1
Fair Work Act 2009
s.225—Enterprise agreement
David Smart
(AG2014/1116)
POPE NITSCHKE FIRST NATIONAL EMPLOYEE COLLECTIVE
AGREEMENT
Real estate industry
COMMISSIONER HAMPTON ADELAIDE, 8 SEPTEMBER 2014
Application for termination of a preserved Collective Agreement after its nominal expiry date
- whether contrary to the public interest - whether appropriate in all of the circumstances -
agreement made under earlier legislative scheme - significant elements now subject to direct
impact of new minimum standards - enterprise agreement negotiations underway - whether
appropriate to alter the basis whilst that process is continuing - existing agreement
problematic and basis for bargaining not clear - potential impact of termination upon all
parties considered - statutory considerations applied - appropriate to terminate agreement
but with some time to deal with the consequences - determination made.
1. The application
[1] This decision concerns an application by Mr David Smart pursuant to Item 16 of
Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act
2009 (the Transitional Act), and as a consequence, s.225 of the Fair Work Act 2009 (the FW
Act). The application seeks to terminate the Pope Nitschke First National Employee
Collective Agreement1 (the Collective Agreement).
[2] The Collective Agreement is a collective agreement-based transitional instrument for
the purposes of the Transitional Act2 with a nominal expiry date of 12 February 2013.3
[3] The parties are covered by the terms of the Real Estate Industry Award 2010 (the
modern award) although it does not presently apply to them due to the continued operation of
the Collective Agreement.4
[4] The application is opposed by the employer party to the Collective Agreement, Pope
Nitschke Pty Ltd (Pope Nitschke).
[2014] FWCA 4876
DECISION
E AUSTRALIA FairWork Commission
[2014] FWCA 4876
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2. The relevant legislation
[5] Item 16 of Schedule 3 of the Transitional Act provides:
“16 Collective agreement-based transitional instruments: termination by FWC
(1) Subdivision D of Division 7 of Part 2-4 of the FW Act (which deals with
termination of enterprise agreements after their nominal expiry date) applies in
relation to a collective agreement-based transitional instrument as if a
reference to an enterprise agreement included a reference to a collective
agreement-based transitional instrument.
(2) For the purpose of the application of Subdivision D to an old IR agreement, the
agreement’s nominal expiry date is taken to be the end of the period of the
agreement.”
[6] Subdivision D of Division 7 of Part 2-4 of the FW Act provides:
“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
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.
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.”
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[7] Mr Smart is an employee who is presently covered by the Collective Agreement,
which has passed its nominal expiry date. The application is validly before the Commission
and I must therefore consider whether the circumstances are such that it would not be contrary
to the public interest to terminate the Collective Agreement, and whether it would be
appropriate to adopt that course of action.
3. The basis of the application
[8] Mr Smart brings this application with the apparent support of 11 of his colleagues.
They were represented in this matter, with permission, by Mr Knox, who is also their
bargaining agent.
[9] Mr Smart contends that the Collective Agreement should be terminated given the
uncertainties arising from the instrument and what he describes as a number of capricious
terms. Amongst other matters, he relies upon the following contentions regarding the
Collective Agreement:
It is misleading in that it contains terms that are modified by the Act and the
National Employment Standards (NES) however that is not clear to the employees
and no clarification has been given to them by the employer;
It contains no actual wage rates;
The employer has not been acting consistently with the terms of the Collective
Agreement in that some employees have not been given written letters of
appointment and/or agreements for commission-only arrangements when these
were required; and
The Long Service Leave (LSL) provisions are contrary to the State LSL Act that
forms part of the NES.
[10] Mr Smart also contends that the employer would not be disadvantaged by the
termination of the Collective Agreement and the application of the modern award that would
follow in that event. That is, the modern award minimum rates and the NES already in effect
apply to the parties. Rather, he suggested, Pope Nitschke was attempting to cling onto an
outdated “credit and debit” system for calculating commissions.
[11] The Collective Agreement was said to undermine the policy and scheme of the Act
and Mr Smart contends that a move to the modern award as the basis for the future would
provide both fairness and certainty for all parties.
[12] He also contends that the termination of the Collective Agreement had the support of a
significant number of the employees and that their views should be given considerable
weight.
[13] Mr Smart seeks that the termination of the Collective Agreement take effect
immediately on the basis that certainty is required. He also contends that the immediate
termination should be made, given the prospect that the employer would send employees on
LSL ahead of any termination taking effect.5
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[14] Mr Smart provided a statutory declaration with the application and gave evidence in
the proceedings. He also relied upon the evidence of Ms Sharon Parsons, an employee who is
also covered by the Collective Agreement and supportive of the termination application.
4. The position of Pope Nitschke
[15] Pope Nitschke was represented, with permission, by Mr Kidman. It opposes the
application on a number of grounds relating to both public interest considerations and whether
the termination of the Collective Agreement would be appropriate having regard to the
statutory criteria.
