Yumaro Limited
[2024] FWCA 2824
•2 AUGUST 2024
| [2024] FWCA 2824 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Yumaro Limited
(AG2024/2003)
YUMARO INCORPORATED ENTERPRISE AGREEMENT 2016
| Textile industry | |
| COMMISSIONER MATHESON | SYDNEY, 2 AUGUST 2024 |
Application for termination of the Yumaro Incorporated Enterprise Agreement 2016 – agreement terminated.
Yumaro Limited (Applicant) has filed an application (Application) pursuant to s.225 of the Fair Work Act 2009 (Cth) (Act) to terminate the Yumaro Incorporated Enterprise Agreement 2016 (Agreement). A Form F24C – Declaration in relation to termination of an enterprise agreement after the nominal expiry date (Form F24C) was filed in support of the Application.
The Agreement is a single enterprise agreement. It was approved by Commissioner Roe on 12 January 2017.[1]
The nominal expiry date of the Agreement is 30 August 2019.
Legislation
The relevant provisions of the Act are as follows:
“225 Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
226 When the FWC must terminate an enterprise agreement
(1) 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 the continued operation of the agreement would be unfair for the employees covered by the agreement; or
(b)the FWC is satisfied that the agreement does not, and is not likely to, cover any employees; or
(c)all of the following apply:
(i)the FWC is satisfied that the continued operation of the enterprise agreement would pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the agreement;
(ii)the FWC is satisfied that the termination of the enterprise agreement would be likely to reduce the potential of terminations of employment covered by subsection (2) for the employees covered by the agreement;
(iii)the agreement contains terms providing entitlements relating to the termination of employees’ employment – each employer covered by the agreement has given the FWC a guarantee of termination entitlements in relation to the termination of the agreement.
(1A)However, the FWC must terminate the enterprise agreement under subsection (1) only if the FWC is satisfied that it is appropriate in all the circumstances to do so.
…
(3) In deciding whether to terminate the agreement, the FWC must consider the views of the following covered by the agreement:
(a) the employees (unless there are no employees covered by the agreement);
(b) each employer;
(c) each employee organisation (if any).
…
(4) In deciding whether to terminate the agreement (the existing agreement), the FWC must have regard to:
(a) whether the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees as the existing agreement; and
(b) whether bargaining for the proposed enterprise agreement is occurring; and
(c) whether the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.
(5) In deciding whether to terminate the agreement, the FWC may also have regard to any other relevant matter.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”
Consideration – s.225
Is the Applicant an employer covered by the Agreement?
Having considered the materials before me, I am satisfied that the Application was made by an employer covered by the Agreement and that the Applicant has standing to make the Application.
Has the Agreement passed its nominal expiry date?
Clause 5A of the Agreement provides that the Agreement has a nominal expiry date of 30 August 2019. Having considered the materials before the Commission and clause 5A of the Agreement, I am satisfied the Agreement has passed its nominal expiry date.
Consideration – s.226(3) – views of employees, each employer and each employee organisation covered by the agreement
Section 226(3) of the Act provides that in deciding whether to terminate the Agreement, the Commission must consider the views of the following covered by the Agreement:
(a)the employees (unless there are no employees covered by the Agreement);
(b)each employer;
(c)each employee organisation (if any).
The Commission set out directions requiring that the Applicant send a copy of an email drafted by the Commission to employees, employee organisations and other employers covered by the Agreement together with the application and documents relevant to the application. The email drafted by the Commission explained the considerations the Commission needs to have regard to in deciding whether to terminate the Agreement and invited views of those covered by the Agreement, including employees, employers and employee organisations. The Applicant provided a Statutory Declaration to the Commission confirming compliance with the directions.
No objections were raised in relation to the application.
Consideration – s.226(4) – bargaining related matters
Section 226(4) of the Act requires that in deciding whether to terminate the Agreement the Commission must have regard to:
(a)whether the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees as the existing agreement; and
(b)whether bargaining for the proposed agreement is occurring; and
(c)whether the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.
It is declared in the Form F24C filed with the application that a process of making a proposed new enterprise agreement had not commenced and I am satisfied that none of the circumstances described in s.226(4) are present in relation to the current application.
