1
Fair Work Act 2009
s.319 - Application for an order re instruments covering new employer and non-transferring
employees in agreements
Zancott Recruitment Pty Ltd
(AG2013/10912)
DEPUTY PRESIDENT BARTEL ADELAIDE, 11 NOVEMBER 2013
Agricultural industry
[1] This decision concerns an application pursuant to s.319 of the Fair Work Act 2009 (the
Act) by Zancott Recruitment Pty Ltd (Zancott). Zancott is a labour hire company involved
primarily in the construction industry.
[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.1 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.
The statutory framework
[5] The collective agreement is a transitional instrument in accordance with sub-item 2(3),
Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act
2009 (the TPCA Act). Item 8 of Schedule 11 of the TPCA Act makes certain modifications
to Part 2-8 of the Act which deals with the transfer of business. For present purposes it is
sufficient to record that the collective agreement is a transferable instrument for the purposes
1 Tr PN 85
[2013] FWC 8865 [Note: An appeal pursuant to s.604 (C2013/7387) was
lodged against this decision - refer to Full Bench decision dated 21 January
2014 [[2014] FWCFB 351] for result of appeal.]
DECISION
E AUSTRALIA FairWork Commission
https://www.fwc.gov.au/documents/decisionssigned/html/2014FWCFB351.htm
[2013] FWC 8865
2
of Part 2-8 of the Act and, providing there has been a transfer of business, the collective
agreement will cover Zancott and the transferring employees.2
[6] Section 311 of the Act sets out when a transfer of business occurs, 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.
Transfer of assets from old employer to new employer
(3) There is a connection between the old employer and the new employer if, in
accordance with an arrangement between:
(a) the old employer or an associated entity of the old employer; and
(b) the new employer or an associated entity of the new employer;
the new employer, or the associated entity of the new employer, owns or has
the beneficial use of some or all of the assets (whether tangible or intangible):
(c) that the old employer, or the associated entity of the old employer, owned or
had the beneficial use of; and
(d) that relate to, or are used in connection with, the transferring work.
Old employer outsources work to new employer
(4) There is a connection between the old employer and the new employer if the
transferring work is performed by one or more transferring employees, as employees
of the new employer, because the old employer, or an associated entity of the old
employer, has outsourced the transferring work to the new employer or an associated
entity of the new employer.
New employer ceases to outsource work to old employer
(5) There is a connection between the old employer and the new employer if:
(a) the transferring work had been performed by one or more transferring
employees, as employees of the old employer, because the new employer, or
2 Pursuant to s.313 of the Act
[2013] FWC 8865
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an associated entity of the new employer, had outsourced the transferring
work to the old employer or an associated entity of the old employer; and
(b) the transferring work is performed by those transferring employees, as
employees of the new employer, because the new employer, or the associated
entity of the new employer, has ceased to outsource the work to the old
employer or the associated entity of the old employer.
New employer is associated entity of old employer
(6) There is a connection between the old employer and the new employer if the new
employer is an associated entity of the old employer when the transferring employee
becomes employed by the new employer.”
[7] I am satisfied that the nature of the arrangements proposed between Zancott and Rural
meet the requirements of ss.313(1) and (4) of the Act and therefore constitute a transfer of
business.
[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.3 In this case, at the time Zancott engages a new
non-transferring employee, it will be covered by the Storage Services and Wholesale Award
20104 (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.
[9] Section 319 of the Act deals with the orders that can be made by the FWC in relation
to non-transferring employees and provides that:
“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
3 Section 314(1)(d) of the Act
4 MA000084
[2013] FWC 8865
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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.”
The case for Zancott
[10] Mr Earls, from the Master Builders Association of South Australia (the MBA)
appeared on behalf of Zancott. He based much of his submission around the interests of the
transferring employees and the negative consequences upon them if the order covering the
non-transferring employees was not made. It was submitted that Rural is struggling
financially and that outsourcing the employees to Zancott would assist their financial position.
