Bakers Delight Holdings Limited and others re Bakers Delight Certified Agreement (ACT) 2002 - re Division 2 agreement with employees - PR923670 [2002] AIRC 1238; (15 October 2002)

Workplace Relations Act 1996

s.170LJ application for certification of an agreement

Division 2 agreement with employees - Agreement binds franchisor, franchisees and the employees of each - section 170LB - Whether a single business within the meaning of the Act - meaning of the term "common enterpise" - Agreement is a multiple-business agreement - Can only be certified by a Full Bench - section 170LC

[1] This decision relates to an application for certification pursuant to Part VIB of the Workplace Relations Act 1996 ("the Act") of the Bakers Delight Certified Agreement (ACT) 2002 ("the Agreement"). The application was made under section 170LK of the Act by Freehills, on behalf of the parties to the Agreement.

[2] Clause 2.1 of the Agreement states that the parties to the Agreement are Bakers Delight Holdings Ltd ("Bakers Delight"), nine companies which own and operate Bakers Delight bakeries in the Australian Capital Territory ("the Franchisees") and the employees (excluding management employees) of each. I shall refer to Bakers Delight, the Franchisees and their non-management employees collectively as "the Applicants".

[3] I understand that the Franchisees are not related bodies corporate within the meaning of the Corporations Act,[1] either with each other or with Bakers Delight_._ I further understand that each Franchisee has entered into a franchise arrangement with Bakers Delight, each with substantially similar contractual obligations to Bakers Delight.

[4] It is a requirement of Part VIB of the Act that an agreement can only be certified by a single member of the Commission if it covers a "single business" within the meaning of section 170LB of the Act. If an agreement covers more than one single business it can only be certified by a Full Bench of the Commission, in accordance with subsection 170LC of the Act.

[5] Notwithstanding submissions made by Mr P Burns of Freehills on behalf of the Applicants, I am of the view that the Agreement covers more than one single business. I have been asked by Freehills to set out my reasons for that decision. I do so below.

[6] This decision turns upon sections 170LB and 170LC of the Act. I set out the relevant parts of those sections below:

(1) For the purposes of this Part, a "single business" is:

(a) a business, project or undertaking that is carried on by an employer; or

(a) if 2 or more employers carry on a business, project or undertaking as a joint venture or common enterprise, the employers are taken to be one employer; and

(b) if 2 or more corporations that are related to each other for the purposes of the Corporations Act 2001 each carry on a single business:

(i) the corporations may be treated as one employer; and

(ii) the single businesses may be treated as one single business.

(3) For the purposes of this Part, a "part" of a single business includes, for example:

(a) a geographically distinct part of the single business; or

(b) a distinct operational or organisational unit within the single business.

(1) In addition to its operation apart from this section to a single business, or part of a single business, of an employer, this Part applies, subject to this section, in the same way to any of the following, or any combination or combinations of the following:

(2) If an application for certification of an agreement by the Commission can only be made under this Part because of subsection (1), the agreement is a `multiple-business agreement'

(3) Only a Full Bench may certify a multiple-business agreement under Division 4.

(4) A Full Bench, under that Division, must not certify a multiple-business agreement unless it is satisfied that it is in the public interest to certify the agreement, having regard to:

(a) whether the matters dealt with by the agreement could be more appropriately dealt with by an agreement, other than a multiple-business agreement, under this Part; and

(b) any other matter that the Full Bench considers relevant.

[7] Reliance was placed by the Applicants upon subsection 170LB(2)(a) of the Act. "Specifically in this case we say that the nine employers do carry on a business or an undertaking as a common enterprise, which does come within the terms of 170LB(2)(a)." (Mr Burns, transcript, PN7)

[8] For Mr Burn's argument that the Agreement covers a single business to have been successful, not only would I have needed to be satisfied that the nine Franchisees were engaged in a common enterprise with each other and are therefore a "single business" but that the Franchisees and Bakers Delight were a "single business". I am not satisfied that either proposition is correct.

[9] Mr Burns referred to, and relied upon, a decision of Lawson C in re McDonald's & SDA - Australian Capital Territory - Certified Agreement 2001 (22 March 2002, Print PR915681). The agreement certified by Lawson C ("the McDonald's Agreement") covered nine named McDonald's franchisee employers in the Australian Capital Territory and the Shop, Distributive and Allied Employees Association. The McDonald's Agreement did not bind the franchisor, presumably because the franchisor does not employ in-store staff.