[16] In terms of the public interest, Pope Nitschke contends that:
Bargaining for a replacement agreement is underway and it would not be
appropriate to terminate the existing instrument whilst negotiations were being
conducted;
This application was made without notice to the employer and at an early stage of
the bargaining process and that action was not consistent with the good faith
bargaining provisions6 of the FW Act;
There is a reasonable prospect that an Enterprise Agreement will be negotiated
between the parties; and
The application has proceeded on a false understanding as to the operation of the
Collective Agreement and the modern award in the context of the FW Act.
[17] In relation to the considerations established by s.226(b) of the FW Act, Pope Nitschke
contends that whilst the application has the apparent support of Mr Smart and a number of
employees, the evidence as to the basis of that position was unsatisfactory and did not provide
a basis to conclude that an informed decision had been made.
[18] Further, the employer opposed the application because in its view the termination of
the Collective Agreement would lead to considerable and unreasonable uncertainty. That is,
the existing remuneration arrangements were agreed in the context of the Collective
Agreement and it was not clear how they would be applied under the terms of the modern
award. It was contended that these arrangements would need to be renegotiated and that in the
absence of a written agreement, the commission-only basis of payment presently operating
could not continue.
[19] On that basis, Pope Nitschke contended that it would not be appropriate to terminate
the Collective Agreement but rather the Commission should permit the issues between the
parties to be resolved through the continuing enterprise agreement negotiations.
[20] In the alternative, Pope Nitschke contended that if the collective agreement was
terminated, no less than 6 months should be allowed before such takes effect.
[21] Pope Nitschke relied upon the evidence of the following:
Mr David Nitschke - Licensed Agent and Principal of Pope Nitschke; and
Mr Donovan Tepper - Chief Executive Officer of the Real Estate Employers
Federation of SA and NT and bargaining agent for Pope Nitschke.
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5. The terms of the Collective Agreement
[22] The Collective Agreement was made, and approved by the Workplace Authority,
under the terms of the Workplace Relations Act 1996 (the WR Act) as it stood in early 2008.
[23] It provides various forms of remuneration arrangements including the payment of a
salary (or pay scale), salary plus commissions, and commission only. In that context, the
Collective Agreement refers to the Australian Fair Pay Commission’s Real Estate Agents
(Commission Only) Australian Pay and Classification Scale for the basic rate of pay and to
the Federal Minimum Wage where appropriate.7 The Collective Agreement also provides a
casual loading of 20 percent.
[24] Mr Smart, Ms Parsons and many of the employees engaged as Sales Agents by Pope
Nitschke are remunerated on the basis of commission-only arrangements. The Collective
Agreement provides that, amongst other conditions, the employee must have agreed in writing
to such an arrangement.8 The requirement for a written letter of appointment for all
employees is also provided in clause 3 of the Collective Agreement. I note that some
employees, including Mr Smart and Ms Parsons, have not received letters of appointment or
been subject to written confirmation of their commission-only status.
[25] In relation to commission based payments, the Collective Agreement establishes the
basis for the calculation of the employer’s net commission based upon the gross commission
paid to the business from sales transactions, less conjunction agents fees, GST and other
amounts depending upon whether the particular pay arrangement is salary plus commission or
commission-only. The Collective Agreement provides as follows in Schedule 2:
“S2.2 Definition of Employer’s Net Commission
(a) For a salesperson that is guaranteed a basic periodic rate of pay for
their guaranteed hours then the Employer’s Net Commission means
the employer’s gross commission from the sales transaction less:
(i) Any conjunction agents fees; and
(ii) GST; and
(iii) Franchise or similar fee: and
OR
(b) For a salesperson who is guaranteed a basic piece rate of pay
(commission only) for their work performed then the Employer’s Net
Commission means the employer’s gross commission from the sales
transaction less:
(i) Any conjunction agents fees; and
(ii) GST; and
(iii) 10% of the remaining amount after (i) and (ii) have been
subtracted (or a lesser amount)
Note: For a commission only salesperson these are the only three
items that may be deducted from the employer’s gross
commission.”9
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[26] Item S2.4 in Schedule 2 of the Collective Agreement further provides that the
employer may deduct from the “employee’s share of the commissions”, a series of payments
and allowances that the employer may be obliged to provide to the employee depending upon
the nature of their appointment and the circumstances of the sales activities. These items
include wages/salaries (however described), allowances, any payment for protected award
conditions, personal promotion expenses, certain advertising expenses, training and
professional development costs, and professional indemnity excesses or negotiated third party
settlements arising from the employee’s actions or omissions.10
[27] The Collective Agreement also contemplates commission payments being made
inclusive or exclusive of superannuation and provides, in effect, that the commission-only
payments have incorporated a loading for annual leave and paid personal/carer’s leave
payments.11
[28] In relation to commission-only arrangements, the Collective Agreement provides for a
minimum of 35% of the “employer’s net commission” to be paid to such employees.12
[29] In relation to LSL, the Collective Agreement refers to the applicable State legislation
but provides that the parties may agree to cash out LSL, including for pro rata leave after
seven years. It does so in the following terms:
“17 Long service leave
17.1 You will receive the following entitlement to long service leave:
Whatever is specified in the applicable State legislation with the following
modifications:
(a) We may agree in writing (sign and dated) for you to cash out long service
leave including for pro rata leave once you have seven complete years of
service
(b) If you take or cash out long service leave you will be paid at your basic
rate of pay. Long service leave will not be payable on
Commissions/incentives/bonuses. Cashing out long service leave means
you lose the entitlement to take long service leave and you receive the
cash in lieu. A commission only salesperson’s basic rate of pay will be
calculated as the same as for annual leave.”
