Sunfresh Health Pty Ltd

[2017] FWC 6388

[2017] FWC 6388

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees in agreements

Sunfresh Health Pty Ltd
(AG2017/5236)

Health and welfare services
COMMISSIONER SIMPSON	BRISBANE, 1 DECEMBER 2017

Application for an order relating to instruments covering new employer and transferring employees.

[1] This is an application pursuant to s.318 of the Fair Work Act 2009 by Sunfresh Health Pty Ltd (the Applicant) seeking orders from the Fair Work Commission (the Commission) relating to a transferrable instrument.

[2] The background to the application is that the Applicant has entered a contract to purchase the UnitingCare Health Linen Service. The Applicant is a related entity of Sunfresh Linen Pty Ltd, which operates a commercial linen hire, laundry services and textile product manufacturing business across Brisbane. UnitingCare Health’s Linen service was acquired by Sunfresh Health to expand the footprint of Sunfresh’s services in the industry.

[1] On 15 June 2017 the Sunfresh Health Enterprise Agreement 2017 was made and approved by the Commission on 26 July 2017. The same agreement was varied on 11 August 2017. The variation was approved on 22 August 2017. All employees employed by the Applicant are currently covered by the Sunfresh Health Enterprise Agreement 2017.

[2] According to the application filed, a transfer of business will occur with the date of settlement to be date of the orders if granted.

[3] The application states that the employees who are the subject of this application have been advised that they are to be terminated by UnitingCare, the old employer as described in s.311(1)(a), and after the termination, the employees will become employed by the Applicant, the new employer as described in s.311(1)(b) if the orders are granted.

[4] The application states that the transferring work that the employees will perform for the new employer is the same or substantially the same as the work performed by the old employer as contemplated in s.311(1)(c).

[5] Further it is said that there is a connection between the old employer and the new employer as described in that the new employer owns or has the beneficial use of some or all of the assets of the old employer, and they relate to, or are used in connection with the transferring work.

[6] The transferring instrument is the UnitingCare Health Support Services Enterprise Agreement 2016 – 2018 approved on 18 February 2016 (UHC Agreement). The relevant modern award for the purposes of the applying the better off overall test when the UHC Agreement was approved was the Health Professionals and Support Services Award 2010. The transferring instrument covers UnitingCare Health and the employees of UnitingCare Health who perform the transferring work. Among the classifications covered by the transferring instrument are employees performing laundry and linen services and road transport services.

[7] The Sunfresh Health Enterprise Agreement 2017 Variation (Sunfresh Agreement) covers Sunfresh Health employees performing laundry services and road transport services. The relevant modern awards for the purposes of the applying the better off overall test when the Sunfresh Agreement was approved were the Dry Cleaning and Laundry Industry Award 2010 and the Road Transport and Distribution Award 2010.

[8] The Applicant submits that its business operations are in laundry services where road transport is ancillary to the provision of these services. The Sunfresh Agreement has a nominal expiry date of 26 July 2021.

[9] The Applicant states that the orders sought will only affect employees who have decided that they wish to become transferring employees, and that the Applicant has made a conditional offer of employment to the transferring employee’s contingent upon the success of this application. That is, the offers of employment are conditional on an order that the transferring instrument will not cover the transferring employees who take up employment with Sunfresh Health Pty Ltd and instead the Sunfresh Agreement will cover the transferring employees.

[10] The Applicant states that it will not employ the transferring employees if the application for orders is unsuccessful as this would harm the viability of Sunfresh Health Pty Ltd.

[11] The Applicant states that under the conditional offers of employment Sunfresh Health Pty Ltd will recognise any personal or carers leave entitlement accrued by the transferring employees during their employment with UnitingCare Health.

[12] The matter was listed for Hearing on 17 November 2017. At the hearing the Applicant was asked whether it would be prepared to offer undertakings to the FWC to preserve for a period of time for transferring employees the equivalent of more generous entitlements under the UHC Agreement as a basis to support its case for the Commission to make the order.

[13] The Applicant said it could not do so as it would impact its ability to compete in the industry. The Applicant advised the Commission that the transferring employees will receive redundancy payments on termination from the old employer which, when taken overall if costed across the workforce that have accepted conditional offers of employment, is a greater monetary sum than the total amount transferring employees would receive if they retained existing entitlements under the UHC Agreement for a further 12 months. The Applicant was asked to provide this information in writing to the Commission which it did.

[14] In deciding whether to make the order the Commission needs to take into account the views of the new employer or the likely new employer, and the employees who would be affected by the order. The likely new employer states that it wishes to employ the transferring employees because of their skills, experience and knowledge of the UnitingCare Health linen facility.

