W Hub Pty Ltd
[2022] FWC 985
•18 MAY 2022
| [2022] FWC 985 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees
s.319 – Application for an order relating to instruments covering new employer and non-transferring employees
W Hub Pty Ltd
(AG2022/1233)
| Mining industry | |
| DEPUTY PRESIDENT BEAUMONT | PERTH, 18 MAY 2022 |
Application for an order relating to instruments covering new employer, transferring employees and non-transferring employees.
This decision concerns an application by W Hub Pty Ltd (W Hub) for orders under ss 318 and 319 of the Fair Work Act 2009 (Cth) (the Act).
The application is made in respect of the employment of 177 employees who are to commence employment with W Hub, having previously been employed by MACA Mining Pty Ltd (MACA).
Background
W Hub is a wholly owned subsidiary of Fortescue Metals Group Ltd (Fortescue). Fortescue owns a mine at Eliwana which is located in Fortescue’s Western Hub in the Pilbara region of Western Australia, approximately 90km northwest of Tom Price.
On or about 1 July 2020, Downer EDI Mining Pty Ltd (Downer) and Fortescue entered a contract for the provision of outsourced early mining and maintenance services.
On or about 1 February 2021, MACA took over providing the services from Downer on the same contract terms. The MACA employees are covered by the Downer EDI Mining Surface Mining Enterprise Agreement 2016 (Downer Agreement).[1]
The arrangement that Fortescue now contemplates is a transition of the mining services from an outsourced model (MACA) to direct engagement by W Hub.
By mutual agreement, MACA and Fortescue are said to have reviewed and developed a sustainable business model for the provision of mining operators and drill/blast operators to the Eliwana mine site. This of course includes a transition from an outsourced arrangement to a direct employment model.
According to W Hub, within seven days of the Commission making the orders sought under ss 318 and 319, it will directly employ 177 MACA mining operators and drill/blast operators who currently perform work at the Eliwana mine site (Transferring Employees).
As observed, the Transferring Employees are currently covered by the Downer Agreement, whereas W Hub’s employees are covered by the W Hub Pty Ltd Enterprise Agreement 2020 (W Hub Agreement).[2]
At this juncture, it is relevant to note that I am satisfied the Downer Agreement is a Transferrable Instrument for the purposes of s 312 of the Act, because it is an enterprise agreement that has been approved by the Commission.[3]
The early mining and maintenance services performed by MACA mining operators and MACA driller/blast operators constitutes ‘transferring work’ for the purposes of s 311(1)(c) of the Act because the work they will perform for W Hub is the same as the work the Transferring Employees currently perform for MACA (Transferring Work).
The circumstances are such that they give rise to a transfer of business as understood in s 311(1) of the Act and I am satisfied that there is a connection between MACA and W Hub for the purposes of s 311(5) of the Act.
By reason of section 313(1) of the Act, the Downer Agreement would be likely to cover W Hub and the Transferring Employees in relation to the Transferring Work if the Transferring Employees commence employment with W Hub.
The orders sought are as follows:
1. An order pursuant to s 318(1)(a) of the Act that the Downer Agreement will not cover:
(a)W Hub; or
(b)the Transferring Employees who will perform, or who are likely to perform, the Transferring Work.
2. An order pursuant to s 318(1)(b) of the Act that the W Hub Agreement will cover the Transferring Employees.
3. An order pursuant to s 319(1)(a) of the Act that the Downer Agreement will not cover any new non-transferring employees who will perform, or who are likely to perform, the Transferring Work (collectively the Orders).
As the Applicant is the new employer of the business for the purpose of ss 318(2)(a) and s 319(2)(a) of the Act, it has standing to apply for the Orders sought.
The statutory provisions
Section 317 of the Act enables the Commission to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.
