Annecto Inc [2023] FWCFB 169 | Case summary

[1] Annecto Inc. (Annecto) has applied, pursuant to 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 Annecto and Health Services Union of Australia Certified Agreement 2004-2007 (Zombie Agreement). The Agreement was approved on 21 December 2004 in accordance with s.170LT of the Workplace Relations Act 1996. It is an agreement-based transitional instrument to which item 20A applies. The Health and Community Services Union (HACSU) (formerly the Health Services Union of Australia), which is a party bound by the Zombie Agreement, supports the application.

[2] 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 the default period for up to four years in prescribed circumstances. The main features of item 20A of Sch 3 are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd[1] and we rely upon what is said in that decision.

[3] 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) to extend the default period if the Commission is satisfied that:

(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.

[4] Relevantly, subitem (7) applies to an application which is made at or after the notification time for a proposed enterprise agreement and the proposed agreement will cover the same or substantially the same group of employees covered by the agreement-based transitional agreement. Subitem (8) applies to an individual agreement-based transitional instrument. Subitem (9) applies to a collective agreement-based transitional instrument where the award covered employees, viewed as a group, would be better off overall if the instrument applied to those employees than if the relevant modern award applied.

[5] The applicant relied upon on a statement of Saj Kethsiri, Manager - Workplace Relations in support of its application. Relevant to subitem (7) Mr Kethsiri described bargaining towards a proposed agreement that would cover the employees currently covered by the Zombie Agreement. Annecto is a large not-for-profit organisation which provides aged care and disability support services. It operates in Victoria, New South Wales, the Australian Capital Territory and Queensland. It employs approximately 1,086 staff. Most of its staff are in Victoria. The Zombie Agreement only applies in Victoria. In February 2019 it merged with another Victorian disability services organisation. The employees of that organisation continue to be covered by another enterprise agreement. Consequently, the Zombie Agreement does not apply to all of Annecto's employees. Mr Kethsiri estimates that it covers around 48% of Annecto's workforce.

[6] In April 2023, the applicant commenced discussions with employees indicating it would be seeking an agreement with national coverage. Prior to those discussions Annecto met with representatives of HACSU and the Australian Education Union to convey its intention to issue Notices of Employee Representational Rights (NERR) to employees. HACSU was not supportive of a national agreement, preferring instead a separate Victorian Agreement. The scope of the proposed agreement is contested. NERRs were issued to employees on 3 May 2023. There was a bargaining meeting on 29 May 2023. The employees were represented by the two unions and two individual employees attended as individual bargaining representatives.

[7] The issue of scope was raised early in the bargaining and is contested. What is not contested is that a proposed agreement will cover the same employees covered by the Zombie Agreement. Annecto presented its log of claims on 27 July 2023 and is expecting separate logs of claims from each of the unions.

[8] Mr Kethsiri describes further complexity associated with the bargaining arising from the merger. The employees of the disability services organisation that transferred to Annecto are covered by their own enterprise agreement. This gives rise to administrative complexity as well. Annecto wishes to consolidate the terms and conditions applying to its allied health staff by bringing all of its employees, who are currently covered by different instruments, under a single enterprise agreement. Mr Kethsiri estimates that it will take 12 to 18 months to finalise an agreement.

[9] Annecto contends that the sunsetting of the Zombie Agreement would lead to a further complexity as it would need to transition its staff covered by the Zombie Agreement to the Social, Community, Home Care and Disability Support Services Industry Award 2010 (SCHADS Award) in circumstances where it hopes to then transition them to an enterprise agreement. The complexity is associated with the payroll and rostering software that it uses to ensure compliance with its obligations under the different instruments. A change to the SCHADS Award and then to a new agreement will require substantial changes to this software twice in a relevantly short period raising logistical and cost implications.

[10] The Commission provided an analysis of the terms of the Zombie Agreement against the SCHADS Award for the purposes of the better off overall test. The analysis showed that that employees would not be better off overall if the Zombie Agreement remained. Mr Kethsiri accepted this analysis but attested to a number of practices in place which are additional to the terms of the Zombie Agreement which are beneficial to employees and would mean that the employees would be better off overall if the current arrangements, the Zombie Agreement and the more favourable terms, continued.

[11] In his statement Mr Kethsiri provided an undertaking that while the Zombie Agreement continues to apply Annecto will continue to:

[16] The Full Bench in ISS Health Services Pty Ltd[2] described the three requirements for subitem (7) to apply. The first is the requirement that the application is made at or after the 'notification time' for a proposed agreement as defined in s.173(2) of the Fair Work Act 2009 (FW Act). The second is that the proposed agreement must cover the same or substantially the same group of employees as the Zombie Agreement. The Full Bench stated that this could be established by comparing the NERR for the proposed agreement to the coverage clause of the Zombie Agreement. The third is that bargaining for the proposed agreement has commenced.

