Application by Sub Regional Investments Pty Ltd atf the Sub Regional Investment Trust [2016] FWC 104 (6 January 2016) [2016] FWC 104 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.319 - Application for an order relating to instruments covering new employer and non-transferring employees Sub Regional Investments Pty Ltd atf the Sub Regional Investment Trust (AG2015/7543) COMMISSIONER ROE MELBOURNE, 6 JANUARY 2016 Application for order relating to instruments covering new employer and non-transferring employees in agreements; IPCA (Vic) Enterprise Agreement 2012. [1] Sub Regional Investments Pty Ltd (the new employer) has made an application under Section 319(1)(b) of the Fair Work Act 2009 (the Act). They are seeking orders that the transferable instrument, the IPCA (Vic) Enterprise Agreement 2012 (the Agreement), that covers the new employer (franchisees of Subway) will also cover the non-transferring employees who perform the transferring work for the new employer. This means that all of the new employer’s employees who perform the transferring work (whether they are transferring employees or non-transferring employees) will be covered by the transferable instrument. The nominal expiry date of the Agreement is 23 April 2016. [2] I am satisfied of the following based upon the material provided by the employer: a. A transfer of business has occurred between BraSub Pty Ltd and Sub Regional Investments Pty Ltd atf the Sub Regional Investment Trust. There has been a transfer of assets. Existing employees of BraSub Pty Ltd were terminated and were reemployed by Sub Regional Investments Pty Ltd within three months and are engaged in the same or substantially similar work. b. The IPCA (VIC) Enterprise Agreement 2012 is a transferable instrument. It applies to all transferring employees pursuant to Section 313 of the Act. c. Sub Regional Investment Trust can make and has made an application that non-transferring employees, that is, those employees who commence employment with the employer who would otherwise be covered by the Fast Food Industry Award 2010 be covered by the Agreement. The application relates to any classifications and locations covered by the Agreement and to employees engaged prior to or after the date of the proposed Order. d. There are a number of non-transferring employees who have commenced work with Sub Regional Investment Trust. e. The company operates the Subway restaurant business in Bairnsdale, Victoria. 11 employees transferred and to date 3 non-transferring employees have been engaged. f. The 3 non-transferring employees have signed forms that they support the application by the employer. They say that the employer has explained how the terms of the Agreement would affect them and have had an opportunity to consider the terms of the Agreement (Section 319(3)(a)(ii). g. The views of the employer (Section 319(3)(a)(i)) support the making of the Order sought. h. The nominal expiry date of the Agreement is 23 April 2016 (Section 319(3)(c)). i. The making of the order would not have a negative impact on the productivity of the workplace (Section 319(3)(d)). j. The company would not suffer any significant economic disadvantage as a result of the instrument covering the non-transferring employees (Section 319(3)(e)). k. There is little business synergy between the Agreement and the Award. The conditions in the two instruments are substantially different (Section 319(3)(f)). [3] The Order can only apply to non-transferring employees from after the date the Order is made (Section 319(4)). [4] I sought additional information from the employer including the following. a. Why does the Order sought apply to locations other than the Bairnsdale site? Does the employer operate at other sites at present and/or plan to operate at other sites? b. Did the employer provide employees with any document to explain the effect of the employment on the non-transferring employees? If so could a copy be provided? c. How are non-transferring employees not disadvantaged when the Agreement: Allows for annual and personal leave entitlements to be unpaid. Allows the employer to choose the rates of pay in option A which may be less than the rates applicable under the Award particularly where employees work a high proportion of their hours on weekends or at night. Allows salaried employees to work overtime without any limit expect for the “reasonable additional hours” requirements which could mean that salaried employees who work significant overtime and a high proportion of their work on weekends and at night are paid less than the Award. [5] There were some other potential issues of disadvantage which were raised. After considering responses to those issues I concluded that although they may disadvantage employees to some extent I did not consider the potential disadvantage to be sufficient to outweigh the other factors I am required to consider under Section 319. Why does the Order sought apply to locations other than the Bairnsdale site? Does the employer operate at other sites at present and/or plan to operate at other sites? [6] The employer confirmed that it currently operates and employs employees at its Bairnsdale and Traralgon stores. Due to a misunderstanding between the Director of the Applicant, and their legal representative, the application sought to have the Agreement cover the Bairnsdale store, and