[30] Although I will deal with the impact of any termination of the Collective Agreement
as part of my consideration of this matter, I would observe that many of its provisions are now
impacted by the minimum standards of the FW Act. That is, although the Collective
Agreement was preserved by the Transitional Act, it now operates subject to various
minimum conditions including the base rate of the modern award,13 and the various elements
of the NES.14 This means that the provisions of the Collective Agreement dealing with
minimum wages, notice and redundancy entitlements, and the payment of annual, personal
and carer’s leave15 are of no effect to the extent that they are detrimental to an employee
compared to the NES and other minimum standards of the FW Act. This potentially has a
[2014] FWCA 4876
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significant impact given that the prepayment of leave entitlements as part of a loaded rate has
been found to be inconsistent with the NES provisions.16
[31] This also means that although the Collective Agreement can continue to operate, some
of its important terms cannot be applied as written and must be considered subject to the over-
riding minimum standards of the FW Act.
6. The terms of the modern award
[32] It is not necessary to canvas all of the provisions of the modern award, however
certain features of that award are particularly relevant in the present context.
[33] The modern award establishes a series of minimum wages and conditions of
employment and relies upon the NES in doing so. In common with the Collective Agreement,
it also provides for remuneration arrangements that permit wage only, wage plus commission
payments, and commission-only payments.
[34] The commission-only employees are treated as being pieceworkers and certain
minimum requirements associated with the nature of the employee, the work performed and
the basis of the engagement are established.17 Certain provisions of the award, including
minimum weekly wages, allowances and overtime do not apply to commission-only
employees.18
[35] Clause 16.2 of the modern award requires as follows in relation to commission-only
employees:
“(a) the employee has agreed in writing with the employer to be remunerated on a
commission-only basis and has entered into a written agreement
(commission-only agreement) with the employer that sets out the basis upon
which the entitlement to commission will be calculated;
...”
[36] There are also further provisions associated with written commission or incentive
agreements in clauses 16 and 17 of the modern award.
[37] The modern award provides for minimum commission-only rates in the following
terms:
“16.5 Minimum commission-only rate
(a) The minimum commission-only rate is calculated as 35% of the
employer’s net commission.
(b) Subject to clauses 16.5(c) and (d), a commission-only employee is
always entitled to at least the minimum commission-only rate for each
sales or commercial leasing transaction for which the employee was
responsible.
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(c) In the situation where:
(i) two or more employees are separately responsible for different
components of a sales or commercial leasing transaction; and
(ii) the employee portion of the employer’s net commission is to be
split amongst the employees according to the component(s) for
which the particular employee was responsible,
any commission-only employee responsible for one or more
component(s) is entitled to at least the minimum commission-only rate
proportionate to the value of each component.
(d) With respect to clause 16.5(c):
(i) component(s) may include, but are not limited to:
commercial leasing of a property;
listing a property or business;
managing the listing of a property or business;
selling a property or business; and/or
nurturing a legally-enforceable contract to completion,
(ii) the proportionate value of each component will be as agreed in
writing between the employer and the employee.
16.6 Where it is agreed that an employee will also be entitled to a portion of the
commission paid to the employer greater than the minimum commission-only
rate prescribed in clause 16.5 then any method of calculation, or any formula
for calculating what amount of commission will be payable to the employee in
excess of the minimum commission-only rate, must be evidenced in a written
agreement between the employer and the employee.”
[38] The terms used to calculate these entitlements are defined in clause 3.1 in the
following terms:
“Employer’s gross commission for a commission-only employee means the
commission received by the employer from a client for a sales or leasing transaction
less GST and conjunctional agent fees;
Employer’s net commission for a commission-only employee means the employer’s
gross commission (as defined) less an amount of no greater than 10%.”
