Veolia Environmental Services (Australia) Pty Ltd
[2022] FWCA 424
•7 APRIL 2022
| [2022] FWCA 424 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Veolia Environmental Services (Australia) Pty Ltd
(AG2022/211)
Veolia Environmental Services (Australia) Pty Ltd SA & NT Refuse Agreement 2018-2021
| Waste management industry | |
| DEPUTY PRESIDENT BELL | MELBOURNE, 7 APRIL 2022 |
Application for termination of the Veolia Environmental Services (Australia) Pty Ltd SA & NT Refuse Agreement 2018-2021.
Veolia Environmental Services (Australia) Pty Ltd (Applicant) has applied, pursuant to s.225 of the Fair Work Act 2009 (the Act), to terminate the Veolia Environmental Services (Australia) Pty Ltd SA & NT Refuse Agreement 2018 – 2021[1] (the 2018 Agreement).
The nominal expiry date of the 2018 Agreement, being 30 June 2021, has passed. As the Applicant is covered by the 2018 Agreement, it is entitled to make an application under s.225. The Transport Workers’ Union of Australia (TWU) is covered by the 2018 Agreement. The TWU opposes the application.
By way of overview, the 2018 Agreement is expressed to cover persons employed by the Applicant in the listed job classifications for all of South Australia and all the Northern Territory, save for a general exception for employees engaged in any municipal council kerbside collection work within metropolitan Adelaide (and defined surrounding regions) or the same kerbside collection work in the Northern Territory.
The genesis of the current dispute arose from a change in the Applicant’s industrial relations strategy in 2021. The effect of that change was that the Applicant would pursue, where possible, localised site-specific enterprise agreements. Following that strategy, the Applicant negotiated three new enterprise agreements to ‘replace’ the 2018 Agreement. Those agreements were the Veolia Environmental Services (Australia) Pty Ltd NT Collection Services Resource Recovery Agreement 2021 – 2024, the Veolia Environmental Services (Australia) Pty Ltd NT Resource Recovery Agreement 2021 – 2024, and the Veolia Environmental Services (Australia) Pty Ltd SA Collection Services & Resource Recovery Agreement 2021 – 2024 (together, the New Agreements).
As a consequence of the New Agreements commencing operation, there remained no employees under the relevant classifications covered by the 2018 Agreement at all. In a practical sense, the New Agreements did replace the 2018 Agreement. However, the site-based coverage clauses of the New Agreements are geographically narrower than the 2018 Agreement. In those circumstances, if the Applicant employs relevant persons in South Australia or the Northern Territory in the future who are not covered by the site-specific New Agreements, then they would be covered by the 2018 Agreement (subject to noting the carve out for municipal kerbside work) in the absence of any other new agreement applying at that point in time. If the 2018 Agreement was terminated – and a key factor in the TWU’s opposition to the application – such persons would instead be covered by the Waste Management Award 2020 (Award) unless a new enterprise agreement covering those new employees was made.
Following a mention hearing on 18 February 2022, directions were issued requiring the Applicant and TWU to file and serve any evidence and submissions on which they intended to rely. The Applicant filed an outline of submissions, supported by a witness statement from Mr Richard Hesketh, the Applicant’s National Workplace Relations Manager. Mr Hesketh was also the signatory of the Applicant’s ‘Form F24C’ declaration that accompanied the Applicant’s initiating ‘Form 24B’ application. The TWU filed an outline of submissions. The TWU did not file a witness statement but it included some documentary evidence, which comprised of some correspondence between the parties. The Applicant filed a further outline in response.
A hearing of the matter was held on 24 March 2022 before me. The Applicant was represented by Mr Rogers of Mills Oakley, having been previously granted permission to be represented (which application was not opposed). The TWU was represented by Mr Russell, Industrial Officer for the TWU (SA & NT). At a high level, I observe that much of the factual material and the applicable principles to s.226 were mostly not in dispute – rather, the differences between the parties reflected competing views as to how those principles ought apply, particularly as they related to future scenarios.