any additional stores that the Applicant operated. The Applicant has confirmed that whilst it currently operates additional stores, and will look to open additional locations, it seeks an Order that the IPCA Agreement apply to non-transferring employees employed at its Bairnsdale store only. [7] I will accordingly amend any Order should it be made to confine its application to the Bairnsdale store only. Did the employer provide employees with any document to explain the effect of the employment on the non-transferring employees? If so could a copy be provided? [8] The Applicant confirmed that it did not provide the employees with any documentation that explained the effect of the employment on the non-transferring employees. This reduces the weight which should be given to the views of the employees as expressed through the signed forms. [9] The Applicant in its submission made the following submission in respect to the fact that the Agreement allows for annual leave and personal leave entitlements to be unpaid: “22. The Applicant submits that since the approval of the IPCA Agreement, the FWC has made a determination on loaded wage rates in Canavan Building Pty Ltd [2014] FWCFB 3202 ('Canavan Decision'). 23. The Canavan Decision outlawed the use of loaded rates as they breached the National Employment Standards. 24. The Applicant states that no transferring employees are employed under the loaded wage rates, and that it does not intend to employ staff under the loaded wage rates. 25. The Applicant undertakes that it will not pay any transferring or non-transferring employees, loaded wage rates under clause 32 of the IPCA Agreement.” [10] The Applicant in its submission made the following submission in respect to the fact that the Agreement allows the employer to choose the particular rate of pay option. Option A excludes penalty payments for weekends and at night. If an employee worked a high proportion of their hours on weekends or at night they may be disadvantaged when compared to the Award. “26. At the time the IPCA Agreement was approved by the FWC, a Better Off Overall Test ('BOOT') analysis was undertaken. 27. The BOOT was based on a number of rosters which were provided by employers who would be covered by the IPCA Agreement. 28. The wage rates in option A were then calculated on a spread of hours which included weekend and night time work. 29. The rates provided in the Agreement were increased each year during the transitional period, to ensure that employees were no worse off under the Agreement, based on the spread of hours provided to the FWC at the time of approval. 30. The Applicant has provided a month of rosters that show the employees work varying shifts, on different days, and would not be worse off under the IPCA Agreement. 31. Currently, only two employees are employed under option A, and these employees work a spread over 5 days a week, with only 1 weekend shift per week. 32. It is submitted that based on the representative rosters provided, employees will not be disadvantaged under the IPCA Agreement.” [11] The Applicant in its submission made the following submission in respect to the fact that the Agreement allows salaried employees to work overtime without any limit except for the “reasonable additional hours” requirements which could mean that salaried employees who work significant overtime and a high proportion of their work on weekends and at night are paid less than the Award. “37. In calculating the salaries provided in the IPCA Agreement, a component has been included for overtime, evening and weekend work. 38. In accordance with section 206 of the Act, on 1 July each year, a calculation is undertaken to ensure that none of the minimum wage rate options under the IPCA Agreement are less than the minimum base rate provided by the Award. 39. The salaries provided across the IPCA Agreement reflect the highest salary calculated under all the minimum wage schedules. 40. The current minimum IPCA Agreement salaries, and the Award weekly rates, are provided below: Classification Fast Food Industry Award 2010 IPCA Agreement Level 1 $721.50 $881.00 Level 2 $764.90 $934.00 Level 3 $786.10 $960.00” [12] I was not fully satisfied by the responses of the employer. I gave the employer the opportunity to be heard further or to have the matter determined on the basis of written submissions. The employer chose to make further written submissions and have the matter determined on that basis. Those further submissions were received on 21 December 2015. [13] The Applicant conceded that the Agreement does not restrict the number of days that an employee can be employed on a weekend under Option A which excludes payment of weekend or night penalties. They advised that only one employee was currently employed under Option A. This employee is employed as a full time, salaried employee, who work 4 days during the week, and one day on the weekend. The employee is paid a salary in excess of the minimum under the Agreement. The employer does not intend to employ persons under Option A unless they work a pattern of four days during the week and one day on the weekend. [14] The Applicant submits that it will provide any employees employed under Option A, with a letter, which will advise that: (a) The employee will be employed under Option A; (b) During the employee's employment, the Applicant will