Zancott Recruitment Pty Ltd
[2014] FWCFB 351
•21 JANUARY 2014
[2014] FWCFB 351 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604—Appeal of decisions
(C2013/7387)
SENIOR DEPUTY PRESIDENT ACTON |
|
Appeal against decision [[2013] FWC 8865] and order [PR544420] of Deputy President Bartel at Adelaide on 11 November 2013 in matter number AG2013/10912.
Introduction
[1] Zancott Recruitment Pty Ltd (Zancott) has lodged an appeal against a decision 1 and order2 of Deputy President Bartel of 11 November 2013.
[2] Her Honour’s decision concerned an application by Zancott for an order pursuant to s.319(1)(b) of the Fair Work Act 2009 (Cth) (FW Act). Her Honour issued the following order:
“Pursuant to section 319 of the Fair Work Act 2009, the Fair Work Commission Orders that the Mondello Farms 2008 Production Employees Collective Agreement (the collective agreement) will cover the Applicant, Zancott Recruitment Pty Ltd and any non-transferring employee of the Applicant as defined within Part 2-8 of the Fair Work Act 2009.
[1] In accordance with section 319(4), this Order will come into operation on the later of the following:
a) The time when any non-transferring employee starts to perform the transferring work for the new employer;
b) The day on which the order is made.
[2] This order will lapse and cease to have [sic] on 1 May 2014.”
[3] Zancott submits on appeal that the order is beyond jurisdiction, Zancott was denied natural justice in the making of the order, and her Honour erred in the exercise of her discretion to make the order.
[4] We turn to set out the relevant law, her Honour’s decision and order and the appeal submissions and, then, to consider those submissions.
Relevant law
[5] Section 319 of the FW Act is contained in Part 2-8 of the FW Act. Part 2-8 deals with the Transfer of Business. The Guide to Part 2-8 states at s.307 of the FW Act that:
“307 Guide to this Part
This Part provides for the transfer of enterprise agreements, certain modern awards and certain other instruments if there is a transfer of business from one national system employer to another national system employer. (For a transfer of business from a non-national system employer that is a State public sector employer to a national system employer, see Part 6-3A.)
Division 2 describes when a transfer of business occurs and defines the following key concepts: old employer, new employer, transferring work, transferring employee and transferable instrument.
Division 2 also sets out the circumstances in which enterprise agreements, certain modern awards and certain other instruments that covered the old employer and the transferring employees (including high income employees) cover the new employer, the transferring employees and certain non-transferring employees and organisations.
Division 3 provides for the FWC to make orders in relation to a transfer of business.”
[6] Section 310 in Division 2 of Part 2-8 of the FW Act states that “[t]his Division provides for the transfer of rights and obligations under enterprise agreements, certain modern awards and certain other instruments if there is a transfer of business from an old employer to a new employer.”
[7] Sections 311(1) and (2) of the FW Act set out the meaning of transfer of business, old employer, new employee, transferring work and transferring employee as follows:
“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.”
[8] Section 312 defines a “transferable instrument” as including “an enterprise agreement that has been approved by the FWC”.
[9] Item 8 of Schedule 11 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (TPCA Act) operates to make the Mondello Farms 2008 Production Employees Collective Agreement a “transferable instrument”.
[10] Section 313 of the FW Act provides for transferring employees and the new employer to be covered by a transferable instrument as follows:
“313 Transferring employees and new employer covered by transferable instrument
(1) If a transferable instrument covered the old employer and a transferring employee immediately before the termination of the transferring employee’s employment with the old employer, then:
(a) the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time (the transfer time) the transferring employee becomes employed by the new employer; and
(b) while the transferable instrument covers the new employer and the transferring employee in relation to the transferring work, no other enterprise agreement or named employer award that covers the new employer at the transfer time covers the transferring employee in relation to that work…
(3) This section has effect subject to any FWC order under subsection 318(1).”
[11] Section 314 of the FW Act provides that new non-transferring employees of the new employer may be covered by a transferable instrument 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 FWC order under subsection 319(1).”
[12] Section 317 in Division 3 of Part 2-8 of the FW Act states that “[t]his Division provides for the FWC to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.”
[13] Section 319 in Division 3 of Part 2-8 of the FW Act states as follows:
“319 Orders relating to instruments covering new employer and non-transferring employees
Orders that the FWC may make
(1) The FWC 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) The FWC 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 the FWC must take into account
(3) In deciding whether to make the order, the FWC 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.”
Decision at first instance
[14] In her decision, her Honour points out relevant background to the application for a s.319(1)(b) order made by Zancott. Her Honour points out:
“[2] Mondello Farms Pty Ltd (Mondello) operated a vegetable processing business. It entered into the Mondello Farms 2008 Production Employees Collective Agreement (the collective agreement) with its employees. The collective agreement was made under the Workplace Relations Act 1996, as amended, and approved by the then Workplace Authority on 23 April 2009. It had a term of 5 years expiring on 30 April 2014.