[39] In general terms, these operate to provide a minimum commission-only arrangement
broadly compatible with that presently operating under the Collective Agreement. However,
unlike the Collective Agreement, the modern award does not seek to regulate how
commission-only payments beyond the minimum are to operate and there is no reference to a
system of deductions that might operate for commission-only payments above the level of
35% of the employer’s net commission. This would not appear to mean that such
arrangements cannot operate as they are contemplated by clause 16.6. However, the outcome
must ensure that each of the relevant minimum provisions of the modern award are always
met.19
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[40] I will return to the implications of this aspect in due course.
7. The enterprise bargaining process
[41] Pope Nitschke initiated bargaining for a proposed enterprise agreement in late January
2014. Mr Tepper and another advisor were appointed as a bargaining representative for the
employer and by late February 2014, two employee representatives were appointed as
employee bargaining representatives. Ms Parsons was one of those representatives.
[42] A meeting of the various bargaining representatives was held on 26 February 2014 and
a proposed enterprise agreement, which had been drafted by Mr Tepper, as well as the
bargaining process under the Act, was discussed.
[43] On 12 March 2014, a meeting was conducted involving the bargaining representatives
and 20 of the employees to be covered by the proposed agreement. A proposal, which had
been circulated prior to the meeting, was discussed and employees raised a series of
questions. The employer undertook to provide written responses to the questions and this was
subsequently done via email on 29 April 2014.
[44] Some of the questions went to the basis of the commission-only arrangements as they
impact upon various leave entitlements contained in both the Collective Agreement and the
proposed new enterprise agreement. It is evident that the responses created considerable
concerns amongst some of the employees and has led them to question the basis of that
instrument and to seek its termination.
[45] In May 2014, 13 of the employees engaged Mr Knox to act as a bargaining agent. A
letter advising of that appointment was provided to Pope Nitschke on 15 May 2014. That
letter also advised that this application had been lodged with the Commission and took issue
with the accuracy of some of the answers provided to the employee’s earlier questions.
[46] In light of this application, the employer did not establish further bargaining meetings
and decided to await its outcome. No other bargaining representatives have sought the
resumption of bargaining.
[47] The draft enterprise agreement proposed on behalf of Pope Nitschke represents an
updated version of the Collective Agreement in that it now refers to the NES and the relevant
provisions of the FW Act rather than the WR Act. It also maintains the basic approach to the
commission-only payment arrangements contained in the present instrument. It is, of course,
only a draft and represents the employer’s preferred approach rather than any proposal that
has been significantly shaped by negotiations.
8. Should the Collective Agreement be terminated?
[48] I have earlier set out the relevant terms of the FW Act. A review of the provisions
themselves and the approach adopted by the Commission and its predecessors reveals the
following broad principles:
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Although the terms of s.226 are mandatory in that the Commission must terminate
an agreement in certain circumstances, this operates subject to the two
preconditions set out in s.226(a) and (b);
The public interest involves something distinct from the interests of the parties,
although they may be similarly affected;20
The consideration in s.226(a) is whether the termination would be contrary to the
public interest and the purpose of this consideration is to take account of the likely
foreseeable consequences rather than speculation;21
The legislation does not intend that agreements remain in place indefinitely but a
party does not have a prima facie right to have the agreement terminated merely
because the agreement has passed its nominal expiry date;22
The consideration of whether the termination is appropriate is a matter of broad
discretion taking into account all of the circumstances of the matter including those
matters cited in s.226(b)(i) and (ii);
Consideration of the views of the employees does not require that a majority of the
employees support any particular view and all interests and positions are to be
taken into account;23 and
The legislative scheme and objects of the Act are clearly relevant to the exercise of
the Commission’s judgement.24
[49] All of the elements of the object provision25 of the FW Act are important, and these
include the notions of fairness, flexibility for business and the promotion of productivity and
economic growth;26 ensuring a guaranteed safety net through the NES and modern awards;27
achieving productivity and fairness through enterprise-level bargaining;28 and acknowledging
the special interests of small and medium businesses.29
[50] These considerations have informed many of the decisions referred to above and I
have taken them into account in this matter.
[51] In relation to the interaction with bargaining, Lawler VP in Tahmoor Coal Pty Ltd30
observed as follows:
“[55] It seems to me that under the scheme of the FW Act, generally speaking, it will
not be appropriate to terminate an agreement that has passed its nominal expiry date if
bargaining for a replacement agreement is ongoing such that there remains a
reasonable prospect that bargaining (in conjunction with protected industrial action and
or employer response action) will result in a new agreement. This will be so even
where the bargaining has become protracted because a party is advancing claims for
changes that are particularly unpalatable to the other party. While every case will turn
on its own circumstances, the precedence assigned to achieving productivity benefits
through bargaining, evident in the objects of the FW Act, suggests that it will generally
be inappropriate for FWA to interfere in the bargaining process so as to substantially
alter the status quo in relation to the balance of bargaining between the parties so as to
deliver to one of the bargaining parties effectively all that it seeks from the
bargaining.”
