd, whichever is later.

COMMISSIONER

 1   PR535584

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<Price code C, AE893423  PR535583 >