1
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional
instruments
KarPay Pty Ltd
(AG2023/4021)
KARELLAS INVESTMENTS PTY LTD EMPLOYEE COLLECTIVE
AGREEMENT 2007
DEPUTY PRESIDENT WRIGHT
DEPUTY PRESIDENT ROBERTS
DEPUTY PRESIDENT SLEVIN
SYDNEY, 6 DECEMBER 2023
Application to extend the default period for Karellas Investments Pty Ltd Employee Collective
Agreement. Not reasonable to extend the default period in the circumstances – application
dismissed.
[1] KarPay Pty Ltd (KarPay) has applied, pursuant to item 20A(4) of Sch 3 to the Fair Work
(Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act),
to extend the default period for the Karellas Investments Pty Ltd Employee Collective
Agreement 2007 (Agreement). The Agreement was made under Part 8 of the Workplace
Relations Act 1996 in April 2007. It was lodged with the Office of Employment Advocate on 1
May 2007 and operated from that date. It is an agreement-based transitional instrument to which
item 20A applies.
[2] The application seeks to extend the default period of the Agreements until 1 July 2024.
[3] The Transitional Act was amended by the Fair Work Legislation Amendment (Secure
Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) to provide for the automatic termination of all
remaining transitional instruments. Pursuant to items 20A(1) and (2) of Schedule 3 to the
Transitional Act, the Agreement will terminate on 6 December 2023 (the end of the default
period) unless it is extended by the Commission. The main features of item 20A of Schedule 3
to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold
Pty Ltd.1
[4] Relevantly, when an application is made under subitem (4) of item 20A of Sch 3 to the
Transitional Act, the Commission is required to extend the default period under either subitem
(6)(a) if satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the
circumstances to do so, or under subitem 6(b) where it is satisfied that it is reasonable in the
circumstances to do so.
[2023] FWCFB 240
DECISION
AUSTRALIA FairWork Commission
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb240.pdf
[2023] FWCFB 240
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[5] KarPay does not contend that any of subitems (7), (8) or (9) apply to the present
circumstances. The Applicant has not commenced bargaining towards a replacement
agreement, and it is not suggested that the employees will be better off if the agreement
continues to apply. Rather, the application is made on the basis that it is reasonable in the
circumstances to extend the default period under subitem 6(b).
[6] In Suncoast Scaffold Pty Ltd the Full Bench described the ‘reasonable’ criterion in item
20A(6)(b) of Sch 3 to the Transitional Act in this way:
[17] Subitem (6)(b) of item 20A constitutes an independent pathway to the grant of an extension.
The ‘reasonable’ criterion in the subitem should, in our view, be applied in accordance with the
ordinary meaning of the word – that is, ‘agreeable to reason or sound judgment’. Reasonableness
must be assessed by reference to the ‘circumstances’ of the case, that is, the relevant matters
and conditions accompanying the case. Again, a broad evaluative judgment is required to be
made.
[7] In Qualipac Farms Unit Trust T/A Qualipacs Farms P/L2 (Qualipac Farms) the Full
Bench considered the purpose of the provisions for the extension of the default period to be
relevant to the broad evaluative judgment that is required under subitem 6(b). Reference was
made to the following extract from the explanatory memorandum:
Provision would be made for the FWC to (upon application) extend the default period to ensure
the automatic sunsetting of zombie agreements does not operate harshly, including by leaving
employees worse off.
[8] Full Benches of the Commission have also said a number of times that the purpose of
the sunsetting arrangements introduced by the SJBP Act3 is that zombie agreements are to be
replaced by contemporary instruments made under the Fair Work Act 2009 (FW Act).
Background
[9] KarPay owns and operates six IGA branded supermarkets in Sydney and a seventh in
the Blue Mountains. At the time the Agreement was made in 2007, the business was owned by
Karellas Investments Pty Ltd. The business transferred to KarPay on 30 June 2018. All of the
employees were thereafter engaged by KarPay. Pursuant to item 8 of Schedule 11 of the
Transitional Act the Agreement became a transferable instrument for the purposes of Part 2-8
of the FW Act and so covered KarPay from the time of the transfer. When the Agreement
terminates, unless it is replaced by another agreement, the General Retail Industry Award 2020
(the Award) will apply.