Mr Hesketh’s evidence was comprised by his adoption of his witness statement and the matters in the Form 24C declaration signed by him. He also provided brief further oral evidence regarding a recent acquisition by ‘Veolia’ of ‘Suez’. I describe below some further detail about that transaction but it is sufficient to note that entities of the ‘Veolia’ corporate group have recently acquired the shares in the ‘Suez’ corporate group. That acquisition was, at least in Australia, subject to various competition law divestment commitments given as part of obtaining approval from the Australian Competition & Consumer Commission (ACCC).[2]
Mr Hesketh was not required for cross-examination. His evidence included the following.
In 2021, the Applicant undertook an operational, industrial and organisational restructure. As part of that industrial restructure, as noted above, was to have localised and site-specific enterprise agreements where possible. The New Agreements were part of that strategy.
The making of the New Agreements was not without controversy, in that they were opposed by the TWU. As part of that process, the Applicant consulted with affected employees about ‘splitting’ the 2018 Agreement. Employees were told that the split would also provide an opportunity from which future opportunities could be pursued. The New Agreements were put to the vote and were approved across October and November 2021. The voting cohorts for the three respective agreements were: 18 total employees (11 in favour, 4 against); 7 total employees (7 in favour, none against); and 126 total employees (66 in favour, 24 against).
Upon commencement of operation of the New Agreements, there were no employees who remained covered by the 2018 Agreement.
I accept the above evidence and note that it was not in controversy. What was of greater controversy was Mr Hesketh’s evidence concerning the future circumstances of the Applicant’s business.
Mr Hesketh’s evidence, which I accept, is that the Applicant does not currently have any “scopes of work” for relevant new business, and is not pursuing any scopes of work, that would be covered by the 2018 Agreement. Mr Hesketh acknowledged that “this is not to say that at some point in the future, there will not be a new market opportunity. Veolia hopes there will be, and that the termination will facilitate and make more accessible, such opportunities.”
The perceived benefits of terminating the 2018 Agreement identified by Mr Hesketh were that “Veolia will have the ability to competitively tender for work and, if successful, develop industrial instruments which are reflective of market conditions to cover the operation following such tender”.
Mr Hesketh also stated, and I accept, that where Veolia successfully tendered for a new scope of work, or acquired a business with an established workforce, he expected that the Applicant would “promptly negotiate an enterprise agreement to cover that business”.
Finally, in relation to the acquisition of ‘Suez’ assets and companies by the Applicant (or more strictly, companies within the corporate group containing the Applicant), Mr Hesketh gave evidence that there was one Suez business at a depot whose employees were capable of being covered by the 2018 Agreement by reason of their classifications and location. In relation to that depot, the ‘Veolia’ group would be divesting that business as part of the process of obtaining merger clearance approval from the ACCC.
The reasons for seeking to terminate the 2018 Agreement were described by Mr Hesketh on two bases. First, Mr Hesketh said that the “termination will ensure that Veolia is able to remain competitive in the markets it may seek to enter (be it through acquisition of an established business, or by tendering for new work)”. Second, the termination was said to “ensure that Veolia does not retain defunct, redundant agreements which may have unintended consequences in the future and that will be increasingly out of step with the markets which it covers”.
The perceived detriments (in Mr Hesketh’s view) of the 2018 Agreement remaining in place were that “Veolia may not be in a position to competitively tender for [any future] bid, and may not, therefore, be able to grow and expand. Additionally, Veolia will be required to maintain the skills and knowledge of an industrial instrument which is out of step with the organisation, and likely not reflective of market conditions”.
The parties filed written submissions and amplified them further orally. It is not practicable or necessary to set them out in full. However, a particular focus of submissions - and cause of divergence - were how the Applicant’s future possibilities might arise and, if they arose, the consequences said to flow from them if the 2018 Agreement was terminated. In this regard, I observe that both parties engaged in varying levels of hypothecating about what the future might look like and the relative incentives and capacity to bargain might be. The speculation is not a cause of criticism, but it flows from the fact that any future business opportunities that might arise, and whose employees would be covered by the 2018 Agreement, necessarily involves speculation.
One example proffered by the TWU in its written submissions was that it was “reasonably foreseeable” that Veolia might seek to employ drivers in the relevant classifications considering the Veolia-Suez merger. In light of Mr Hesketh’s oral evidence at the hearing about the divestment that will occur as part of the ACCC approval process, I do not accept that submission.