[10] In the course of his decision, Lawson C stated:

"3. In considering whether the named employers in the current application constitute a `common enterprise' I was referred to an authority of the High Court relied upon in similar applications for the certification of similar agreements in Western Australia [Print PR910428_]. In_ Australian Softwood Forestry Pty Ltd and Attorney-General (N.S.W.); Ex Rel. Corporate Affairs Commission [1981] HCA 49; (1981) 148 CLR 121 @ para 25, Mason J said:

`An enterprise may be described as common if it consists of two or more closely connected operations on the footing that one part is to be carried out by A and the other by B, each deriving a separate profit from what he does, even though there is no pooling or sharing of receipts of profits. It will be enough that the two operations constituting the enterprise contribute to the overall purpose that unites them. There is then an enterprise common to both participants and, accordingly, a common enterprise.'

4. The nine named employers in the current application carry on businesses which are identical in character, are operated in an identical manner and which provide identical products which are priced identically. In all respects the operations of the businesses are carried out in a manner which is seamless to the consumer. In each case the businesses are mutually interdependent with McDonald's Australia Ltd.

5. Having considered the material provided since the hearing, I am satisfied that the nine businesses constitute for the purpose of this agreement a single business and common enterprise."

[11] Mr Burns also made reference to a number of agreements which have been certified by single members of the Commission, in each case involving a number of franchisees as parties to a single agreement. Examples referred to by Mr Burns include "McDonald's franchisees, Kentucky Fried Chicken, Eagles Pizzas" (transcript, PN24). I accept that other single members of the Commission have been satisfied that employers who are franchisees have, in particular circumstances, been engaged in a single business within the meaning of section 170LB of the Act.

[12] While I respect the views of Lawson C and those other members of the Commission, I am not satisfied that the Agreement now before the Commission is an agreement covering a "single business" within the meaning of section 170LB of the Act. I shall set out my reasons for holding this opinion further below.

[13] In Re South Grafton Abattoir Certified Agreement 2001 (8 February 2002, Print PR914228), Commissioner Bacon relied upon a decision of his Honour Munro J (Qantas Airways Limited v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (8 May 2000, Print S5768) paragraph 9) in refusing to certify an agreement which covered three related bodies corporate involved in an abattoir, a fourth company (an unrelated labour hire company) which had a contract to supply labour to the abattoir and the employees of each, because he was of a view that the four employers were not engaged in a single business. Commissioner Bacon stated (at paragraph 10):

"... I am not satisfied that two employers declare a common enterprise in respect of work simply by one contracting to the other to provide labour to perform work. On the material before me I cannot conclude that the four employers collectively carry on a business as a common enterprise."

[14] In _Qantas Airways Limited v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (_Munro J, 8 May 2000, Print S5768), the Commission considered and applied the judgment of Mason J (as he then was) in Australian Softwood Forests Pty Ltd v Attorney General (New South Wales) ex rel Corporate Affairs Commission [1981] HCA 49; (1982) 148 CLR 121 ("Australian Softwood Forests". His Honour Munro J also referred to decisions of Hancock SDP (re NTFS/ Ascot, Dry Creek Enterprise Agreement, 1996, 19 August 1996, Print N4127) and Maher DP (re Lend Lease Corporation Limited Enterprise Development Agreement 1993, 8 March 1994, Print L2210). Munro J held that Qantas and its contract labour supplier (Forstaff) were not in a common enterprise with each other. At paragaph 32, Munro J stated:

"I consider that the words `carry on a business ... as a common enterprise' imply that some weight, or at least some consideration, must be given to the declared collective intent of the relevant employers. In the circumstances of this matter the commonality of interest, or closeness of connection or sharing of operations, in the absence of a declared intent to carry on a common enterprise, is not made out to a degree that establishes a common enterprise. There are plainly two employers involved currently in the staffing of the Avalon facility. However, the operation was manifestly intended to be a contracting out or "outsourcing" of some Qantas maintenance work. That concept of arrangement appears to be antithetic to engagement in a joint venture or common enterprise comprised of the contractor and subcontractor as a notionally single employer for purposes of the Act. Two employers do not declare a common enterprise in respect of work contracted out merely by the letting of the contract. In this instance, Qantas and Forstaff, by their conduct of the litigation, contest and dispute the establishment at Avalon of a common enterprise. I am not persuaded that the contractual relationship shown and the degree of interaction or supervision of work is sufficient to constitute a common enterprise comprised of Qantas and Forstaff operations at the Avalon site."

[15] On appeal, the Full Bench (Polites SDP, Watson SDP and Gay C, 6 October 2000, Print T1582) agreed that the arrangements could not in any way be described as a common enterprise. The Full Bench also considered whether the Qantas-Forstaff contractual arrangement could be described as a "joint venture" within the meaning of section 170LB. They rejected the submission (paragraph 20):

"We do not think that there is any evidence in this case of a joint venture. Joint venture is defined in Butterworths Concise Australian Legal Dictionary [p.223] as:

`An association of persons for particular trading, commercial, mining, or other financial undertakings or endeavours with a view to mutual profit. It is not a technical legal term with a settled common law meaning: United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1; 60 ALR 741. The association is usually for the participation in a single project rather than a continuing business. A joint venture may be carried out by way of a partnership, company, trust, agency, joint ownership, or other arrangement. It may include an activity carried on by a body corporate which was formed to carry on the activity by means of joint control or ownership of shares in the body corporate.'"

