Application by Macmahon Contractors Pty Ltd [2016] FWC 198 (12 January 2016) [2016] FWC 198 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.318 - Application for an order relating to instruments covering new employer and transferring employees Macmahon Contractors Pty Ltd (AG2015/7709) DEPUTY PRESIDENT BULL SYDNEY, 12 JANUARY 2016 Application for an order relating to instruments covering new employer and transferring employees in agreements [1] On 17 December 2015, Macmahon Contractors Pty Ltd (the applicant) lodged an application in the Fair Work Commission (the Commission) for an order under s.318 of the Fair Work Act 2009 (the Act) which relates to instruments covering a new employer and transferring employees in the context of a transfer of business. [2] The applicant is the likely new employer of the business to which this application relates, and therefore has standing to apply for the order under s.318(2)(a) of the Act. [3] There are two agreements to which this application relates: 1. The Telfer Enterprise Agreement 2012 (the Telfer Agreement, AE898263) which has a nominal expiry date of 15 November 2016; and 2. The Macmahon Pilbara Surface Mining Agreement 2014 (which currently covers the applicant) which has a nominal expiry date of 29 May 2018 (the Macmahon Agreement, AE408299) Orders sought [4] The applicant seeks the following orders: 1. Pursuant to s.318(1)(a) of the Act that the Telfer Agreement does not and will not cover the applicant and any transferring employees; and 2. Pursuant to s.318(1)(b) of the Act, that the Macmahon Agreement cover the transferring employees of the applicant. [5] On 4 January 2016, the Commission requested the applicant provide further submissions in support of its application, as it is noted that rates of remuneration for certain classifications under the Macmahon Agreement are lower than the Telfer Agreement . In particular, pursuant to s.318(3)(a)(ii) of the Act, the Commission must have regard to whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment. Further, the Commission must have regard to whether the order would be in the public interest under s.318(3)(g) of the Act. Background [6] On or about 11 November 2015, the applicant entered into a contract with Newcrest Operations Limited (Newcrest) to undertake contract mining services at Newcrest’s Telfer Pilbara Mine (Telfer Mine) to commence on 10 February 2016. [7] It is stated by the applicant that Newcrest’s decision to outsource the mine functions to the applicant is to reduce costs and optimise productivity and performance. [8] Three Newcrest employees currently covered by the Telfer Agreement have applied for employment with the applicant. The applicant has offered employment to two employees conditional upon a s.318 order to which this application relates. [9] It is submitted that the applicant will employ a total number of approximately 80 employees to perform the contracted work with Newcrest (non-transferring employees). Transfer of business [10] The applicant submits that there will be a transfer of business as defined at s.311(1) of the Act on the basis that: 1. On or about 31 January 2016 the employment of Newcrest employees (old employer) engaged in the Telfer Mine will terminate (s.311(1)(a) of the Act); 2. On or about 1 February 2016, the transferring employees will commence employment with the applicant, being the new employer (s.311(1)(b) ; 3. The work the transferring employees will perform for the applicant (being the new employer) is the same or substantially the same as the work that the employee performed for Newcrest (the old employer), as per s.311(1)(c) of the Act; and 4. There is a connection between the applicant and the old employer as described in s.311(1)(d) of the Act, namely that the old employer has outsourced the transferring work to the applicant. [11] The actual transfer of business has not yet occurred, the new employment contracts with the applicant are to commence on 10 February 2016. [12] Section 317 of the Act provides for the Commission to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer. The orders sought in this application can be made ahead of the actual transfer of the business as envisaged and defined in s.311 as Macmahon Pty Ltd is "likely to be the new employer" as per s.318(2)(a) of the Act. There is likely to be on and from 1 February 2016, a transfer of business by means of an outsourcing contract from the old employer to the applicant as per s.317. The application is made pursuant to s.318 which permits the Commission to make certain orders if there is likely to be a transfer of business, as defined in s.311 of the Act. Relevant legislation [13] Section 312(1) of the Act defines the meaning of a transferable instrument. Pursuant to s.312(1)(a) the Telfer Agreement and the Macmahon Agreement constitute transferable instruments for the purposes of the Act. [14] Section 313 provides for the transferable instrument (the Telfer Agreement ) to, in effect, transfer to the new employer along with the employees who are transferred. [15] Therefore, the applicant and the transferring employees will be covered by the Telfer Agreement. [16] The applicant seeks that the Telfer Agreement not cover the applicant and the transferring employees, and that the Macmahon Agreement (which currently covers the applicant) to cover the transferring employees. [17] The relevant sections of the Act which allows for the Commission to provide the Orders sought by the applicant are: “ Orders relating to instruments covering new employer and 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 transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee; (b) an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.” [18] Section 318(3) of the Act sets out considerations that the Commission must take into account in deciding whether to make the order: “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....” Consideration [19] In its application, the applicant has addressed each of the matters the Commission is required to consider when issuing an order under s.318. The application was accompanied by: 1. Statutory declaration of Roger Hughes, General Manager and HR Executive for the applicant; 2. Expressions of interest document seeking expressions of interest from employees, with an explanatory memorandum regarding the outsourcing of work from the old employer, Newcrest to the applicant; 3. Notices to employees regarding the application to set aside the Telfer Agreement and that the Macmahon Agreement