[17] We are satisfied that these three requirements are met. The notification time for the agreement is the date the NERR was issued to employees on 3 May 2023. The application was made on 12 July 2023. The coverage of the proposed agreement described in the NERR is broader than the coverage of the Zombie Agreement but includes the same or substantially the same group of employees as the Zombie Agreement. Bargaining has commenced. A bargaining meeting occurred on 29 May 2023 and there have been exchanges of claims between the bargaining representatives.

[18] As subitem (7) is met, subitem 6(a) requires a consideration of whether it is otherwise appropriate in the circumstances to extend the default period. In ISS Health Services, the Full Bench considered it was appropriate to do so where the parties were seeking time to negotiate a replacement agreement are not simply seeking to extend an agreement for the maximum period for the sake of convenience. The Full Bench also took into account the complexity of the negotiations due to the number of employees and work sites to be covered by the replacement agreement. The third factor the Full Bench took into account was that while the Zombie Agreement remained in place, the employees would be better off overall than if the modern award applied.

[19] All three of these factors are relevant to the current case. Annecto and HACSU are committed to negotiating a replacement agreement and need time beyond 6 December 2023 to do so. The negotiations are complex due to the competing scope claims of the parties. The expanded coverage sought by Annecto will require resolution, either by agreement or under s.238 of the FW Act and may involve coverage of employees nationally and beyond the employees covered by the Zombie Agreement. Besides the national coverage issue, HACSU's preference for a a more limited scope, applying to Victoria only, involves the complexity of integrating terms and conditions currently regulated by two agreements as a consequence of the merger referred to in Mr Kethsiri's evidence. As to the third factor, whilst the undertakings would not be relevant to any better off overall analysis under subitem (9), they may be taken into account in determining whether it is otherwise appropriate to extend the default period under subitem (6)(a)[3]. Given the undertakings provided in Mr Kethrisi's statement it is clear, and agreed between the parties, that the employees will be better off overall if the agreement and the undertakings apply to the employees covered by the Zombie Agreement if the default period is extended. Other factors relevant to these proceedings are the support of HACSU for the extension, the views of the employees as expressed to their union and the two upcoming reports that may have an impact on the funding in the disability care sector and so may have an impact on the negotiations.

[20] Given our conclusions above it is not necessary to consider Annecto's alternative case under subitem (6)(b) that it is reasonable in the circumstances to extend the default period.

[21] As we are satisfied that subitem 6(a) applies we are required to extend the default period. As the Full Bench observed in Suncoast Scaffolding Pty Ltd[4] the Commission has a discretion as to the length of the extension, subject to the limitation that the extension cannot be more than four years. The nature of the discretion is such that we are not bound to grant the period of extension sought in the application.[5] The extension sought by Annecto, and supported by HACSU, is two years.

[22] In ISS Health Services Pty Ltd the Full Bench ordered an extension of 12 months in circumstances where subitem (7) applied. The Full Bench considered this sufficient time for a replacement agreement to be finalised. The Full Bench noted that should the parties require assistance to finalise an agreement then s.240 of the FW Act provides access to the Commission to resolve any disputes that arise in bargaining. The Full Bench noted that the additional 12 months amounted to an 18 month period in which to conclude an agreement as the NERR in that matter had been issued in June 2023.

[23] In Applications by APESMA[6] the Full Bench dealt with circumstances where bargaining had not commenced, and the employer was not proposing to commence bargaining. The Full Bench extended the default period for a period of three years from its decision, as it anticipated that the unions may need to apply for a majority support determination under s.236 of the FW Act and sought to provide a reasonable amount of time for that to occur. The order arising from that decision extended the default period to August 2026, a period of 2 years and 9 months.

[24] In this matter Mr Kethrisi's evidence was that it would take a further 12 to 18 months to finalise a replacement agreement. We are of the view that an extension that is longer than the extension granted in ISS Health Pty Ltd is appropriate given the complexity associated with bargaining for a replacement described above. We are of the view that the extension should be shorter than the extension granted in Applications by APESMA because in that case bargaining had not commenced and the employer was not proposing to bargain.

[25] We will therefore order an 18 month extension of the default period. We believe this to be appropriate in all of the circumstances of this case. It should allow sufficient time for the parties to resolve, either between themselves or with the assistance of the Commission, the scope issue and other complexities associated with the proposed enterprise agreement.

[26] An order extending the default period for the Zombie Agreement to 6 June 2025 will be published separately. The Agreement is published, in accordance with subitem (10A)(c), as an Annexure to this decision.

Annecto Inc [2023] FWCFB 169 (23 August 2023)

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Judgment (22 paragraphs)

Legislation Cited (3)