Nonetheless, I do accept that there is a realistic possibility for the Applicant, at some point within the next year or two, that a business opportunity might arise where the relevant future employees would be covered by the 2018 Agreement (if it was not terminated or another agreement made to cover the employees in the new business). Such a possibility arises from the present fact that the Applicant “hopes” this will happen. I also infer that, if such an opportunity did arise, the Applicant presumably investigate it and would attempt to pursue it. In pursuing the opportunity, I also expect that the Applicant would be able to do so competently, although its ultimate success will necessarily be informed by competing rivals and the Applicant’s ability to make a competitive offer (including as affected by any industrial instruments that would apply to that new business offering).
The TWU contended that the 2018 Agreement should not be terminated for a “reasonable period of time” and it sought undertakings to that effect as a condition for the TWU offering its support to terminate the 2018 Agreement. In oral submission, the period of time was indicated to be around 5 years. That period essentially reflected, in the TWU’s view, a reasonable period for any new business opportunities to materialise and for any industrial instrument to be negotiated prior to the termination of the 2018 Agreement. In the TWU’s view, the bargaining position for future employees would be better protected in that scenario if the bargaining base was the 2018 Agreement, as opposed to the Award. It stated:
“Should the Agreement be terminated without such an undertaking provided by Veolia, then the TWU and any future employees would be unfairly disadvantaged in any future agreement negotiations through a substantial depletion of their bargaining position.”
In further support of its position, the TWU also stated that:
· there was no time or cost imperative for the 2018 Agreement to be terminated (noting there are no employees covered by it),
· the nominal expiry date had only recently passed, and
· the Applicant had not advanced any compelling reason to terminate, particularly where termination would be detrimental to the TWU and prospective employees.
The detrimental factors identified by the TWU that would arise included diminished entitlements under the Award, when compared to the 2018 Agreement, particularly in relation to redundancy, various allowances and wage rates. I accept that the wage rates under the 2018 Agreement are higher than the Award. In oral submissions by the Applicant, the approximate difference (which did not appear to be disputed) was between around $2 - $6 per hour. In the undertakings sought by the TWU, the TWU proposed a guarantee of rates at a minimum of 10 percent above the Award or any successor award.
The Applicant disputed that the redundancy or allowance entitlements would be a meaningful detriment. In relation to redundancy, it said the difference between the two instruments would only arise for redundancies after 10 years. For allowances, the Applicant noted that the 2018 Agreement contained some allowances not included in the Award and that the Award contained some allowances not included in the 2018 Agreement.
Applicable principles
Section 226 of the Act provides as follows:
“226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”
There appeared to be little difference between the parties as to the key applicable principles. In respect of the public interest, both parties referred to Re Kellogg Brown and Root, Bass Strait (Esso) Onshore / Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 (Esso) at 40. Relevantly in Esso, it was stated:
“22 The absence of any reference to the interests of the negotiating parties in s 170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include.
23 The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.”
A consideration of the public interest will involve something that is distinct from the interests of the persons and bodies covered by the agreements.[3] Assessment of where the public interest might lie may sometimes require balancing competing public interests.[4]
The Full Bench in Aurizon concluded that there was no “predisposition” against the termination of an enterprise agreement that had passed its expiry date but that s.226 ought operate according to its terms. [5]
In considering whether or not it is “appropriate” to terminate an enterprise agreement that has passed its expiry date, all of the circumstances need to be taken into account. They include the views and circumstances of the employer, employees and any union, and the effect termination will have on them.[6]
The Applicant submitted that the public interest considerations included ensuring the workplace instruments that apply to it remain “fit for purpose” and match the Applicant’s “ongoing and evolving business needs and industrial relations framework”. It referred to improved “business efficiency”, although this was qualified somewhat in oral submissions with another element: the improved business efficiency of the Applicant would in turn allow the Applicant to engage in the market more competitively and that competitive markets are in the public interest. The parties were in dispute about the perceived benefits of competitive markets. While in my view the promotion of competitive markets is quite likely to be in the public interest, I am not satisfied that the evidence before me establishes that termination of the 2018 Agreement will necessarily have such effect. It might end up doing so but in circumstances where no specific “scope of work” has even been identified nor is there any present assessment beyond “hope” that one will arise, it is too speculative to assume any improvement in competitive markets.