[15] The Applicant says the transferring instrument is inappropriate to its business compared to its existing enterprise agreement which is based on awards more suited to its business operations. The Applicant says that there are significant costs and productivity implications which would have a detrimental impact on the viability of the business, rendering Sunfresh Health Pty Ltd uncompetitive in relation to the cost structures of its competitors. The Applicant referred to the Holy Cross Laundry and Spotless Laundry industrial arrangements as comparators in the industry it operates. Sunfresh said the transferring instrument would otherwise create two categories of employees with differing employment conditions.

[16] Sunfresh stated that it holds a preference for employing the transferring employees however views the negative commercial and business impact associated with adopting the transferring instrument as outweighing the benefits of the employees’ skills experience and knowledge.

[17] The Applicant submitted that if the order is not granted, it will have no choice but to seek to employ new non-transferring employees under its existing agreement. At the hearing I asked the Applicant if the existing sale agreement was contingent upon the order being made. The Applicant advised the Commission to the effect that a contract for sale was agreed and would proceed. Sunfresh’s submissions were to the effect that if an order was not made, then the only effect on the sale would be a delay in the completion date, and that transferring employees would not be offered employment.

[18] The application was accompanied by a signed statement from Mr Steven George, the Chief Executive Officer of Sunfresh Health Pty Ltd. Mr George said in his statement that in making conditional offers of employment to the employees affected by this application, documentation was provided to assist them in deciding whether to accept the conditional offer. This included the conditional offer itself, as well as an information pack which included a copy of the Sunfresh Agreement.

[19] Mr George said that the employees were provided 14 days to consider the offer, and were provided a written conditional offer and asked to consider it, and sign and return the form attached to the offer by 31 October 2017. At the time of Mr George making his statement to the Commission, 66 employees had accepted the offers which is almost all existing employees at the existing linen service.

[20] Mr George said the employees were given multiple opportunities to express any concerns and clarify and ask questions that might have been raised in relation to the acquisitions effect on their terms and conditions of employment.

[21] Mr George said in addition to the information pack, he and management were available for one on one interviews and gave a presentation that explained in clear detail the impact of the transition and new employment conditions. Mr George said all casual employees have been offered permanent employment.

[22] Attached to Mr George’s statement were 66 declarations signed and dated by employees for whom the order is sought. The declarations included that the employees have received, read and understood and been given an opportunity to consider the information pack, the conditional offer of employment and the Sunfresh Agreement. Each declaration included that the employee had understood the offer of employment is conditional upon the Commission ordering that the Sunfresh Agreement would cover and apply to their future employment, and that they have accepted the offer understanding that they have been made redundant by their current employer, and agree to provide a statement to the Commission that they support the application for orders.

[23] I am satisfied on the evidence provided that both the potential new employer, and the employees who would be affected by the order, support the making of the orders.

[24] Sunfresh included as part of its submission a table setting out the differences between the Sunfresh Agreement and the UHC Agreement. Whilst there are differences overall the UHC Agreement is more generous, and on that basis employees will be financially disadvantaged. That needs to be also weighed against the retrenched employees having been paid redundancy pay from the old employer, and having almost unanimously accepted conditional offers of employment, understanding their conditions of employment will be less overall. It would seem to be stating the obvious that a factor in the overwhelming acceptance of the conditional offers must have been a preference for ongoing immediate employment over unemployment.

[25] The transferring instrument expires on 31 December 2018 whereas the Sunfresh Agreement expires on 26 July 2021.

[26] The transferring instrument would impact productivity given its employment classifications are very different from the classification structure with the new employers existing workforce and it would create a complex environment for workers to work alongside each other on quite different terms and conditions of employment. The two instruments also have different arrangements for hours of work.

[27] The Applicant would suffer economic disadvantage if the orders were not made as the different conditions that would apply under the transferring instrument are in excess of their standard operating costs. The Applicant would also need to bear the cost of maintaining two separate administrative and payroll arrangements.

[28] For reasons already described above there is not a great level of business synergy between the transferring instrument and the Sunfresh Agreement.

[29] Despite holding misgivings about a reduction in overall conditions of employment, and the Applicant not being prepared to preserve for a time the more generous conditions under the UHC Agreement, on the particular facts of this case it would not be contrary to the public interest to grant the orders.

[30] In the absence of the orders, a not insubstantial group of retrenched employees will not be offered ongoing employment. I have taken into account each of the matters contained in s.318(3) of the FW Act, and have concluded it is appropriate to make the orders. The orders will be issued separately and concurrently with this decision.

COMMISSIONER

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