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[52] I would respectfully agree and note that this consideration involves an assessment of
the degree to which the termination of the agreement would impact upon the status quo and
the bargaining positions of the parties. Further, the approach outlined is a general statement
and each circumstance must be considered on its merits.
[53] Central to many of the considerations touching upon this matter are the likely
foreseeable consequences of the termination. This in turn requires an assessment of the nature
and terms of the Collective Agreement and the modern award, which would apply in that
event.
[54] On many elements, the continued operation of the Collective Agreement is
problematic given that it now operates in a very different legislative context. This means that
many of the key elements cannot be applied according to its terms and must be read subject to
the minimum standards of the FW Act. This has the potential to, and has, created confusion,
potential non-compliance and a difference of view as to how it is to be applied.
[55] It is also apparent that the approach within the Collective Agreement to those leave
entitlements now covered by the NES is problematic given that it involves, at least
conceptually, the pre-payment of these entitlements through a loaded rate. Further, there is no
guarantee that the leave will actually be provided and paid at the employee’s base rate of pay
for their ordinary hours of work in the period covered by the leave, as is required by the
NES.31
[56] The meaning of the term “base rate of pay” as it might apply to annual and personal
leave is not immediately clear given the provisions of the FW Act and the circumstances
created by the Collective Agreement. The meaning of the term is established in s.16 of the
FW Act. In general terms, unless an employee is a pieceworker, incentive-based payments
and bonuses are not included. “Pieceworker” is defined in s.21 of the FW Act and this in turn
relies upon the terms of a modern award that applies (which is not presently the case), the
terms of a relevant enterprise agreement that defines or describes the employee as a
pieceworker, or the regulations which provide for the employee to be a pieceworker where
they are award and agreement free.
[57] The employees in this case are not award/agreement free for present purposes32 and
the regulations33 made under the Transitional Act provide a formula for calculating a base rate
of pay where pieceworkers are subject to a transitional instrument such as the Collective
Agreement. This is, in effect, the same formula that applies to award/agreement free
pieceworkers under the FW Act more generally, albeit that it is based upon the rates in the
transitional instrument (the Collective Agreement).
[58] This means that incentive payments (commissions) may form part of the base rate of
pay for the purposes of the NES under the Collective Agreement, and more evidently, the
modern award. However, the level of complexity to ascertain the actual entitlements under the
Collective Agreement is significant.
[59] What is clear is the modern award defines the commission-only employees as
pieceworkers and this aspect of the application of the NES to those employees at Pope
Nitschke would be much clearer with the termination of the Certified Agreement.
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[60] Concerns have been raised by the employees in this matter about the import of the
LSL provisions of the Collective Agreement. These provisions have been set out earlier in the
decision. Fundamentally, the concerns relate to an earlier indication from the employer that
the commission-only employees were not entitled to LSL, and a more recent position, that
they are entitled to leave but any payments would simply be deducted from the net employer
commissions if and when LSL is taken or paid out.
[61] The relevant State LSL scheme referred to in the Collective Agreement is the Long
Service Leave Act 1987 (SA). The State LSL Act potentially continues to apply to these
parties by virtue of s.27 of the FW Act. That is, the State LSL Act is not excluded by the
FW Act and there is no direct NES entitlement given that the employees are not entitled to
long service leave under Division 9 of Part 2-2.34
[62] Section 16 of the State LSL Act provides as follows:
“16—Act not to apply to certain workers
This Act does not apply in relation to workers who have a long service leave
entitlement—
(a) under some other Act; or
(b) under a fair work instrument under the Fair Work Act 2009 of the
Commonwealth; or
(c) under an instrument given continuing effect under the Fair Work
(Transitional Provisions and Consequential Amendments) Act 2009 of
the Commonwealth.”
[63] It is likely that the employees subject to this application presently have an entitlement
to LSL35 under the Collective Agreement and that as a result, the State LSL Act does not
directly apply. In any event, it is tolerably clear that the provisions of the State LSL are in
effect drawn into and apply as part of the Collective Agreement, subject to any inconsistent
provisions of the agreement.
[64] In that regard I note that it was contended on behalf of Mr Smart that the State LSL
Act was part of the NES itself.36 However, the actual provision of the FW Act in s.113 does
not contain an entitlement to LSL in the case of the employees subject to this application. On
that basis, it is unlikely that the no detriment interaction rule applicable to the NES
provisions37 has any work to do here.
[65] Section 8 of the State LSL Act provides that workers are to be paid at their ordinary
weekly rate of pay, which is defined in s.3(2)(a) of that FW Act. Where the worker is
employed on commission or on any other system of payment by result, the worker's ordinary
weekly rate of pay will be ascertained by averaging the worker's weekly earnings over the 12
months immediately preceding the relevant date. Clause 17 of the Collective Agreement, to
the extent that it purports to modify the calculation of commissions/incentives payments for
present purposes, must be taken into account.
