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 Pharmelite Pty Ltd & MVDP Capital Pty Ltd & AKCY Pty Ltd T/A Camden Day and Night Pharmacy (AG2023/4423) Woonona Pharmacy Management Pty Ltd (AG2023/4732) Salton Pty Ltd T/A Delroy TerryWhite Chemmart (AG2023/4795) Pharmacy industry DEPUTY PRESIDENT ROBERTS DEPUTY PRESIDENT SLEVIN COMMISSIONER CRAWFORD SYDNEY, 10 JANUARY 2024 Application to extend the default period for the Community Pharmacy Multiple Business Agreement (New South Wales) Introduction [1] The following entities have made applications under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) to extend the default period for a multi-business agreement, the Community Pharmacy Multiple Business Agreement (New South Wales) (Agreement): a. Pharmelite Pty Ltd, MVDP Capital Pty Ltd and SKCY Pty Ltd t/a Camden Day and Night Pharmacy have made a joint application (Pharmelite & Ors Application). This application is made pursuant to Sch 7 of the Transitional Act, which is directed at enterprise agreements made during the bridging period, and seeks to extend the default period for the Agreement to 6 December 2025. b. Woonona Pharmacy Management Pty Ltd (Woonona Application). This application is made pursuant to Sch 3 of the Transitional Act and seeks to extend the default period for the Agreement to 30 November 2027. [2024] FWCFB 3 DECISION f_p_n_1_ [2024] FWCFB 3 2 c. Salton Pty Ltd t/a Delroy TerryWhite Chemmart (Salton Application). This application is made pursuant to Sch 3 of the Transitional Act and seeks to extend the default period for the Agreement to 30 June 2024. [2] The Commission’s records indicate 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’. Agreements of this kind are commonly referred to as ‘zombie agreements’. [3] Given the Agreement is WR instrument, we will exercise our discretion to amend the Pharmelite & Ors Application to provide that it is made pursuant to Schedule 3 of the Transitional Act. [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. 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 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 [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 extend the default period 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. Grounds relied upon Pharmelite & Ors Application [6] The grounds relied upon for the Pharmelite & Ors Application are: a. The businesses have been impacted by the 60-day dispensing rule introduced on 1 October 2023. b. There has been a recent change of ownership which has had an impact on payroll processes. c. One owner is off work due to serious health issues and another is on maternity leave. d. The overwhelming majority of employees would be better off overall under the Agreement than they would be under the Pharmacy Industry Award 2020 (Award). [7] The grounds indicate that the Pharmelite and Ors Application relies on subitem 20(6)(a) and (9) of Sch 3 to extend the default period because employees are likely to be better off overall if the Agreement continues to apply rather than the relevant modern award, and it is otherwise f_p_n_2_ [2024] FWCFB 3 3 appropriate to do so. In addition, the grounds indicate that the application relies on subitem 20(6)(b), which can apply where “it is reasonable in the circumstances” for the default period to be extended. Woonona Application [8] The grounds relied upon for the Woonona Application are: a. The pharmacy has the longest trading hours of any pharmacy between Wollongong and Sutherland. The pharmacy is open until 9pm on weekdays and 8pm on weekends and public holidays. b. The pharmacy is currently unprofitable after 7pm on weekdays and 5pm on weekends. The longer operating hours are for the benefit of the community. The pharmacy is used as an urgent care centre because most medical practices close at 6pm. c. The Agreement provides flexibility. If the Agreement ceases to operate, the pharmacy will reduce its trading hours, which will reduce health access for the relevant communities. d. The introduction of the 60-day dispensing rule has reduced profitability for the pharmacy. [9] The grounds indicate the Woonona Application relies on subitem 20(6)(b) to extend the default period because “it is reasonable in the circumstances” to do so. [10] However, a comparison of terms between the Agreement and the Award prepared by the Pharmacy Guild of Australia, New South Wales Branch was subsequently filed in support of the Woonona Application. We will take this to mean the Woonona Application also relies on subitem 20(6)(a) and (9) of Sch 3 to extend the default period because employees will be better off under the Agreement, and it is otherwise appropriate to do so. Salton Application [11] The ground relied upon for the Salton Application is: a. The pharmacy is in the process of being sold and changing industrial instruments for the employees will be difficult during the finalisation of the sale. [12] This ground indicates the Salton Application relies on subitem 20(6)(b) to extend the default period because “it is reasonable in the circumstances” to do so. Consideration Better off overall ground [13] We are not satisfied we can extend the default period pursuant to subitem 20(6)(a) and (9) of Sch 3 as sought by the Pharmelite and Ors Application and the Woonona Application, f_p_n_3_ [2024] FWCFB 3 4 because the better off overall requirement has not been met, that is, the relevant employees, viewed as a group, would not be better off overall if the Agreement applied to them rather than if the relevant modern award applied. [14] The relevant modern award is the Pharmacy Industry Award (Award). [15] The Commission’s Agreement’s Team produced an analysis of the Agreement against the Award. A copy of the analysis was provided to the applicants for comment. A response was received on behalf of the applicants. It included a table prepared by the Pharmacy Guild comparing each of the terms in the Agreement with the equivalent Award term. The following arises from that material. [16] The applicants’ response to the Commission’s analysis compared the rates of pay