[3] Mondello subsequently went into receivership and an administrator was appointed. On 30 August 2013, Rural Harvest Farms Pty Ltd (Rural) acquired the business of Mondello and the employees of Mondello transferred to Rural in accordance with the Act. Rural now proposes to outsource the work performed by its employees to Zancott in order to save on recruitment and human resource management costs. If the outsourcing takes place, the employment of Rural employees who are covered by the collective agreement will be terminated and they will then be employed by Zancott (the transferring employees).
[4] Zancott seeks an order pursuant to s.319(b) of the Act that the collective agreement will cover non-transferring employees who perform the transferring work for Zancott.” [Footnote omitted]
[15] Her Honour also indicates she is satisfied the nature of the arrangements between Zancott and Rural Harvest Farms Pty Ltd constitute a transfer of business within the meaning of the FW Act.
[16] Her Honour then considers s.314 of the FW Act stating the following:
“[8] Section 314 of the Act sets out the circumstances in which a transferable instrument (in this case the collective agreement) may cover new non-transferring employees, that is, employees who are engaged after the transfer of business and who perform the transferring work. However the section applies in circumstances where no modern award covers the new employer in relation to the transferring work. In this case, at the time Zancott engages a new non-transferring employee, it will be covered by the Storage Services and Wholesale Award 2010 (the modern award) in respect to the transferring work. In addition, s.314 is not directed to the situation of current employees of Zancott who may in the future perform the transferring work.” [Footnotes omitted]
[17] In considering the matters in s.319(3) of the FW Act, her Honour says:
“[14] I have set out above the views of the transferring employees and of Zancott. Section 319(3)(a)(ii) of the Act requires the Fair Work Commission (the FWC) to have regard to the views of “the employees who would be affected by the order”. By definition new non-transferring employees are yet to be employed. I understand that there is no intention at this stage to engage existing employees of Zancott in the transferring work, although Zancott wishes to have this option available if circumstances change.
[15] Section 319(3)(b) requires the FWC to consider whether any employee would be disadvantaged in the terms and conditions of employment by the making of the order. Existing Zancott employees engaged the construction and related industries, who may in the future be engaged on the transferring work, currently receive more favourable wages and conditions than those provided by the collective agreement. The potential significance of this circumstance in relation to the terms and conditions of employment that such employees will receive if engaged on the transferring work depends on the nature of the contractual arrangement they currently have with Zancott. Given the limited likelihood that existing employees will be engaged on the transferring work, this matter is of less weight than the situation of new non-transferring employees.
[16] New non-transferring employees would receive the terms and conditions of the modern award in the absence of any order under s.319(1), and I conclude they would be disadvantaged if they were to receive the terms and conditions of the collective agreement. The collective agreement has a provision for voluntary additional hours at ordinary rates, lower penalty payments for public holidays, lower shift penalties, a lower casual loading and lower meal and first aid allowances than the modern award. There are no terms and conditions in the collective agreement that are more beneficial than the terms and conditions of the modern award. The extent of the disparity between the respective instruments is a significant matter weighing against the granting of the application.
[17] The nominal expiry date of the collective agreement is 30 April 2014 and as such is likely to be within its nominal life if the outsourcing of the employees were to proceed. This would tend to favour the making of the order. In view of the submissions put in support of the application I have a concern that there is little incentive for Zancott to renegotiate the agreement on or before its expiry, however I acknowledge that the employees have a say in this matter and that economic circumstances in the vegetable processing industry may change.
[18] Sections 319(3)(d) and (c) require a consideration of the impact of any order on the new employer’s productivity and economic position. In this case there is no suggestion of any negative impact on Zancott and accordingly this favours the making of the order sought.
[19] The FWC is required to take into account the degree of business synergy between the transferable instrument and any existing workplace instrument that already covers the new employer. The only existing workplace instrument is the collective agreement applicable to the employees working in the construction and related industries. Given the different nature of this work compared to the transferring work, it is my view that issues of business synergy do not assume any importance in this matter. The modern award is not “a workplace instrument that already covers the new employer” and is therefore not relevant to the consideration of ss.319(3)(f) of the Act.
[20] The final matter to be taken into account under s.319(3) [of] the Act is the public interest…
[22] Zancott have submitted that its interests and those of the transferring employees are tied to the interests of Rural, and that Rural’s interests are served by making the order sought. I presume that Zancott’s business interests are served by obtaining a new contract with Rural but there was no information put on which I can reach a view on how the order would promote the efficiency of Zancott’s business.
[23] The protection of employee’s terms and conditions of employment is reinforced in the objects of the Act and the modern awards objective that deal with the provision of a fair and relevant minimum safety net of modern awards and National Employment Standards. The order sought will effectively deprive new non-transferring employees of access to the modern award terms and conditions in favour of an inferior collective agreement for as long as the collective agreement remains in place.” [Footnotes omitted]
[18] Her Honour concludes as follows:
“[24] I have taken into account the submission that the transferring employees would be concerned if, having worked through the difficult period with Mondello and Rural, they receive less beneficial terms and conditions than non-transferring employees. However, in my view the public interest consideration that arises are the disparate terms and conditions of employment among employees performing the same work for the same employer and the potential for divisions to occur within the workforce. This consideration has to be balanced with the provisions of Part 2-8 of the Act, which contemplate that such a circumstance may be appropriate and the relevant objects of the Act concerning a fair safety net as set out above.