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[66] I note that Clause 17 of the Collective Agreement states that LSL is not payable on
Commissions/incentives/bonuses. It is apparent that at least at some earlier stage, Pope
Nitschke understood that this meant that commission-only salespersons were not entitled to
LSL. However, the better view, and the one now apparently being adopted by the employer,38
is that such salespersons are entitled to LSL based upon their “basic rate of pay”. On that
view, clause 17 in relation to commission-only salespersons refers to the same basis of
calculating payments as adopted for annual leave.
[67] This basis for annual leave payments is provided by Schedule 2.8(b) of the Collective
Agreement and this in turn refers to the “formula in the regulations for piece workers”. That
formula, in effect, is provided by the Workplace Relations Act Regulations 200639 and this
also apparently requires the consideration of the average earnings over the preceding
12 months.40 In that regard, the definitions within the former regulations are very complex
and require consideration of the various partially circular definitions of the terms applicable to
piece workers within the WR Act itself.41 I note that the clearer provisions under the Fair
Work Regulations 2009,42 that would apply in relation to annual leave and other direct NES
entitlements for pieceworkers, would not appear to apply to the LSL calculation given the
preserved terms of the Collective Agreement.
[68] The application of the Collective Agreement in the context of the State LSL Act
provisions for employees partially rewarded by commission payments has not been the
subject of much debate by the parties. This form of employment is permitted under the
Collective Agreement and the modern award; albeit it is not the popular form of engagement
used by Pope Nitschke. It is sufficient to note that this form of engagement raises further
issues of complexity in terms of LSL payments under the Collective Agreement given its
interaction with the WR Act and regulations.
[69] For present purposes, I proceed on the basis that both the Collective Agreement and
the State LSL Act, without the impact of that agreement, would require LSL to be paid taking
into account average commissions, at least for commission-only salespersons.
[70] Section 8(3a) of the State LSL Act provides that workers may be paid in lieu of taking
LSL by “agreement with a worker”. Any such agreement must be in writing.43 This is
conceptually consistent with clause 17 of the Collective Agreement.
[71] The relevant question for the Commission is whether the termination of the Collective
Agreement would have an impact upon the parties and if so, whether that supports the
termination application.
[72] In the circumstances of the parties here, the State LSL Act will apply in full if the
Collective Agreement is terminated. That is, the modern award does not provide award-based
LSL provisions and the State law will continue to be preserved by virtue of s.27 of the FW
Act. The requirement that LSL payments include commissions and incentive payments for
commission-only salespersons will also continue; albeit that the basis for the calculation of
such payments would be much clearer and there would be less room for dispute about those
elements.
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[73] The capacity to pay out LSL in lieu of taking leave in certain circumstances will also
continue if the Collective Agreement is terminated.
[74] The major issue in dispute about the consequences of terminating the Collective
Agreement in relation to LSL arise from the employer’s view that the agreement permits LSL
entitlements to be deducted from net employer commissions.
[75] Item S2.4 of Schedule 2 in the Collective Agreement does not make specific reference
to the deduction for LSL payments from commissions and these payments do not fall under
the scope of protected award conditions.44 Pope Nitschke contends that LSL payments should
be considered to be “wages/salaries (however described)” and fall within the scope of
item S2.4(a) That approach would require a very generous application of the concept of wages
or salaries so as to include leave entitlements (which are calculated on a different basis and
operate as an entitlement in their own right). However, whether the employer’s position is
correct is ultimately a matter for a Court of competent jurisdiction. The potential for the
Collective Agreement to operate in that manner and the lack of clarity about the issue are
factors to be weighed into the decision in this matter more generally.
[76] I note that a form of credit and debit system could potentially operate in that manner
under the modern award subject to certain important limitations that I will return to shortly.
[77] On the LSL matter, and more generally, the impact of the potential termination and the
need for the parties to be able to deal with the consequences are considerations to be taken
into account in this matter.
[78] At a conceptual level, when considered in the context of the legal import of the NES
and the other minimum standards, the framework of the Collective Agreement is not
significantly different to the modern award. That is, it permits the same various forms of
remuneration arrangements and each operates subject to a minimum commission-only
provision of 35% of the employer’s net commission. That net commission is differently
defined, but not significantly so.
