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
S & N Smith Investment Pty Ltd T/A The Coffee Club At Smithfield,
Cairns Central And Redlynch
(AG2023/4902)
S AND N INVESTMENTS PTY LTD COLLECTIVE AGREEMENT 2007
Hospitality industry
DEPUTY PRESIDENT ROBERTS
COMMISSIONER PERICA
COMMISSIONER LIM
SYDNEY, 21 MARCH 2024
Application to extend the default period for S AND N INVESTMENTS PTY LTD COLLECTIVE
AGREEMENT 2007
Introduction
[1] On 5 December 2023, S & N Smith Investment Pty Ltd (Applicant) made an application
under 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 S and N
Investments Pty Ltd Collective Agreement (Agreement). The application seeks to extend the
default period to 6 December 2027.
[2] The Agreement was made in 2007 and approved under the Workplace Relations Act
1996 (Cth) (WR Act). The Agreement is a ‘WR Act Instrument’ within the meaning of item
2(2) of Sch 3 to the Transitional Act. It is classified by item 2(5)(c)(i) of Sch. 3 as a ‘collective
agreement-based transitional instrument’.
[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 subitems 20A(1) and (2) of Sch 3 to the
Transitional Act, the Agreement was to terminate on 6 December 2023 unless the default period
is extended by the Commission.
[4] Item 20A of Sch 3 to the Transitional Act provides for the automatic sunsetting of
agreement-based transitional instruments by the end of the default period on 6 December 2023,
subject to the capacity to apply to the Commission for an extension of that period for up to four
[2024] FWCFB 176
DECISION
AUSTRALIA FairWork Commission
http://www.austlii.edu.au/au/legis/cth/num_act/fwlajbpa2022516/
http://www.austlii.edu.au/au/legis/cth/num_act/fwlajbpa2022516/
http://www.austlii.edu.au/au/legis/cth/num_act/fwlajbpa2022516/
[2024] FWCFB 176
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years in prescribed circumstances. The agreements to which these provisions apply are referred
to in the SJBP Act as ‘Zombie Agreements'. The main features of item 20A of Sch 3 are
described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd1 (Suncoast) and we
rely upon what is said in that decision.
[5] When an application is made under subitem (4) of item 20A of Sch 3 to the Transitional
Act, the Commission is required, under subitem (6)(a), to extend the default period if the
Commission is satisfied that subitem (7), (8) or (9) applies and it is otherwise appropriate in the
circumstances to do so. Put briefly, subitem (7) applies if, at the time of the application, the
applicant is bargaining for a replacement agreement. Subitem (8) applies to individual
agreement-based transitional instruments. Subitem (9) applies if, as at the time the application
is made, it is likely the award covered employees covered by the Agreement, viewed as a group,
would be better off overall if the Agreement continued to apply than if the relevant modern
award or awards applied (BOOT test).
[6] The Commission must also extend the default period under subitem (6)(b) if satisfied it
is reasonable in the circumstances to do so.
[7] The application is made pursuant to subitem 6(a) on the basis that the employees covered
by the Agreement would be better off overall if the Agreement continued to apply to them rather
than if the relevant modern award applied and it is otherwise appropriate in the circumstances
to extend the default period.
Background
[8] The Applicant operates Coffee Club franchises in Smithfield, Cairns Central and
Redlynch in Queensland. It employs approximately 44 employees under the Agreement. Of this
number, three are employed on a full-time basis, 18 are employed on a part-time basis, and 23
are employed as casuals. If the Agreement did not apply, the Restaurant Industry Award 2020
(the Award) would apply to the employees.
[9] The Applicant submits that the employees would be better off overall under the
Agreement compared to the Award in the following ways:
(a) Employees are paid an all-inclusive hourly rate for every hour worked Monday-Sunday.
This means they are paid above award level wages as ‘the all-inclusive rate is calculated
based on employees working only either a Saturday or Sunday and on average five
public holidays per year.’
(b) Most of the employees are part-time and thus accrue annual leave. A change to the
Award would mean a decrease in their hourly rate, which would result in accrued annual
leave hours being paid out at a lower rate.
(c) Casual employees are, as a matter of practice, paid a 25% loading, although the
Agreement provides for a loading of 20%.
(d) Superannuation contributions are calculated and paid on the all-inclusive hourly rate,
rather than base rate.
[2024] FWCFB 176
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(e) The Applicant has applied the Fair Work Commission’s minimum wage increase each
year to the all-inclusive hourly rate paid to employees.
[10] The Applicant submits that the Agreement has passed several compliance audits
conducted by the Fair Work Ombudsman and contracted consultancies. The Applicant also
submits that they are a family business that has been operating for over 21 years and that the
last few years have been strenuous, leading the Applicant to close two of their businesses last
year.
