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Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional
instruments
Paul Day
(AG2023/4290)
FESTO PTY LTD EMPLOYEE COLLECTIVE AGREEMENT 2006
Hospitality industry
DEPUTY PRESIDENT WRIGHT
DEPUTY PRESIDENT ROBERTS
DEPUTY PRESIDENT SLEVIN
SYDNEY, 9 APRIL 2024
Application to extend the default period for Festo Pty Ltd Employee Collective Agreement 2006
[1] Mr Paul Day (Applicant), on behalf of all employees engaged in production and
warehousing functions by Festo Pty Ltd (Festo), has applied pursuant to subitem 20A(4) of Sch
3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth)
(the Transitional Act), to extend the default period for the Festo Pty Ltd Employee Collective
Agreement 2006 (the Agreement).
[2] The application seeks an extension of the default period for the Agreement until 6
December 2027.
[3] The Agreement is a collective agreement that was made under the Workplace Relations
Act 1996 (Cth) (WR Act) and approved under that Act by the Workplace Authority. The
Agreement is a ‘WR Act instrument’ within the meaning of item 2(2) of Sch 3 of the
Transitional Act. It is classified by item 2(5)(c)(i) of Sch 3 as a ‘collective agreement-based
transitional instrument’.
[4] 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. The SJBP Act refers to agreements of this kind as ‘zombie
agreements.’ 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 Pursuant to items 20A(1) and
(2) of Schedule 3 to the Transitional Act, the Agreement would have terminated on 6 December
2023 (the end of the default period) unless extended by the Commission. The Agreement
continued to apply pursuant to item 20A(11) pending our decision in this matter.
[2024] FWCFB 204
DECISION
AUSTRALIA FairWork Commission
[2024] FWCFB 204
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[5] Under subitem 20A(6) of Sch 3, where an application is made under subitem 20A(4) for
the default period to be extended, the Commission must grant the application for a period of no
more than four years if either (a), subitem (7), (8) or (9) applies and it is otherwise appropriate
in the circumstances to do so, or (b), it is reasonable in the circumstances to do so. Subitem (7)
applies if bargaining for a replacement agreement is occurring. Subitem (8) relates to individual
agreement-based transitional instruments. Subitem (9) applies if the application relates to a
collective agreement-based transitional agreement and it is likely that as at the time the
application is made the award covered employees, viewed as a group, would be better off
overall if the agreement continued to apply than if the relevant modern award applied.
[6] The application is made on the basis that it is reasonable in the circumstances to extend
the default period under subitem 6(b).
Background
[7] Festo sells pneumatic and electric automation solutions to the manufacturing industry.
Its operations include a production floor, which is responsible for assembly of the products
purchased and a warehouse, responsible for receipt of parts and the despatch of goods and
finished products. There are ten employees covered by the Agreement. Six work in the
warehouse and four in production. Warehouse employees pick, pack and record the movement
of goods. Production employees are using machinery to cut and shape pneumatic and electric
automation goods to customer specifications. The business operates from 8am to 5:20pm.
[8] The employees would otherwise be covered by the Storage Services and Wholesale
Award 2020 (Storage Award) or the Manufacturing and Associated Industries and Occupations
Award 2020 (Manufacturing Award).
[9] Clause 7.1 of the Agreement sets out annual wage rates applicable to employees. The
clause also provides for three 3.75% increases to be applied to the rates in 2006, 2007 and 2008.
Even when considering the wage increases, rates are still below the Award, and as such in
accordance with Item 13 of Schedule 9 of the Transitional Act 2009 (Cth), base rates of pay
under the Agreement are taken to be equal to the Award. The employees are actually paid rates
above the Agreement and Awards.
[10] The Agreement is to be read in conjunction with Parts I and IV (Long Service Leave)
of the Metal, Engineering and Associated Industries Award 1998. The Agreement relies on the
1998 Award for all terms and conditions other than in relation to wages, long service leave,
redundancy, dispute resolution procedure and cashing out of annual leave.
[11] The Agreement provides greater long service leave entitlements, accruing at the rate of
1.3 weeks per year of completed service and greater redundancy payments for employees with
at least 3 years' service. The Agreement provides a reduced redundancy payment of 3 weeks
redundancy pay per year of service, which falls below the Act for employees with less than 2
years' service.
[12] The Agreement includes a number of terms which are less beneficial than the Modern
Awards, including:
• lower allowances;
[2024] FWCFB 204
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• lower night shift allowances and shorter shift definition when compared to the Storage
Award;
• lack of early morning shift when compared to the Storage Award;
• reduced overtime penalty when compared to the Storage Award.
[13] Festo has proposed that once the Agreement terminates the employees’ employment be
regulated by contracts of employment that incorporate the more beneficial terms of the
Agreement including the more beneficial aspects of long service leave and redundancy pay.
[14] The Applicant contends that it is reasonable in the circumstances to extend the
Agreement because the employees will be better off under a collective agreement than under
the individual arrangements proposed by Festo.
Consideration
[15] In a number of recent Full Bench decisions, the Commission has refused to extend the
default period of transitional instruments that contain inferior conditions to those in the relevant
modern award. In Peter Frick,2 the Full Bench considered that the default position of the
statute to automatically terminate transitional instruments on 6 December 2023 suggests
a policy preference for employees covered by transitional instruments to be regulated by
contemporary instruments.3 In Kalfresh Management Services Pty Ltd,4 the Full Bench
expressed the view that where an agreement contains inferior and outdated terms and
conditions, this weighs strongly against a conclusion that it is reasonable in the
circumstances to extend a default period.5
[16] The Applicant seeks to maintain the Agreement due to a preference of the employees to
be covered by a collective agreement rather than the individual contract arrangements proposed
by Festo. The proposed arrangements will operate in conjunction with the industry awards.
These arrangements do not preclude the employees from entering into an enterprise agreement
under Part 2-4 of the Fair Work Act 2009 (Cth). Doing so would allow the employees’ terms
and conditions to be updated in accordance with the contemporary standards set out in that Act.
[17] Having regard to the Full Bench authorities and the material before the Commission in
this matter, we have determined it is not reasonable to extend the default period of the
Agreement. It is not reasonable to do so because the inferior conditions in the Agreement mean
it is likely that there would be a disadvantage to employees if the Agreement continues to apply.
The employees’ desire to be covered by a collective arrangement can be met by entering into
bargaining for a new enterprise agreement.
[18] As our decision to refuse to extend the default period 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 assist the parties in entering into the necessary administrative arrangements
to give effect to the sunsetting of the Agreement, the default period is extended to 16 April
2024.
[2024] FWCFB 204
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DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
AC301724 PR773324
1 [2023] FWCFB 105 at [3] to [18].
2 Peter Michael Frick [2023] FWCFB 137.
3 Ibid, [32].
4 Kallium Management Services Pty Ltd as Trustee forthe Kalium Labour Trust T/A Kalfresh Pty Ltd [2023] FWCFB 217.
5 Ibid, [14].
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/2023fwcfb137.pdf
https://www.fwc.gov.au/documents/decisionssigned/pdf/2023fwcfb217.pdf