Consideration – s.226(1)
Section 226(1) of the Act sets out three grounds upon which an Agreement may be terminated after its nominal expiry date. As there are employees covered by the Agreement, the Applicant does not seek to rely on s.226(1)(b) as the grounds for the termination of the Agreement. Rather, the Applicant seeks to rely on the grounds set out in ss.226(1)(a) and 226(1)(c).
Section 226(1)(a) – is the continued operation of the agreement unfair for the employees covered by it
In Annexure A to the Form F24C, the Applicant provides some background to its submissions that the continued operation of the Agreement would be unfair for the employees covered by it.
The Applicant is a registered charity and National Disability Insurance Scheme (NDIS) provider based in Moruya, New South Wales, and employs 203 employees, including 93 employees with a disability and who undertake supported employment.
The Agreement adopts the ‘Yumaro Wage Assessment Tool’ (Yumaro Tool) which has been utilised by the Applicant to determine wages for supported employees during the life of the Agreement. The Applicant submits that there have been significant developments in relation to the methodologies for setting wages for supported employees including:
- the decision in Nojin v Commonwealth and Another [2012] FWCFC 192 (Nojin) in which the Full Federal Court determined (by majority) that two employers had unlawfully discriminated against employees in breach of section 15 of the Disability Discrimination Act 1992 (Cth) through use of the ‘Business Services Wage Assessment Tool’ (BSWAT);
- changes to the Supported Employment Services Award 2020 (SES Award) to remove wage assessment tools, including the Yumaro Tool and include a new wage setting methodology for supported employees which came into effect from 30 June 2023.
The Applicant submits that in light of these developments, it is apparent that from 30 June 2023, the wage setting methodology set out in the Agreement is outdated, potentially unlawful and inconsistent with the findings reached by the Commission following its consideration of wage assessment tools.
The Applicant referred to the following observations made by the Commission about competency-based assessment tools during the 4 yearly review of modern awards:
“[314]…The Nojin litigation demonstrates that the work value element of the wage assessment of a disabled employee in an ADE environment should not proceed on the basis of notional core or industry competencies which have no substantive relationship to the classification descriptors for minimum pay rates in the applicable award or to the work actually performed by the employee. An assessment carried out on this basis will be likely to be inherently disadvantageous to and thereby discriminatory towards intellectually disabled employees.”[2]
The Applicant submitted that given these findings and the outcome of the award review proceedings more broadly, the ongoing use of the Yumaro Tool as a tool for determining wages for supported employees would likely be unfair to employees for a range of reasons including:
- The Yumaro Tool is now no longer an approved wage assessment tool (as at 30 June 2023), and accordingly the Yumaro Tool is now inconsistent with the wage setting methodology set out in the SES Award.
- The efficacy of the Yumaro Tool as a wage setting tool has not been endorsed by the Commission (and has arguably been dis-endorsed). In particular, the potential for inconsistent or unfair wage outcomes has been specifically raised by the Commission.
- The Yumaro Tool (among other wage assessment tools) have been found not to meet the modern awards objective and were removed from the Award as at 30 June 2023.
- Given the above, any ongoing use of wage assessment tools, such as the Yumaro Tool, may lead to claims that the tools operate unfairly to employees (or certain classes of employees) due to potentially inconsistent or unfair wage outcomes.
- Any ongoing use of wage assessment tools, such as the Yumaro Tool, may lead to potential litigation (similar to the Nojin litigation) or arguments that the operation of the Yumaro Tool is unlawfully discriminatory against employees.
The Applicant submitted that if the Agreement was to continue to apply, it would, by reason of clauses 5.2, 12.1, 12.2 and 12.3 of the Agreement, be obliged to apply the Yumaro Tool as the Agreement does not allow it to utilise a different wage setting methodology.
The Applicant also submitted that the ongoing operation of the Agreement would be unfair to employees due to the operation of s.206 of the Act. Section 206 of the Act has the effect that if an enterprise agreement applies to an employee and a modern award covers the employee, an employee’s base rate of pay under the agreement must not be less than the base rate of pay that would be payable under the modern award if it applied to them.
The Applicant submitted that in order to ensure rates determined under the Agreement do not offend s.206 it would have to apply both the Yumaro Tool and the new SES Award structure to each supported employee. The Applicant submitted that in addition to being an unduly burdensome process, employees would be subjected to two different assessment processes, which are often stressful and confusing for supported employees, and the requirement for multiple assessments would create a further level of unfairness.