[10] The application is made on the basis that KarPay needs time to put into full operation
new payroll software that is capable of properly and efficiently administering the recording and
management of employee entitlements under the Award. KarPay explains that the software
packages it used to apply the Agreement terms and conditions is outdated and becoming
obsolete as they no longer operate efficiently with more modern operating systems, browsers
and IT infrastructure used in the business. KarPay explains that around early June 2023 it began
investigating possible software programs to replace the existing programs. New software was
identified, acquired, and installed by 30 October 2023. KarPay seeks an extension of the default
period so that the software can be programmed, data can be transferred, employee details can
be entered, cost centres for each supermarket can be configured, administrative staff can be
[2023] FWCFB 240
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trained to operate the new system, the software can be tested, and errors can be rectified before
“going live”.
[11] KarPay provided two witness statements. The first was from Andrew Karellas, one of
its directors. The other was from Yolanda Gerges, a director of the software contracting firm
that has been engaged to configure and implement the new software. Ms Geres states that her
firm was engaged on 8 November 2023. Her firm has experience in configuring payroll
software for employers covered by the Award. Ms Gerges states that she understands KarPay
intends to implement the new software once it is satisfied that it has been properly installed and
employees are fully familiar with its operation. Ms Gerges indicates that this will takes 3 to 4
months. Ms Geres states that the project has been split into two phases. From 6 December 2023
a number of elements will be in place to allow KarPay to use the new software. Ms Geres says
that steps taken to permit this to happen, including fast track training of staff to operate the
system, has occurred quickly and not been ideal. The second phase will involve refining and
testing the software and providing further training. Ms Geres says this process will be
completed in early April 2024 allowing for her firms’ shut down period from 22 December
2023 to 15 January 2024.
[12] Mr Karellas says that while Ms Geres’ firm has been working on the new software since
8 November 2023 it is yet to be formally engaged and will not be engaged until the software is
up and running and KarPay is satisfied that it does the job. He says the software is currently in
the BETA stage and so is not finalised.
[13] KarPay provided details of its workforce. It employs 459 shop assistants and 51
managers. The managerial staff are employed on salaries. The shop assistants are employed
under the Agreement. There are 195 casual employees and 263 part time employees. The rest
are full time.
[14] The managerial staff are paid salaries that are well above the Award. The shop assistants
are paid a flat rate 4% above the Award. This arrangement does not arise because of the
operation of the Agreement. The Agreement rates were set at the minimum rates in the
Australian Fair Pay and Condition Standard which have long been obsolete. Consequently, the
rates of pay in the Agreement are below the Award. In those circumstances item 13, Sch 9 of
the Transitional Act operates such that the base rates of pay in the Agreement are deemed to be
the same as the Award.
[15] No penalty is paid under the Agreement for work after 6.00 pm Monday to Friday. The
Award penalty at that time is 25%. No penalty is paid under the Agreement on Saturday. The
Award penalty is 25%. On Sundays the Agreement provides for a penalty of 50% which is the
same as the Award. On Public Holidays a lower penalty of 100% is paid compared to the Award
penalty of 125%.
[16] Under the Agreement the casual loading is 20% compared to the Award of 25%. The
Agreement rates for casuals are all lower than the Award. However, KarPay pays the Award
penalty rate for ordinary hours. Even taking this into account, the penalty rates paid to casuals
for Monday to Friday after 6.00 pm, Saturdays and Public Holidays are still less than the Award
rates.
[17] KarPay’s analysis of its payment arrangements is that for hours worked from Monday
– Friday and Sunday employees are better off on the current arrangements. For work performed
[2023] FWCFB 240
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after 6.00 pm Monday to Friday, on Saturdays and public holidays employees are worse off on
those arrangements. This analysis is done on the basis that employees are paid as described
above. That is, the rates in the Agreement are not applied, rather employees are paid 4% above
the Award and casuals are paid the Award penalty of 25% for ordinary time but penalty rates
are below the Award.
[18] KarPay provided the rosters for each employee at each of its stores for the week starting
6 November 2023. Starting times were as early as 6.00 am and finishing times as late as 11.00
pm. Work is performed 7 days per week. KarPay also analysed its current payment
arrangements compared to the Award for worked performed in the week commencing 11 June
2023. That analysis concluded that of the 1,334 shifts worked in that week, payments on 711
shifts would have been higher if the Award applied.