The ‘Better Off Overall Test’
[11] There is a lengthy list of issues with the Agreement. The major issues can be summarised
as follows:
(a) The Agreement provides a table with all-inclusive hourly rates applicable to employees
which are loaded rates that are paid in lieu of ordinary hours, overtime, weekends,
annual leave loading, meal allowances, public holidays, any other relevant award
allowances and any other penalty rates. The agreement does not provide for how the all-
inclusive rates are calculated.
(b) The all-inclusive rates referred to in the Agreement are below the Award rates. Clause
3.8 of the Agreement says that the rates of pay shall be assessed by the employer
annually and may be increased where appropriate in consideration of the minimum
wage set by the Australian Fair Pay Commission. The clause also says that where the
rates in the Agreement are less than the Australian Pay and Classification Scales
(APCS), then any increases to the APCS shall increase rates in the Agreement. The
combined effect of these provisions is unclear however we note that item 13 of Schedule
9 of the Transitional Act has the effect that the base rate of pay payable under the
Agreement is to be no less than the base rate of pay payable under the Award.
(c) Given the base rates of pay in the Agreement would be no less than the Award, full-
time and part-time employees would be worse off given the lack of annual leave loading
and allowances. Should they work at times when they would otherwise receive
weekend, overtime or public holiday penalties, they will also not be better off overall.
(d) The Agreement provides for a 20% loading for casual employees compared to the 25%
loading in the Award.
(e) The Agreement is largely silent on terms and conditions that are otherwise set out in the
Award.
(f) There are several terms in the Agreement that are inconsistent with the National
Employment Standards (NES). These include clauses which allow the employer to
withhold monies due to an employee if the employee fails to give notice or abandons
their employment, clauses that provide for the accrual of leave in a fashion that is
inconsistent with the NES, a clause that limits the amount of carer’s leave an employee
can take and a clause that allows the employer to deduct monies from an employee’s
final termination pay.
[2024] FWCFB 176
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[12] We have considered the Agreement as a whole, including clauses of the Agreement that
are more beneficial than the Award such as:
(a) The Agreement provides a higher minimum engagement period for casual employees
of three hours, compared to two hours in the Award.
(b) The Agreement provides higher percentages for junior employees under the age of 19
years old.
[13] The Applicant was given the opportunity to respond to the above issues. The Applicant’s
response can be summarised as being that the Applicant affords employees better wages and
conditions than those provided for in the Agreement. The Applicant also submitted that the
Agreement is silent on terms and conditions to allow for flexibility, and that it was not intended
to leave out safeguards or less beneficial terms.
Consideration
[14] Based on the above, we cannot be satisfied that the employees, viewed as a group, would
be better off overall if the Agreement continued to apply to them than if the Award applied.
The operation of the all-inclusive wage rates in the Agreement in lieu of various award
provisions such as overtime, weekend penalty rates, leave loading and allowances means
employees would not be better off if the Agreement continues to apply to them. We also note
that a majority of employees are employed as casuals and that the casual loading provided for
in the Agreement is less than that in the Award. We observe that the relevant comparison for
the purpose of assessing whether employees would be better off is between the terms of the
Award and those of the Agreement, not what is or has been paid as a matter of practice. We
conclude that subitem (9) of item 20A of Sch 3 does not apply here.
[15] For completeness we would add that we do not consider that it would be otherwise
appropriate to extend the default period. The Full Bench in Northern Inland Credit Union
Limited2 noted that the application in that matter was not accompanied by any proposal to
transition within a reasonable period of time to a contemporary employment arrangement
consistent with the FW Act and the current circumstances of the employees involved. We are
of the view that the statutory intention behind the SJBP amendments is that transitional
instruments approved many years ago under previous iterations of the legislation are to sunset
and be replaced by modern industrial instruments made under the FW Act unless there are
cogent reasons why that should not occur3. Here the Applicant sought the maximum available
extension for an instrument that was made some 16 years ago, and which contains ambiguities,
outdated references and conditions of employment and potential inconsistencies with the NES.
We do not consider it would be appropriate to grant the extension sought in those circumstances.
[16] The application is dismissed.
[17] As our decision is to refuse to extend the default period under subitem 20A(6) of Sch 3
and our decision is made after the sunset date in the Transitional Act, subitem (11)(e) provides
that we must extend the default period to the day of this decision or specify a day that is not
more than 14 days after the day of this decision. We have decided that, to enable the Applicant
to make the necessary administrative arrangements to give effect to the sunsetting of the
Agreement, the default period is extended to 4 April 2024.
THE FAIR WORKS LUSTRAL AMISSION THE SE
[2024] FWCFB 176
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DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
AC312613 PR772589
1 [2023] FWCFB 105 (‘Suncoast Scaffolding’).
2 [2023] FWCFB 120
3 See Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified Agreement
2004-2007 [2023] FWCFB 137, at [32].
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb105.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb120.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb195.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb137.pdf