If the Agreement is terminated, the SES Award will apply to supported employees. The Applicant submitted that the transition from the Agreement to the SES Award will not and cannot result in any supported employee’s wage rate being reduced due to transitional arrangements in the SES Award that will come into effect from 30 June 2023 and in particular the following provision:
“H.1 No reduction in hourly wage rate
An employer shall not reduce the hourly wage of any employee employed as at 1 January 2023 by reason of their:
H.1.1 classification or reclassification into Grade A or B; or
H.1.2 initial SWS assessment in the period from 30 June 2023 to 30 June 2026”.
The Applicant submitted that the above provisions operate to prevent supported employees from having their wages reduced as a result of the implementation of the new SES Award wages structure.
Additionally, the Applicant has provided an undertaking which states:
“2.In the event that the Agreement is terminated, Yumaro undertakes that employees’ existing hourly rates of pay will be maintained and no employee’s hourly rate of pay will be reduced as a result of the Agreement terminating.”
The Applicant has also provided undertakings to preserve the redundancy entitlements at clause 15.3 which are superior to the entitlements in the SES Award. In respect of existing employees who are covered by the Agreement as at the date of termination of the Agreement and for a period of four years from the date of the Agreement’s termination, the Applicant has provided an undertaking that where a dispute cannot be resolved in accordance with clauses 30.2 and 30.3 of the SES Award, pursuant to clause 30.5 of the SES Award, it will consent to the Commission dealing with the dispute by way of arbitration where the matter is not resolved by way of mediation and/or conciliation.
I have considered the Applicant’s submissions and am satisfied that:
(a)the wage assessment tool prescribed by the Agreement is inconsistent with the wage setting methodology set out in the SES Award from 30 June 2023;
(b)taking into account the observations made by the Commission about competency-based assessment tools during the 4 yearly review of modern awards, the application of the Yumaro Tool as a wage setting tool has the potential for inconsistent, unfair and disadvantageous wage outcomes for employees;
(c)the application of multiple assessment processes under the Agreement and SES Award in order to meet obligations under s.206 of the Act may give rise to confusion for employees undergoing such assessment.
I am also satisfied that the Applicant’s undertakings will operate to largely preserve above award entitlements in the Agreement and ensure a supported employee’s hourly rate of pay will not be reduced as a result of the Agreement terminating.
In the circumstances of this matter and having regard to the context described above, I am satisfied that the continued operation of the Agreement would be unfair for employees covered by it.
Section 226(1)(c)
It is not necessary for the Commission to be satisfied that more than one of the grounds set out in s.226(1) of the Act have been met in assessing a termination application made under s.225. However, the Applicant has sought to rely on the grounds in both ss.226(1)(a) and (c) of the Act and for completeness I have addressed the s.226(1)(c) considerations below.
Section 226(1)(c)(i) - Would the continued operation of the Agreement pose a significant threat to the viability of a business carried on by the employer, or employers, covered by the Agreement?
The Applicant submitted that:
it is a medium sized not-for-profit, mission-based enterprise;
it does not have the financial or other resources to apply two separate wage setting methodologies for supported employees which would be required from 30 June 2023 if the Agreement remains in operation;
this requirement would result in the Applicant incurring additional expenses and administrative burden;
it may be exposed to potential litigation or claims that the Agreement unlawfully discriminates against certain employees and it does not have the resources to defend any such litigation;
there is a risk that any such litigation would lead to the Applicant needing to re-evaluate the operation of its supported employment services, leading to the potential loss of a significant number of employees with a disability.
The practical requirement to administer two wage setting methodologies will give rise to additional cost and administrative burden. However more fundamentally, I am satisfied that continued application of the Yumaro Tool would expose the Applicant to the risk of litigation, particularly considering the findings in Nojin, that the Yumaro Tool is a significant feature of the Agreement and may otherwise be applied to a significant number of employees covered by the Agreement who are employees with a disability and who undertake supported employment. Given the nature of the Applicant’s organisation being a not-for-profit, mission-based organisation with resource limitations, I am satisfied that the risk of litigation is a real one and were it to occur it may give rise to significant negative ramifications for the Applicant, including a potential need to re-evaluate the ongoing operation of Yumaro Enterprises. In the circumstances of this matter, I am satisfied that the continued operation of the Agreement would pose a significant threat to the viability of a business carried on by the employer covered by the Agreement.
