1
Fair Work Act 2009
s.604—Appeal of decisions
Zancott Recruitment Pty Ltd
(C2013/7387)
SENIOR DEPUTY PRESIDENT ACTON
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER JOHNS MELBOURNE, 21 JANUARY 2014
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 decision1 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.
[2014] FWCFB 351
DECISION
E AUSTRALIA FairWork Commission
[2014] FWCFB 351
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[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).
[2014] FWCFB 351
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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;
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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;
[2014] FWCFB 351
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(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
[2014] FWCFB 351
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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
[2014] FWCFB 351
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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.
[2014] FWCFB 351
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[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:
[2014] FWCFB 351
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“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.
[2014] FWCFB 351
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(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 order4 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.
Endnotes:
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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