ensure that the employee is employed on weekends for no more than 25% of their rosters, averaged over a 4 week period; and (c) If the employee is employed for more than 25% of their roster on a weekend, averaged over a 4 week period, the employee will be paid the greater of the entitlements provided for by Option E or Option A. [15] It is submitted that by providing the employee with the contractual entitlement outlined in paragraph 11, employees will not be disadvantaged by the making of the order. Conclusion [16] For the reasons discussed earlier the requirements for the making of the proposed order in Sections 319(1) and (2) have been met. I have taken into account the matters specified in Section 319(3). The views of the employer and the employees stand in favour of making the order. Although the employee views are not a strong consideration given that there is no evidence that they were fully aware of the consequences of the proposed Order. The nominal expiry date of the Agreement is only a few months away so the restriction on employees’ ability to bargain for superior conditions is only a short term issue. This is a neutral factor. The productivity and economic disadvantage matters are neutral factors. The lack of business synergy between the Award and the Agreement is a factor that stands in favour of making the order. I am satisfied that, absent other considerations, it would not be generally in the public interest to make an Order in circumstances where employees would be disadvantaged when compared to the Award. It is in the public interest to generally maintain the Award as the minimum safety net of wages and conditions. I am therefore satisfied that if employees would be disadvantaged when compared to the Award by the making of the Order then the order should not be made and conversely if I am satisfied that employees would not be disadvantaged then the Order should be made. [17] Without measures to rectify the concerns I have no doubt that employees could be disadvantaged by the making of the Order. The test I am required to apply under Section 319(3)(b) is different from the BOOT applied at the time the Agreement was made. The circumstances faced by the employees at this time, more than three years after the Agreement was approved, differ from the circumstances at the time the Agreement was approved. [18] The reference by the employer to typical rosters and the rates currently paid does not reduce my concerns. There is nothing under the Agreement to prevent the employer from changing the rosters, the pay option applicable to a new employee under the Agreement or the rates of pay provided they exceed the requirements specified in the Agreement. [19] I am satisfied that employees could be disadvantaged by the making of the Order because: • They could work sufficient weekends and nights on an all inclusive pay rate under the Agreement such that their rate of pay would be less than that applicable under the Award. • They could be salaried employees and work sufficient additional hours without the payment of overtime such that their rate of pay would be less than that applicable under the Award. • They could take their annual leave and personal leave entitlements unpaid. [20] I am satisfied that the concerns can be overcome by a combination of the two methods proposed by the applicant employer. Firstly, the provision of a signed undertaking; and secondly, by the incorporation of that undertaking into a new contract of employment by way of signed letter to affected employees, including future employees. I will issue the Order sought in respect to the Bairnsdale store applicable from the date the Order is made provided that the applicant employer provides a signed undertaking which includes an undertaking to provide all employees, including future employees, affected by the Order with a signed letter on company letterhead to similar effect. The undertaking should cover the following matters. a. An undertaking that the employer will not enter into any agreement to pay annual leave or paid personal leave as a loaded wage rate in accordance with Clause 32 of the Agreement. b. An undertaking that no employee will be engaged under Option A unless they have a contract of employment which guarantees that they will be employed on weekends for no more than 25% of their rosters, averaged over a 4 week period and that in the event that they are employed for more than 25% of their roster on a weekend, averaged over a 4 week period, the employee will be paid the greater of the entitlements provided for by Option E or Option A. c. An undertaking to apply the wage rates as per the 2015/2016 schedule as a minimum and to adjust those rates in future years in line with decisions of the Fair Work Commission in respect to Award rates. d. An undertaking to conduct a reconciliation of each salaried employee’s pay when compared to the amount which would have been payable under the Award each 26 weeks or upon termination of employment and to pay the difference should there be any shortfall. [21] Should an acceptable undertaking and sample letter be provided by 13 January 2016 the Order shall be made. In the event that an acceptable undertaking and sample letter has not been provided by that date the application is dismissed. COMMISSIONER Printed by authority of the Commonwealth Government Printer <Price code C, PR575877>