The discretion to make the order sought by W Hub under s 318(1) of the Act will only be exercised after taking into account the matters set out in s 318(3) of the Act.[4] These factors, which must be read having regard to the objects of the Part, are intended to enable the Commission to balance appropriately the protection of employees’ entitlements under certain instruments with the need for some flexibility to depart from the default rules about coverage of instruments following a transfer of business.[5]
Section 318 provides as follows:
318 Orders relating to instruments covering new employer and 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 transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee;
(b) an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.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 transferring employee, or an employee who is likely to be a transferring employee;
(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 transferring employee before the later of the following:(a) the time when the transferring employee becomes employed by the new employer;
(b) the day on which the order is made.The exercise of the discretion given to the Commission in this regard is undertaken within the objects of this Part of the Act, which state as follows:
309 Object of this Part
The object of this Part is to provide a balance between:(a) the protection of employees’ terms and conditions of employment under enterprise agreements, certain modern awards and certain other instruments; and
(b) the interests of employers in running their enterprises efficiently;
if there is a transfer of business from one employer to another employer.
In deciding whether to make the order sought under s 319 of the Act, I am also obliged to take into account various factors. The factors relevant to the application are set out in s 319(3) of the Act, and include:
(a) the views of W Hub and the employees affected by the Order;
(b) whether any employees would be disadvantaged by the Order in relation to their terms and conditions of employment;
(c) the nominal expiry of the Agreement;
(d) whether the Agreement would have a negative impact on productivity of the Applicant’s workplace;
(e) whether the Applicant would incur significant economic disadvantage as a result of the Agreement covering it;
(f) the degree of business synergy between the Agreement and any workplace instrument that already covers the Applicant; and
(g) the public interest.
Subsections 318(3)(a)(i) and 319(3)(a)(i): the views of W Hub as the likely new employer
In its application, W Hub has put forward its views regarding the integration of the Transferring Employees within its business and the greater Fortescue business, the maintenance of productivity and parity in terms and conditions, in addition to limiting unnecessary administrative costs. These factors have, in my view, a legitimate basis and accordingly are factors that weigh significantly in favour of granting the application.
Subsections 318(3)(a)(ii) and 319(3)(a)(ii): the views of the employees who would be affected by any order
W Hub has filed comprehensive materials regarding it garnering the views of the Transferring Employees.[6] It is evident that a comprehensive communication process regarding the proposed transfer of the Transferring Employees from MACA to W Hub was undertaken as detailed in the supporting Statutory Declaration of Mr Blair Simmons, IOC Superintendent at the Eliwana mine site, and also the Transition Project Lead for the transfer of business.
The evidence before me shows that 177 out of a total of 185 MACA employees have accepted conditional offers of employment with W Hub with the intention of continuing their careers, subject to the Orders sought being made.[7]
Given the evidence of the process undertaken regarding consultation with the Transferring Employees, the provision of ‘Completed Feedback Forms’ too numerous and heavy to carry in a backpack or send via email, provision of an example of the conditional offers of employment, and advice to the Transferring Employees that an application would be made to the Commission to seek the Orders, I am satisfied that the Completed Feedback Forms and the acceptance of the conditional offers of employment, demonstrate the genuine views of those that completed them.
Subsections 318(3)(b) 319(3)(b): any disadvantage to the employees in relation of their terms and conditions of employment
[25]
The Act requires that the Commission take into account whether any employees would be disadvantaged by the order in relation to the employees’ terms and conditions of employment.[8]
Considerable material has been provided to the Commission analysing the differences between the Downer Agreement and the W Hub Agreement and other terms and conditions of employment that W Hub have offered. Whether any of the Transferring Employees would be disadvantaged overall if covered by the W Hub Agreement is a matter that must be taken into account.[9]
One of the primary considerations regarding disadvantage is, in my view, the pay rates that will be afforded to the Employees. The evidence before the Commission is that W Hub intends to offer roles on the same terms and conditions as other full time Fortescue employees – extending to Fortescue’s Staff Incentive Plan. This is notwithstanding the Downer Agreement being an enterprise agreement that details minimum terms and conditions – as does the W Hub Agreement.