However, if the order was not made and the modern award terms and conditions applied to
new employees of Zancott who perform the transferred work, it was submitted that the cost to
Rural of the outsourcing arrangement would be prohibitive. I interpose that the weight of
these submissions is diminished by the absence of evidence from Rural.
[2013] FWC 8865
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[11] It was further submitted that any disadvantage suffered by the non-transferring
employees would be of limited duration given the April 2014 nominal expiry date of the
collective agreement.
[12] An affidavit from Mr Cameron Buzzacott, the Managing Director of Zancott,
supporting the submissions of Mr Earls was attached to the application. Mr Buzzacott noted
that applying the modern award would add $335,053 to direct labour costs. I am unsure as to
the basis of this calculation but the figure provides some insight into the disparity between the
terms and conditions of the collective agreement and the modern award.
[13] All but one of the transferring employees signed a declaration supporting the making
of the orders as sought on the basis that it would ensure consistency of terms and conditions
among the transferring and non-transferring employees.5 This was supplemented by evidence
from one of the transferring employees, Mr Cory Fox.6
Consideration
[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.7
[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
conditions8 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
5 Annexure CB2 to the affidavit of Mr Buzzacott. One employee was not available to sign the declaration.
6 Tr PN92 - 117
7 TR PN30 - 34
8 These employees are currently covered by the Zancott Pty Ltd Employee Collective Agreement 2009, made pursuant to the
Workplace Relations Act 1996, as amended.
[2013] FWC 8865
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lower meal and first aid allowances than the modern award.9 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) the Act is the public interest.
The relevant aspects of the public interest were recently summarised by a Full Bench in Parks
Victoria v The Australian Workers' Union and others10 with reference to well settled case law
on this topic.11 The proceeding before the Full Bench concerned the making of a workplace
determination, with the public interest being one of the matters that the FWC is obliged to
take into account in determining the terms to include in the workplace determination, in
accordance with s.275 of the Act. The Full Bench stated
“[49] Section 275(d) provides that the Commission must take the public interest into
account. The public interest imports a discretionary value judgment confined only by
the subject matter, scope and purpose of the FW Act.
[50] The public interest refers to matters that may affect the public as a whole such as the
achievement or otherwise of the objects of the FW Act, employment levels, inflation
and the maintenance of appropriate industrial standards.
[51] The statutory distinction between the interests of the employer and employees on the
one hand (s.275(c)) and the public interest on the other (s.275(d)) leads us to conclude
9 Some of these provisions are subject to the Transitional Provisions in Schedule A to the modern award. See Bupa Care
Services Pty Ltd v P & A Services Pty Ltd as trustee for the D’Agostino Family Trust t/as Michel’s Patisserie
Muruillimbah & others, [2010] FWAFB 2762 in relation to the treatment of voluntary additional hours as compared to
award overtime provisions.
10 [2013] FWCFB 950 (11 February 2013)
11O’Sullivan v Farrer (1989) 168 CLR 210 at p216; Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore
Facilities Certified Agreement 2000 (2005) 139 IR 34
[2013] FWC 8865
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that the public interest is distinct from the interests of the parties, though the
considerations may overlap. For example, matters which may be in the public interest
may also be in the interests of one or more of the parties.” (footnotes omitted)
[21] The object of Part 2-8 of the Act is:
“309 Object of this Part
The object of this Part is to provide a balance between:
(a) the protection of employees’ terms and conditions of employment under
enterprise agreements, certain modern awards and certain other instruments;
and
(b) the interests of employers in running their enterprises efficiently; if there is a
transfer of business from one employer to another employer.”
[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.12 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.13 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.
Conclusion
[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.
12 TR PN59 - 60; PN46
13 Sections 3(b) and 134(1) of the Act
[2013] FWC 8865
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[26] An order giving effect to my determination is issued with this decision.
DEPUTY PRESIDENT
Appearances:
Mr T Earls on behalf of Zancott Recruitment
Hearing details: 1 November 2013
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