under the Agreement with the Award rates applicable during the 2022/2023 financial year and concluded all of the rates in the Agreement were higher than the Award. The relevant time for the BOOT comparison is the date that the applications for extension of the agreement were made. The applications were made in November and December 2023. The rates in the Award increased by 5.75% from 1 July 2023, in accordance with the Annual Wage Review Decision 2022-23. Consequently, the correct comparison rates were those higher rates. Applying those rates, the Agreement contains a mixture of rates that are either marginally above, or marginally below, the minimum rates for the corresponding classifications in the Award. In circumstances where the Agreement rates fall below the Award, Item 13 of Schedule 9 of the Transitional Act requires the employers covered by the Agreement to apply the minimum base rates in the Award. All other conditions of employment being equal, employees who are paid at Award rates would not be better off overall under the Agreement. [17] Further, the following conditions in the Agreement are inferior to the Award: a. Casual loading. b. Casual minimum engagement for Pharmacy Assistants. c. Reduced casual shift, weekend, and overtime penalties. d. Reduced Saturday penalty rates. e. Reduced Sunday penalty rate for Pharmacy classifications. f. Extended averaging period for ordinary hours. g. Lack of safeguards concerning annualised salaries. h. Lack of safeguards for part-time employees. [18] There are some benefits to employees in the terms of the Agreement, including greater redundancy payments, more flexible rostering arrangements, and entitlements to meal breaks. [19] Given the various inferior conditions and the minimal conditions in the Agreement that are superior to the Award, we find the employees as a group are not likely to be better off under the Agreement. [20] We have considered the comparison document prepared by the Pharmacy Guild but do not consider this alters our assessment that the employees, viewed as a group, are not likely to be better off under the Agreement. f_p_n_4_ [2024] FWCFB 3 5 [21] As a result, the default period for the Agreement cannot be extended under subitem 20(6)(a) and (9) of Sch 3 to the Transitional Act. ‘Reasonable’ ground [22] 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. [23] We also consider the purpose of the provisions to be relevant to the broad evaluative judgment we are required to make. The explanatory memorandum expressed the purpose of the provisions relating to extending the default period in this way2: 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. [24] Full Benches of the Commission have said a number of times that the purpose of the sunsetting arrangements introduced in the SJBP Act3 is that zombie agreements are to be replaced by contemporary instruments made under the Fair Work Act 2009 (FW Act). [25] For the reasons which follow, we are not satisfied that in the circumstances of these applications it is reasonable to extend the default period for the Agreement. [26] We acknowledge the profitability impact identified by the relevant pharmacies concerning the recent introduction of a 60-day dispensing rule. However, this change has likely impacted all pharmacies, including those applying the Award rates and conditions. This issue does not make it reasonable to extend the Agreement. [27] We acknowledge the important community health services currently being provided by the applicant in the Woonona Application in its region and that our decision may have an impact on its operating hours. [28] We also accept it is inconvenient to have to change industrial instruments during a sale process, and when owners are off on leave. [29] However, we are mindful of the need to ensure that the integrity of the safety net provided for by the Act and modern awards is not undermined by very old agreements that no longer meet contemporary standards. We also note that the sunsetting of agreements of this kind was provided for by amendments to the Transitional Act in December 2022 and that there has been an opportunity to put alternative arrangements in place since that time. f_p_n_5_ [2024] FWCFB 3 6 [30] We also note that the Agreement is a multi-employer agreement. Clause 1.3.1 provides that it applies to and binds employers in the community pharmacy industry listed in Schedule A to the Agreement. Schedule A lists over 120 employers. The Agreement also applies to and binds employees of the employers listed in Schedule A working as pharmacists, pharmacy students, pharmacy trainees and pharmacy assistants. The extension of the Agreement at the behest of the applicants in this matter has the potential to impact the industrial arrangements of those other employers and their employees in circumstances where they have played no part in these proceedings. This is a further reason that it is not reasonable to grant the applications to extend the default period for the Agreement. [31] We are not satisfied that in the circumstances of this case it is reasonable to extend the default period for the Agreement. The Agreement does not contain contemporary terms. We consider the Agreement is precisely the type of instrument that the SJBP Act was intended to address because its continued operation would disadvantage employees and the conditions are outdated. [32] As our decision is to refuse to extend the default period under subitem 20(6) of Sch 3 and our decision is made after the sunset date in the Transitional Act, subitem 20(11) 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 parties to make the necessary administrative arrangements to give effect to the sunsetting of the Agreement the default period is extended to 24 January 2024. [33] The application is dismissed. DEPUTY PRESIDENT Printed by authority of the Commonwealth Government Printer <AC326059 PR770090> 1 [2023] FWCFB 105 at [3] to [18]. 2 Explanatory Memorandum Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 at [670]. 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 137, at [32]. f_p_n_6_