[16] It was not argued before me that the Franchisees and Bakers Delight were engaged in a joint venture. In the circumstances, I am satisfied that the Franchisees and Bakers Delight are not engaged in a joint venture within the meaning of section 170LB. That being the case, the only way in which I could be satisfied that the Commission as presently constituted has the power to certify the agreement is if the Franchisees and Bakers Delight are engaged in a common enterprise.

[17] In consideration of whether multiple employers might constitute a "single business" within the meaning of the Act, a number of members of this Commission[2] have referred to and relied upon the judgment of Mason J in Australian Softwood Forests. I turn now to consider that judgment, in the context of the Agreement and the question whether Bakers Delight Holdings Limited and the nine Franchisees are engaged in a common enterprise with each other.

Decision of the High Court in Australian Softwood Forests

[18] The case before the High Court of Australia in Australian Softwood Forests[3] related to a business arrangement entered into in New South Wales between companies that owned land (which was used to grow pine trees) and growers, relating to planting and harvesting of pine tree plantations for profit. In issue was whether there was an issue or offer of an "interest" within the meaning of subsection 76(1) of the Companies Act 1961 (NSW). Subsection 76(1)(b) included in the definition of an "interest" a "common enterprise... in which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party" (Australian Softwood Forests, 128).

[19] In the course of his judgment, with which Gibbs CJ and Stephen J agreed (Australian Softwood Forests, 125), Mason J stated that (Australian Softwood Forests, 133):

"The argument is that in order to constitute a "common enterprise" there must be a joint participation in all the elements and activities that constitute the enterprise. I do not agree. An enterprise may be described as common if it consists of two or more closely connected operations on the footing that one part is to be carried out by A and the other by B, each deriving a separate profit from what he does, even though there is no pooling or sharing of receipts of profits. It will be enough that the two operations constituting the enterprise contribute to the overall purpose that unites them. There is then an enterprise common to both participants and, accordingly, a common enterprise."

Certification of multi-business agreements by previous Full Benches

[20] In re SDA - Domino's (WA) Dial-a-Pizza Agreement 1998 (Ross VP, Fielding DP and O'Connor C, 22 July 1999, Print R6382), a Full Bench of this Commission certified an agreement which bound the Shop, Distributive and Allied Employees Association, Domino's Pizza Australia Pty Ltd and a number of franchisees. The Full Bench stated:

"3. Domino's Pizza operates on the basis of a limited number of company outlets and significant numbers of franchised outlets. In Western Australia there are eight company outlets and thirteen franchised outlets. The agreement before us covers the eight company outlets and nine franchisees covering the thirteen franchised outlets in Western Australia.

4. As the Agreement applies to businesses carried on my [sic.] more than one employer it is a "multi-business agreement" within the meaning of s.170LC.

8. It was submitted that it was in the public interest to certify the Agreement for three reasons, including:

- the franchisees are relatively small employers with a limited workforce at each outlet and they do not have the financial or business capacity to negotiate separate or individual agreements with their employees;

- consistency is a fundamental principle in the operation of these businesses. The consistent treatment of wages and conditions of employment will ensure that employees and potential employees have certainty as to their working conditions when seeking employment with Domino's Pizza; and

- the continued growth and viability of Domino's Pizza through its corporate and franchised outlets will be enhanced as a consequence of the certification of the agreement."

[21] In Re Australian Medical Association (Victoria) Limited, Australian Salaried Medical Officers Federation Victorian Branch, Victorian Public Health Sector (Hospital Medical Officers) Multi-Employer Certified Agreement 1999 (Acton SDP, Lacy SDP and Gay C, 12 June 2001, Print PR905059), a Full Bench of this Commission certified an agreement which covered the Australian Salaried Medical Officers Federation and various employers who operate public hospitals in the State of Victoria. The matter proceeded on the basis that the agreement "applies to businesses carried on by more than one employer, [and] it is a `multi-business agreement' within the meaning of s.170LC." (paragraph 3) This was the case notwithstanding that it was submitted (with relation to the public interest test in subsection 170LC(4) that (paragraph 5):

"- Public hospitals are funded by the Victorian Government through a uniform system of per capita unit cost payments.

- The services are regulated by the State Government Department of Human Services through mandatory policies and procedures covering matters such as patient care standards; particular operational requirements; reasons and procedures for suspending/terminating services to a consumer; and health and safety."

[22] It can be seen from those two cases that Full Benches of this Commission have in the past treated agreements binding a franchise arrangement, and a closely integrated and controlled system of employers, as multi-business agreements within the scope of section 170LC.