Section 226(1)(c)(ii) - Would the termination of the Agreement be likely to reduce the potential of terminations of employment covered by subsection 226(2) for the employees covered by the Agreement?
The Applicant submitted that, in the context of its submissions about the continuation of the Agreement posing a significant threat to the viability of a business carried on by the employer as summarised above, termination of the Agreement would reduce the potential of job losses. This is because it would remove the obligation on the Applicant to apply the Yumaro Tool as the applicable wage assessment tool for supported employees and would require the Applicant to instead apply the new SES Award wage structure.
I have earlier found that I am satisfied that the risk of litigation is a real one and were it to occur it may give rise to significant negative ramifications for the Applicant, including a potential need to re-evaluate Yumaro Enterprises. This raises the potential for the termination of employees undertaking the work for the Applicant, a significant number of whom are employees with a disability, who undertake supported employment and to whom the Yumaro Tool would apply. In the circumstances of this matter, I am satisfied that the termination of the Agreement is likely to reduce the potential of terminations of employment of the nature described in s.226(2)(a) of the Act.
Section 226(1)(c)(iii) - If the Agreement contains terms providing entitlements relating to the termination of employees’ employment, has each employer covered by the Agreement given the Commission a guarantee of termination entitlements?
The Agreement contains terms providing entitlements relating to the termination of employees’ employment.
Section 226A(1) sets out the description below in relation to a ‘guarantee of termination entitlements’.
“Guarantee of termination entitlements
(1) A guarantee of termination entitlements is an undertaking given by an employer covered by an enterprise agreement that:
(a)is an undertaking that the employer will comply with subsection (3) if the agreement is terminated under section 226 and the employer terminates the employment of a protected employee for the termination of the agreement:
(i) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the insolvency or bankruptcy of the employer; and
(b)is in writing; and
(c)meets any requirements relating to the signing of undertakings that are prescribed by the regulations.”
Section 226A(3) provides that for the purposes of paragraph (1)(a) (as set out above), the employer complies with this subsection, in relation to the termination of the protected employee’s employment, if the employer complies with the terms of the enterprise agreement that, if the agreement were still in operation, would have provided the employee with entitlements that:
(a)relate to a termination of the employee’s employment:
(i) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the insolvency or bankruptcy of the employer; and
(b)except if the employee was an award/agreement free employee immediately before the termination of the employee’s employment—are more beneficial than the entitlements under a modern award that covered the employee in relation to the employment at that time.
Section 226A(2) provides that a ‘protected employee’ for a termination of an enterprise agreement under s.226 is an employee who would, but for the termination of the agreement, be covered by the agreement.
The Agreement sets out termination entitlements at clause 15. This includes severance pay in clause 15.3 of the Agreement and the Applicant has provided an undertaking in accordance with s.226A that these provisions will continue to be provided to existing employees who are covered by the Agreement as at the date of termination of the Agreement.
Section 226(5) – other relevant matters
I have earlier found the risk of litigation arising from the continued application of the Yumaro Tool prescribed by the Agreement is a real one that may give rise to a need to re-evaluate the Applicant’s Australian Disability Enterprise. I have also found this raises the potential for termination of employees, a significant number of which are employees with a disability and who undertake supported employment. The consequence of termination of employment for these employees may have a particularly acute impact on them and this weighs in favour of termination of the Agreement.
Section 226(1A) – Appropriateness
Section 226(1A) provides that the Commission must terminate the enterprise agreement under subsection 226(1) only if the Commission is satisfied that it is appropriate in all the circumstances to do so. The application is not opposed, at least one of the grounds in s.226(1) has been met, there are no bargaining related concerns impacting the application and the Applicant has provided undertakings that largely preserve any above award entitlements. A copy of the undertakings is attached at Annexure A of this decision.
Conclusion
Having regard to the requirements of s.226 of the Act and based on the material before the Commission, I am satisfied that the continued operation of the Agreement would be unfair for the employees covered by it and that it is appropriate to terminate the Agreement having regard to all the circumstances.
Pursuant to s.226 of the Act, the Agreement is terminated. In accordance with s.227 of the Act, the termination of the Agreement shall operate from 2 August 2024.
An order to this effect has been issued concurrently with this decision.
COMMISSIONER
Annexure A
[1] [[2017] FWCA 239]
[2] [2019] FWCFB 8179 at [319]-[330].
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