However, in addition, the W Hub Agreement provides for several benefits unavailable under the Downer Agreement. Those benefits are not insubstantial, and include:
(a) up to 4 days of paid compassionate leave per occasion (above the entitlement in the National Employment Standards and the Downer Agreement);
(b) 13 weeks of long service leave after 10 years’ continuous service, 6.5 weeks for every 5 subsequent years and the ability to take pro-rata long service leave after 5 years continuous service (above the entitlement in the Long Service Leave Act 1958 (WA) and the Downer Agreement);
(c) superannuation at the rate of 11 % (above the statutory entitlement and the entitlement in the Downer Agreement of 10%); and
(d) an additional week of redundancy pay (above the entitlement in the National Employment Standards and the Downer Agreement).
In addition, the W Hub Agreement provides for increased notice periods when changing work location and in some circumstances, for changes to ordinary, rostered, or extra hours.
Having regard to the W Hub Agreement and the Downer Agreement, it is my view that there would not be a reduction in the entitlements of the Transferring Employees if the Orders were granted, and further I am unpersuaded that overall the Transferring Employees would be disadvantaged.
Subsections 318(3)(c) and 319(3)(c): the nominal expiry date of the enterprise agreement
The Downer Agreement has a nominal expiry date of 15 February 2021 in contrast to that of the W Hub Agreement which is 18 January 2025. W Hub submitted that given the Downer Agreement has passed its nominal expiry date and the W Hub Agreement is within its nominal term for just under another three years, the Orders would ensure a longer period of stability in conditions and operations for the Transferring Employees and W Hub.
Subsections 318(3)(d) and 319(3)(d): any negative impact on productivity in the workplace
These considerations have been broadly outlined in discussing the employer’s position under ss 318(3)(a)(i) and 319(3)(a)(i) above. However, Mr Simmons provided further detail on the negative impact on productivity.
Mr Simmons explained that there were approximately 8,909 Fortescue employees and of those, approximately 3,720 were covered by enterprise agreements.[10] Mr Simmons stated that the Transferring Employees represented approximately 2% of the total number of employees. However, if the Downer Agreement continued to cover the Transferring Employees, there would be several discrepancies between the terms and conditions of employment between employees working on the same mine site and the administration of the Transferring Employees and the W Hub employees.
W Hub submitted that if the orders were not granted, it would incur additional costs to outsource the payment of the Transferring Employees because the Fortescue payroll system could not accommodate payment on a fortnightly basis. It pressed that this would result in the duplication of W Hub and Fortescue resources, due to the necessity of having two separate payroll systems operating. Those systems would ultimately need to be reconciled, said W Hub, which would further add to the administrative burden.
W Hub noted that the implication of these administrative issues was, in short, administrative confusion, arising from the necessity of knowing whether a person was a Transferring Employee to determine whether to submit queries to W Hub or a Fortescue outsourced payroll provider.
Mr Simmons also had cause to comment on the significantly better benefits that W Hub employees would have in comparison to the Transferring Employees. These benefits included more long service leave, increased compassionate leave days and a higher superannuation rate.[11] It was Mr Simmons’ view that differences in terms and conditions of employment would likely lead to disharmony and reduced productivity in the workplace. This circumstance, understandably, ran contrary to what Mr Simmons said were the values of Fortescue and its approach to establishing inclusive workforces.
On any objective level affording employees who are performing the same work different terms and conditions of employment will inevitably give rise to discontent where one employee realises, she or he has been attributed with lesser fiscal value than other. It is not unforeseeable that the impact of this dynamic on productivity may likely be profound, and, in short, would be simply unfair.
Subsections 318(3)(e) and 319(3)(e): any significant economic disadvantage to W Hub.
W Hub submitted that it would suffer operational and administrative inefficiencies, and increased administrative costs, from having to administer the Downer Agreement in parallel with the W Hub Agreement. In this respect, it referred to its example concerning the issue with payroll systems.