[19] The information provided makes it clear that the employees will not be better off if the
Agreement continues to apply than if the modern Award applies.
[20] KarPay has not commenced bargaining for a replacement agreement. In its application
KarPay stated that upon the ‘sunsetting’ of the Agreement it is considering, from an operational
and financial perspective, whether to either:
a. employ all employees to whom the Agreement applies under an enterprise
agreement;
b. employ all such employees under the Award; or
c. depending on classifications, employ some such employees under an enterprise
agreement and others under the Award.
[21] KarPay says that deciding what option to take requires considerable calculations to be
made and thought to be applied. It claims that as each supermarket has 10 cost centres (grocery,
dairy/freezer, delicatessen, bakery, produce, meat, checkout, instore administration, instore
managers, store online) and over 100 individual rosters, the calculations required to cover all
scenarios presented by each individual roster are considerable and its decision will be guided
by what is best financially and operationally for the business.
Consideration
[22] KarPay seeks an extension until 1 July 2024 on the basis that it is reasonable in the
circumstances to do so. As the Full Bench in Suncoast Scaffold Pty Ltd said, reasonableness
must be assessed against the relevant matters and conditions in each case. A broad evaluative
judgment is required. As the Full Bench in Qualipac Farms said, the purpose of the provisions
requiring the extension of the default period are relevant to that judgment. That purpose is to
ensure the automatic sunsetting of zombie agreements does not operate harshly including by
leaving employees worse off and to have those agreements replaced by contemporary
instruments. The Full Bench in ISS Health Services Pty Ltd4, when considering the
appropriateness of extending a zombie agreement where bargaining was occurring, took into
account whether the extension was sought merely on the basis of convenience.
[23] Here KarPay seeks an extension on the basis that it would like time to fully implement
payroll software to assist it in applying the Award terms and conditions to its employees. It asks
for an extension to 1 July 2024, when the evidence suggests that the new software will be fully
implemented by early April 2024. Further, the evidence suggests that the software was installed
on 8 November 2023 and initial training has commenced in its operation.
[2023] FWCFB 240
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[24] The application does not accord with the purpose of item 20A of Sch 3 to the
Transitional Act. KarPay makes the application knowing that the extension will result in most
employees being worse off than they would be under the relevant modern award. The
employees are low paid employees many of whom are currently being paid less than they would
be paid under the minimum terms and conditions provided for by the Award. Many of the
employees are casual employees. The application is made in circumstances where KarPay is
not proposing to do anything more than consider entering into a modern enterprise agreement
to replace the zombie agreement.
[25] The application is essentially a request to extend the zombie agreement to meet the
administrative convenience of KarPay. The provisions of the SJBP Act providing for the
automatic sunsetting of zombie agreements commenced operation in December 2022. The Act
did not terminate the agreements immediately. It provided a 12-month grace period up to 6
December 2023. KarPay has had 12 months to make arrangements to replace its payroll
software. It gives no explanation as to why it waited 7 months before initiating steps to do so.
It appears from the evidence that the software it has chosen was installed in early November
2023 and that some training has occurred. The evidence is that there needs to be further
refinements and training so that the software operates to KarPay’s expectations. The evidence
does not suggest that the software is not able to be used now, albeit in an imperfect fashion.
The evidence does not go to whether there were other software solutions that could be used to
assist in applying the terms and conditions in the Award.
[26] KarPay’s administrative convenience argument must be weighed against the impact on
employees of the extension. The employees will be worse off if the extension is granted. The
employees should not have to continue to endure the substandard conditions contained in the
Agreement simply to allow KarPay to implement new payroll software that it should have
introduced before the default date in the legislation. An extension in these circumstances would
be harsh on employees.
[27] We are not satisfied that it is reasonable to extend the default period for the Agreement.
[28] The application is dismissed.
[2023] FWCFB 240
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DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
AC306654 PR769114
1 [2023] FWCFB 105 at [3] to [18].
2 [2023] FWCFB 212 at [14]
3 See for example Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified
Agreement 2004-2007 [2023] FWCFB 137at [32]
4 [2023] FWCFB 122 at [4].
OF THE FAIR WORK L MISSION THE SEA
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb105.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb212.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb195.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb137.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb122.pdf