apply; 4. Comparison document of the key clauses between the Telfer Agreement and the Macmahon Agreement ; and 5. Offers of employment to the transferring employees and their signed acceptance of the offers. Section.318(3)(a)(i)- Views of the new employer or the likely new employer [20] Mr Hughes’ statutory declaration which was filed in support of this application stated that having the two agreements in place would create considerable workplace dislocation given that the same type of employees would have different rosters for the same work 1 . [21] The applicant seeks to standardise the conditions of employment at the Telfer Mine on the basis that such an arrangement will: ● Promote a cohesive workplace culture; ● Facilitate the movement of employees within the Telfer Mine; and ● Reduce the costs incurred in the administration of employment conditions. s.318(3)(a)(ii) - Views of the employees who would be affected by the order [22] The applicant states that the transferring employees were extensively consulted with prior to the offers of employment through: 1. Onsite meetings between the human resources department of the applicant and Newcrest employees at the Telfer Mine, and at that meeting providing Newcrest employees with the option of applying for employment with the applicant; 2. The distributing of the “expressions of interest” document for employees reference; 3. Providing Newcrest employees with information regarding the transfer of business and comparison document between the Telfer Agreement and the Macmahon Agreement. [23] The applicant states two out of the three Newcrest employees who applied for a position with the applicant have been offered employment, indicating that the transferring employees do not oppose the Macmahon Agreement covering them. s.318(3)(a)(ii) - Whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment [24] The applicant submits that there are differences between the Telfer Agreement and the Macmahon Agreement , referencing the comparison of terms and conditions document which was provided to the transferring employees. It was noted by the applicant, that the rates of pay under the Macmahon Agreement are significantly higher than the Mining Industry Award 2010 , which is the relevant underpinning award. [25] In response to the Commission’s concerns regarding remuneration, the applicant particularised the positions of employment offered to the transferring employees and the corresponding rates of pay in the Telfer Agreement and the Macmahon Agreement , confirming that the transferring employees would receive greater rates of remuneration under the Macmahon Agreement . To this extent, the applicant stated that any disadvantage would likely to be small. s.318(3)(c) - the nominal expiry date of the agreement [26] The Telfer Agreement has a nominal expiry date of 15 November 2016, and the Macmahon Agreement has a nominal expiry date of 29 May 2018. [27] The applicant submits that the Macmahon Agreement will be within its nominal term for eighteen months longer than the Telfer Agreement , therefore ensuring a longer period of stability in industrial relation at the Telfer Mine. s.318(3)(d) - Whether the Telfer Agreement would have a negative impact on the productivity on the new employer’s (the applicant) workplace [28] It is submitted that should the Telfer Agreement apply, it would have a negative impact on the productivity of the applicant’s workplace for the following reasons: 1. As the Telfer Agreement and the Macmahon Agreement provides different roster cycles, the applicant would have to run two roster cycles simultaneously which would result in significant additional travel and administration costs. 2. Further, having employees who are performing the same type of work under separate roster cycles and arrangements would create considerable workplace dislocation. s.318(3)(e) - Whether the applicant would incur significant economic disadvantage as a result of the Telfer Agreement covering it [29] It is submitted that the applicant would incur significant economic disadvantage a result of the Telfer Agreement covering it for the reasons stated above. s.318(3)(f) – The degree of business synergy between the Telfer Agreement and the Macmahon Agreement [30] The applicant submits that there is not a great degree of business synergy between the Telfer Agreement and the Macmahon Agreement , in particular the Macmahon Agreement provides for a 2 week on/1 week off roster on the basis of fly in/fly out work whereas the Telfer Agreement provides for a 2 week on/2 week off pattern of work. s.318(3)(g) - The public interest [31] It is submitted that it is in the public interest for the applicant to have one agreement cover all of its employees, as this will prevent a disparity arising between transferring employees and non-transferring employees. [32] The efficient and effective operation of the business of an applicant is a matter within the public interest (see for example Optus Administration Pty Ltd v ASU- Communications Division 2 ), which supports the applicant's contention that it is not in the public interest for a workforce to be covered by multiple industrial instruments. The applicant emphasised that this applied particularly to situations where the transferring employees amounted to only two employees out of 80 employees (non-transferring employees) to be covered by the Macmahon Agreement . Conclusion [33] I am satisfied that the Telfer Agreement and the Macmahon Agreement are transferable instruments as described in s.312(1)(a) of the Act and the circumstances described are a transfer of business within s.311 of the Act. [34] Having regard to the grounds and reasons stated in support of the application, I am satisfied that the requirements of the Act have been met. With respect to the public interest consideration, there is nothing which demonstrates that the orders sought would be contrary to the public interest but rather a promotion of balance to employees' terms and conditions and ensuring that the applicant's business operates effectively and efficiently. [35] For the reasons set out above, an order [ PR575505 ] will issue that the Telfer Agreement cease to cover the applicant or any transferring employees at the Telfer Mine, and the Macmahon Agreement will apply in its place. DEPUTY PRESIDENT 1 The Telfer Agreement and the Macmahon Agreement operate under different roster cycles and shift lengths 2 [2010] FWA 3567 Printed by authority of the Commonwealth Government Printer <Price code C, PR576013>