The Applicant further contended, as it related to the public interest, that termination of the 2018 Agreement would assist in its operational productivity, as it would remove the administrative burden associated with the maintenance of the skills, knowledge and systems required for an agreement that is now defunct. I would note that this submission is better directed at the Applicant’s private interests, as opposed to being in the public interest.
The TWU’s submissions were primarily directed at the maintenance of “proper industrial standards”[7]. It contended that termination of the 2018 Agreement would “diminish industrial standards and work to regress the industry back to Award conditions. This would only serve to empower Veolia and disempower the TWU and future Veolia employees.” I note the matters above, advanced by the TWU, also generally reflect that submission.
The Applicant sought to answer the TWU’s contention, at least in part, by reference to the evidence (which I accept) that the Applicant’s intention is to negotiate a new industrial instrument should a business opportunity arise. In doing so, I accept that the Applicant correctly submits that new employees would have the benefits available under the Act to promote their bargaining interests.
As to the specific issue concerning the maintenance of proper industrial standards and how that affects the public interest, it also begs the question in the present case to ask regarding the maintenance of proper standards ‘for whom?’ The employees previously covered by the 2018 Agreement are now covered by the New Agreements. There are no employees covered by the 2018 Agreement and there might never be so again. So far as there is a possibility that future employees who might be covered by the 2018 Agreement, the termination of that agreement would not leave such persons without proper industrial standards given the underpinning existence of the Award.
I also do not consider it is in the public interest for enterprise agreements that have passed their expiry date, and for whom no employees are covered, to be kept in operation on the basis that the agreement is to act as a default instrument against the possibility that future employees in different areas of the business operations (which do not presently exist) were capable of being covered by it.
I observed above that I was not satisfied that the public interest would be advanced by the termination of the 2018 Agreement, as that contention ultimately rested on a “hope” that future business opportunities would arise. I also consider that the converse is the case – the factual forecasts of future work do not allow me to conclude that the termination of the 2018 Agreement is contrary to the public interest, including in respect of the maintenance of proper industrial standards and the opportunities that will exist to negotiate new agreements.
As to the public interest, I am satisfied based on the evidence and submissions made by the parties that it would not be contrary to the public interest to terminate the 2018 Agreement.
In considering whether it is “appropriate” to terminate the 2018 Agreement, I have taken account of the views of the TWU and the Applicant and their circumstances, including the likely effect that termination of that agreement will have on them. For the Applicant, I consider that termination of the 2018 Agreement will have some positive benefits, although I do not consider it at the level advanced by the Applicant in its submissions.
In part, the TWU aligned its disadvantage with the disadvantages future employees was said to incur – for example, being unfairly disadvantaged in negotiations. The TWU sought undertakings from the Applicant that included matters specific to the TWU, such as recognition of TWU delegates and delegate training days. The TWU also sought an undertaking that it be recognised as the sole union to represent its members covered by the 2018 Agreement.
I have necessarily not taken into account the views and circumstances of employees covered by the 2018 Agreement because there are no longer any such persons.
Taking into account all the circumstances, I consider it appropriate to terminate the 2018 Agreement. Given my conclusions that it is not contrary to the public interest to terminate the 2018 Agreement and that it is appropriate to do so, I must terminate that agreement.
The termination will operate from 7 April 2022.
DEPUTY PRESIDENT
[1] AE502813.
[2] It is a matter of public record on the ACCC’s website that Veolia Environment S.A. sought approval to require all of the remaining shares in Suez S.A. that it did not already own. Three court-enforceable undertakings were proffered to the ACCC as part of that acquisition: Re Aurizon Operations Ltd (2015) 249 IR 55 (Aurizon) at [129].
[4] Aurizon, [130].
[5] Aurizon, [142].
[6] Aurizon, [167].
[7] Cf, the reference to this factor in Esso, above.
Printed by authority of the Commonwealth Government Printer
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