[79] From an overall perspective, the major difference is that the Collective Agreement
prescribes the detail of a credit and debit system that purports to permit the deduction of
expenses and employee entitlements from the net commission received from sales by the
employer. The modern award does not directly contemplate these arrangements. However,
given that the commission-only minimum is broadly similar, and the award operates as a
minimum, there would not appear to be a reason in principle why such a system could not
operate. This would, of course, be subject at all times to the minimum requirements of each
element of the modern award (including the minimum commission-only payments), the NES
and the Act. As stated earlier, any such arrangements would also require a written
commission-only agreement for each employee. Subject to these conditions, a system of
credit and debit above the minimum commission-only level would appear to be consistent
with the provisions of clause 16.6 of the modern award as set out earlier in this decision.
[80] This means that the parties could transition to the more robust and clearer modern
award without significant disruption to the existing arrangements. This would however
require a review of the existing commission-only agreements, or the making of written
commission-only agreements in relation to some employees. I will return to the implications
of this shortly.
[2014] FWCA 4876
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[81] In terms of the impact of the potential termination upon the bargaining arrangements,
this consideration militates against the application, at least at this point in time. The
bargaining process is at its early stages and a change in the status quo is a significant
consideration for reasons outlined earlier. The need for caution when a party seeks to
terminate an agreement during the course of the bargaining process to tactically alter the
process is self evident. I add that the application in this case is based upon broader concerns.
In addition, although the employees supporting this application are opposed to the
underpinning concepts of the proposed new enterprise agreement, at least conceptually, some
of the issues being pursued by them would be capable of being considered as part of a
bargaining process and that process had not run its course when this application was made.
[82] Similarly, the timing of this application is a factor to be weighed against the
termination given the public interest considerations and the obligations upon bargaining
parties.45
[83] However, in this case, there are some unique circumstances. The proper operation of
the status quo is not clear and is very much in dispute. This applies to such an extent that the
basis for the negotiations is problematic. Further, with one significant exception, the terms of
the modern award that would apply in the event of a termination are generally capable of
supporting the arrangements already in place, albeit on a clearer basis. The bargaining process
to be undertaken will also require that any agreement that is intended to be approved by the
Commission will need to meet the various statutory requirements including meeting the Better
Off Overall Test of s.193 of the FW Act and not undermine the NES. In that regard, I note
that the Collective Agreement was made and approved in a very different context.
[84] The exception referred to above is the express operation of the “credit and debit”
system operating for commission purposes and discussed earlier in this decision. I will also
return to this aspect shortly.
[85] In terms of the views of the employees, I accept that some of the views of Mr Smart
and his colleagues have been formed without a full understanding of the operation of the FW
Act and the fact the Collective Agreement is buttressed and modified to a significant extent.
This is certainly understandable in the circumstances and the desire for greater clarity and
certainty about the minimum conditions of their employment is a legitimate objective.
[86] There are some 11 employees out of a total of approximately 2446 employees
supporting the application. There are two employees who have withdrawn their support and
indicated47 to the Commission, and the employer, that they now support the retention of the
Collective Agreement. The fact that a significant group of employees support the application
but others, whose interests are also directly impacted by the potential termination, are either
against or “agnostic” on the issue, is an important consideration.
[87] The employer opposes the application. This is based upon a desire to maintain the
current arrangements whilst a new agreement is negotiated. Further, Pope Nitschke has
organised its business and employment circumstances in the context of the existing Collective
Agreement. This is also an important consideration and I have taken that position, and the
other concerns of the employer, into account.
[2014] FWCA 4876
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[88] There is no Organisation (registered union) that is covered by the Collective
Agreement.
[89] I have dealt with most of the likely consequences of the termination above, however
one aspect requires further discussion. The potential move from the Collective Agreement to
the modern award would involve the transition to an environment where written commission-
only agreements are required. There are, for some employees, existing written agreements
however these were negotiated in the context of the Collective Agreement and its particular
very broad approach to the credit and debit system. There are also some commission-only
employees without a written agreement.
[90] As set out earlier, the evidence reveals that many of the salespersons are engaged on a
commission-only basis. The commission rates are significantly higher than the minimum
commission-only rates payable under the Collective Agreement, or the modern award.
However, these rates are based on a very broad approach to the debiting of employment costs
being applied by Pope Nitschke under the current instrument.
[91] The need for Pope Nitschke and the employees to consider their circumstances,
potentially take advice and renegotiate their arrangements in a somewhat different context
with clearer parameters, is a significant matter to be taken into account in relation to whether
the application should be granted and if so, with what lead time.
9. Conclusions and orders
[92] On balance, I am satisfied that the termination of the Collective Agreement in the
particular circumstances evident here would not be contrary to the public interest. I am also
satisfied that the termination is appropriate having regard to the likely effect of that action and
the circumstances of the employees and the employer.