[25] On weighing the relevant matters in s.319(3) I have determined that an equitable outcome is to make the order as sought, but that it will lapse on the nominal expiry date of the collective agreement. Assuming the outsourcing proceeds, this will give the parties the opportunity to consider a new agreement that will deliver consistency across transferring and non-transferring employees and will ensure that any prejudice to non-transferring employees by the making of the order, is for a limited time only.
[26] An order giving effect to my determination is issued with this decision.”
Appeal submissions
[19] Zancott submits on appeal that in providing for her order to lapse and cease on 1 May 2014, her Honour exceeded her jurisdiction.
[20] We are satisfied that her Honour did not have jurisdiction to place such a time limit on her order. We have come to this view for the following reasons.
[21] The nature of the order that may be made under s.319(1)(b) of the FW Act is set out in s.319(1)(b). Section 319(4) restricts when an order may come into operation. There is no provision in s.319, Part 2-8 or elsewhere in the FW Act providing for the FWC to order when a s.319(1)(b) order will cease to operate. The cessation provision in her Honour’s order is not “necessary” for, “incidental” to or “consequential” upon the exercise of the power granted by the FW Act. 3
[22] Further, s.603 in Part 5-1 of the FW Act concerns the variation and revoking of Fair Work Commission (FWC) decisions. Section 603 provides as follows:
“603 Varying and revoking the FWC’s decisions
(1) The FWC may vary or revoke a decision of the FWC that is made under this Act (other than a decision referred to in subsection (3)).
Note: If the FWC makes a decision to make an instrument, the FWC may vary or revoke the instrument under this subsection (see subsection 598(2))…
(3) The FWC must not vary or revoke any of the following decisions of the FWC under this section:
(a) a decision under Part 2-3 (which deals with modern awards);
(b) a decision under section 235 or Division 4, 7, 9 or 10 of Part 2-4 (which deal with enterprise agreements);
(c) a decision under Part 2-5 (which deals with workplace determinations);
(d) a decision under Part 2-6 (which deals with minimum wages);
(e) a decision under Division 3 of Part 2-8 (which deals with transfer of business);
(f) a decision under Division 8 of Part 3-3 (which deals with protected action ballots);
(g) a decision under section 472 (which deals with partial work bans);
(h) a decision that is prescribed by the regulations.
Note: The FWC can vary or revoke decisions, and instruments made by decisions, under other provisions of this Act (see, for example, sections 447 and 448).” [Underlining added]
[23] Section 598 in Part 5-1 of the FW Act provides in respect of FWC decisions as follows:
“598 Decisions of the FWC
(1) A reference in this Part to a decision of the FWC includes any decision of the FWC however ddescribed. However, to avoid doubt, a reference to a decision of the FWC does not include an outcome of a process carried out in accordance with subsection 595(2) (which deals with the FWC’s power to deal with disputes).
Note: Examples of decisions that the FWC makes include making modern awards, approving or refusing to approve enterprise agreements, decisions as to how, when and where a matter is to be dealt with, deciding whether to grant permission to hear an appeal, and decisions in relation to appeals.
(2) If the FWC makes a decision that makes or varies an instrument, a reference in this Part to a decision of the FWC includes the FWC’s decision to make or vary the instrument in the particular terms decided.
(3) A decision of the FWC that is described as an order must be made by order.
Note: An example of a decision that is described as an order is a bargaining order.
(4) A decision of the FWC that is not described as an order may be made by order.”
[24] The cessation provision in her Honour’s order is tantamount to a revocation or variation of the order, albeit a delayed revocation or variation.
Conclusion
[25]
For the foregoing reasons we are satisfied that in making the order the subject of this appeal, her Honour exceeded her jurisdiction. We are therefore satisfied we should grant permission to appeal. We do so. Since the order made by her Honour is beyond jurisdiction, we also quash the order 4 and decision5 leading to it. We remit the application by Zancott for a s.319(1)(b) order to Commissioner Johns to determine. An order to that effect is being issued at the same time as this decision.6
SENIOR DEPUTY PRESIDENT
Appearances:
T. Earls for Zancott Recruitment Pty Ltd.
Hearing details:
2014.
Melbourne and Adelaide (video hearing):
January 15.
1 Zancott Recruitment Pty Ltd, [2013] FWC 8865.
2 Zancott Recruitment Pty Ltd, PR544420.
3 Transport Workers’ Union of New South Wales v Australian Industrial Relations Commission, (2008) 171 IR 84 at [37].
4 Zancott Recruitment Pty Ltd, PR544420.
5 Zancott Recruitment Pty Ltd, [2013] FWC 8865.
6 PR546812.
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