The Commission has accepted that a new employer would suffer economic disadvantage because of being bound by a transferrable instrument in circumstances where there would be increased administrative costs and increased wage costs.[12] While W Hub did not quantify the costs it would incur from the Downer Agreement transferring, I am satisfied that its explanations regarding the administrative burden faced, are sufficiently persuasive to say it would experience economic disadvantage because of the imposition of the Downer Agreement.
However, it is not the case that economic disadvantage can be assessed as being significant in the absence of data to suggest as much. However, I consider that the administration of separate payroll for a small number of employees is counterintuitive to the object of running an enterprise efficiently, which is an ‘Object of this Part’.[13]
Subsections 318(3)(f) and 319(f): business synergy between the W Hub Agreement and the Downer Agreement
[42]
In respect to business synergy, W Hub relied on its submissions regarding the Transferring Employees constituting a small proportion of Fortescue’s total workforce and the necessity to establish and maintain a separate payroll system for a cohort that made up only 2% of the total Fortescue employee workforce.
I am further satisfied that there is little business synergy between the W Hub Agreement and the Downer Agreement, considering the additional benefits available under the former. Circumstances which would see the Transferring Employees undertaking the same work as their W Hub counterparts for less leave and superannuation benefits, would, in my view, result in marked disharmony within the workforce at the Eliwana site.
Subsections 318(3)(g) and 319(3)(g): the public interest
The public interest in this context is influenced by the objects of this Part of the Act in s 309 and those adopted by the Act more broadly.
There is public interest in ensuring that agreed and statutorily approved arrangements are not put aside lightly and where they are to no longer apply, the interests of the employees concerned are safeguarded[14]. The absence of an overall disadvantage in the terms and conditions of employment of the Transferring Employees, and the evident Transferring Employees’ support and lack of objection regarding the change, are important considerations.
W Hub has submitted that there is no guarantee that the Transferring Employees would continue to remain employed by MACA following the completion of the transition of mining services from an outsourced model to direct engagement with W Hub. According to W Hub, the making of the Orders would result in the Transferring Employees being able to maintain secure, permanent employment with W Hub. This is not an insignificant factor.
In circumstances where a substantial number of MACA employees (Transferring Employees) at the Eliwana site have expressed their interest in commencing employment with W Hub, it is, in my view, in the public interest for the Orders to be made. Particularly when, there are no other issues of public interest in this matter that have bearing regarding the Orders sought.
It is the case that the public interest in this matter is served by facilitating arrangements that permit and encourage the maintenance of employment for the Transferring Employees through the transfer of business process.
Conclusion and Orders
[35] Having regard to all the matters raised by ss 318 and 319 of the Act, I am satisfied that I should exercise my discretion to grant the application and to make the Orders sought.
[36] Orders[15] will be issued in conjunction with the decision and operate in accordance with ss 318(4) and 319(4) of the Act.
DEPUTY PRESIDENT
Matter determined on the papers
[1] [2017] FWCA 934; AE423350; PR590270.
[2] [2021] FWCA 232; AE510127; PR726245.
[3] Fair Work Act 2009 (Cth) s 312(1)(a) (the Act).
[4] Explanatory Memorandum Fair Work Bill 2008 [1259].
[5] Ibid.
[6] Statutory Declaration of Mr Blair Simmons, Annexures BS-1 to BS-18 (Simmons Statement).
[7] Ibid Annexures BS-1 to BS- 18..
[8] The Act (n 3) 318(3)(b).
[9] Ibid s 318(3)(b); Linfox Australia Pty Ltd [2013] FWC 3384, [19] (Linfox).
[10] Simmons Statement (n 6) [75].
[11] Ibid [77].
[12] Thiess Pty Ltd t/a Thiess [2015] FWC 595.
[13] The Act (n 3) s 309(b).
[14] Linfox (n 9) [29].
[15] PR741728.
Printed by authority of the Commonwealth Government Printer
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