[93] There are however factors arising from the circumstances of the parties that impact
upon the discretion as to when the termination will take effect. That is, whilst not leading to a
view that the termination would be contrary to the public interest or inappropriate, the need
for the parties to deal with the consequences of the termination is such that a reasonably
lengthy lead time for the termination would be appropriate. These considerations include most
importantly, the requirement to renegotiate and/or confirm written commission-only
remuneration arrangements that would operate under the terms of the modern award. This is
not necessarily a straight forward exercise given the strongly held and divergent views about
the operation of commission arrangements beyond the minimum commission-only payments
required by the modern award. Further, some delay would permit the opportunity to negotiate
a new enterprise agreement should that course of action ultimately be supported by the
majority of employees.
[94] I accept the continuation of the Collective Agreement for a period extends the
uncertainty. In terms of the impact of the delay upon the LSL arrangements, there is a dispute
about the capacity to debit such payments from commissions. Whatever the Collective
Agreement means on that count, and it is not clear, that matter can be determined and it is not
unreasonable per se to permit the approved and preserved Collective Agreement terms to
operate for a period given the consequences for all parties arising from its termination.
[2014] FWCA 4876
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Importantly, any continuing uncertainty needs to be balanced against the requirements for
appropriate transitional arrangements for all parties subject to the Collective Agreement.
[95] In all of the circumstances, I have determined that the Pope Nitschke First National
Employee Collective Agreement is to be terminated and the termination will take effect on and
from 7 December 2014.
Printed by authority of the Commonwealth Government Printer
Price code C, AC312832 PR553349
Appearances:
A Knox, Registered Agent for Mr Smart and 11 named employees.
T Kidman, of Crawford Legal, with permission for Pope Nitschke Pty Ltd.
Hearing details:
2014
Adelaide:
July 21, 22, 31
September 3.
Written submissions:
2014
August 26 and 29.
1 The agreement was originally approved pursuant to the Workplace Relations Act 1996 in February 2008.
2 Item 2(5)(c)(i) of Schedule 3.
3 Clause 3 of the Agreement states the nominal expiry date will be the fifth anniversary of the date on which the agreement
was lodged. This date is taken from the Form F24B Application Form.
4 S.47 and s.48 of the FW Act.
5 This is also subject to a separate dispute notification (DR2014/162).
6 S.228 of the Act.
[2014] FWCA 4876
18
7 Schedule 1.
8 S1.1.
9 Schedule 2.
10 S2.4.
11 S2.8.
12 S2.3 and S2.7.
13 Item 13 of Schedule 9 of the Transitional Act.
14 Item 23 of Schedule 3 of the Transitional Act.
15 Under the NES these entitlements must be paid at the “at the employee’s base rate of pay for the employee’s ordinary
hours of work in the period” - Divisions 6 and 7 of Part 2-2 of the Act.
16 See Canavan Building Pty Ltd [2014] FWCFB 3202.
17 Clause 16.2 of the modern award.
18 Clause 16.4 of the modern award.
19 See Clarke v Playford Real Estate Pty Ltd [2012] SAIRC 49 for a discussion as to how “deductions” from the employer’s
commission may be made under the modern award, provided the minimum entitlements are met.
20 Tahmoor Coal Pty Ltd [2010] FWA 6468 at [30].
21 Ibid at [29] including the discussion of earlier authority.
22 Energy Resources Australia Ltd v Liquor, Hospitality and Miscellaneous Union [2010] FWA 2434.
23 AWX Pty Ltd trading as AWX [2013] FWCFB 8726.
24 Ibid at [46] and Energy Resources Australia Ltd v Liquor, Hospitality and Miscellaneous Union [2010] FWA 2434.
25 S.3 of the FW Act.
26 S.3(a) of the FW Act.
27 S.3(b) of the FW Act.
28 S.3(f) of the FW Act.
29 S.3(g) of the FW Act.
30 Tahmoor Coal Pty Ltd [2010] FWA 6468.
31 See Canavan Building Pty Ltd [2014] FWCFB 3202.
32 Item 32 of Schedule 3 of the Transitional Act.
33 Fair Work (TPCA) Regulations 2009 at reg 3.01.
34 There are no relevant award-derived LSL entitlements as contemplated by s.113 of the FW Act.
35 See Maughan Thiem Auto Sales Pty Ltd v Cooper [2014] FCAFB 94 at par 43 and 44 in relation to the related concept of
when a LSL entitlement arises under an instrument.
36 See the Explanatory Memorandum to the Fair Work Bill 2008.
37 Item 23 of Schedule 3 of the Transitional Act.
38 The evidence of Mr Nitschke during proceedings.
39 As a result of the definition set out in clause 2 of the Collective Agreement.
40 Part 7 of the regulations to the WR Act.
41 See the definitions touching upon the calculation of the employee’s basic periodic rate of pay in s.178 of the WR Act.
42 Regulation 1.09.
43 S.5(1a) definitions of the State LSL Act.
44 S.354 of the WR Act.
45 S.228 of the FW Act.
46 Transcript PN1477.
47 Via emails during the later stages of the hearing.