[23] While it may not have been argued before the Full Benches in those two cases that there was in fact a "single employer" within the meaning of section 170LB, the point was argued in re The Minister for Health for Western Australia and others (Polites SDP, Harrison SDP and Laing C, 24 April 1998, Print Q0368), an appeal against a decision of O'Connor C refusing to grant a large number of applicants in the Western Australian health sector orders pursuant to section 127 against the Australian Nursing Federation. In that case, the Australian Nursing Federation took industrial action in support of a demand that the various employers negotiate a single agreement with the Australian Nursing Federation relating to the terms and conditions of employers. The Full Bench rejected the submission that the Hospital Board employers could be treated collectively as a "common enterprise" within the meaning of the Act (page 6).

[24] Similarly, in South Australian Health Commission and others -and- Australian Liquor, Hospitality and Miscellaneous Workers Union (O'Connor P, MacBean SDP and Bryant DP, Print M3485, 12 July 1995), a Full Bench rejected the submission that that 80 hospitals and health facilities which provide health services in accordance with their constitution and the South Australian Health Commission Act 1976 (SA) could be regarded as a "common enterprise" as it was then defined by the Industrial Relations Act 1988 (Cth).

[25] It can be seen from the Full Bench cases I have discussed above that even in the case where significant controls are placed upon employers, either by a franchise agreement (in the Domino's case) or by statute (in each of the hospital cases), this Commission has been cautious in treating multiple employers as a common enterprise.

Arrangements between the Franchisees and Bakers Delight

[26] I turn to the question whether, in light of what has been decided about the meaning of the term, the arrangement between Bakers Delight and the Franchisees can be described as a "common enterprise".

[27] Although evidence was not led of the arrangements between the Franchisees and Bakers Delight, Mr Burns made a number of submissions relating to matters of fact. I have no reason not to accept those submissions at face value.

- "The overall appearance and design of the bakery is planned and co-ordinated by the franchisor using the Bakers Delight logo and brand..." (transcript, PN60) and "All Bakers Delight outlets are distinctive in appearance, signage, product and service requirements" (transcript, PN59) such that a person walking in to any of the Franschisees' stores would view each as a common enterprise with the other (transcript, PN30, 44);

- the franchise arrangement that Bakers Delight has with each Franchisor enforces a common approach to branding and products, "and there is no scope to step outside that" (transcript, PN36-41);

- "The franchisor does conduct nationwide advertising promotional campaigns that are identical throughout the company." (transcript, PN59);

- "it is quite clear in terms of the arrangements that do apply there is very little scope for independent operation in terms of the particular stores. They are controlled quite tightly and uniformly through the franchise arrangement." (transcript, PN57)

- "...all recipes for products are the same in every store and the products are made according to identical methods in each and every bakery." (transcript, PN60)

- "The Franchisees in turn must follow the franchisor's systems and operating manuals and policies. So you can see the degree of control in terms - are imposed by agreement with the franchisees at their store level..." (transcript, PN60);

- [The Franchisees] "must only sell Bakers Delight products. They cannot go out and sell a competitor's product or make different product that Bakers Delight does not endorse." (transcript, PN60-61);

- "...in terms of the staff they must train their staff in accordance with Bakers Delights training methods." (transcript, PN61); and

- "the franchisees must maintain the appearance and operation of the premises consistent with the national franchise standards and each store must participate in the marketing and promotional activities which are run at the franchisor level." (transcript, PN61).

Are the Franchisees engaged in common enterprise with one another?

[29] Despite Mr Burns' submissions, I am not satisfied that the nine Franchisees are engaged in a common enterprise. Notwithstanding the substantial degree of uniformity of their operations, I am not of the view that each Franchisee is "closely connected" with the operations of each other Franchisee "on the footing that one part is to be carried out by [Franchisee] A and the other by [Franchisee] B" (Australian Softwood Forests, 133).

[30] Albeit that they may be located some distance from each other, the Franchisees operate in the same market and are in competition with one another. To state that the Franchisees are in anything other than competition with one another would be to suggest that the Franchisees, or perhaps Bakers Delight, is in breach of the Trade Practices Act 1974 (Cth). I note that Mr Burns did not make any submissions regarding the uniformity or otherwise of pricing across the Franchisees' stores.

[31] I refer to the decision of his Honour Munro J in Qantas Airways Limited v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (8 May 2000, Print S5768) (which was upheld on appeal - 6 October 2000, Print T1582), where he stated that (paragraph 32):

"I consider that the words "carry on a business ... as a common enterprise" imply that some weight, or at least some consideration, must be given to the declared collective intent of the relevant employers. In the circumstances of this matter the commonality of interest, or closeness of connection or sharing of operations, in the absence of a declared intent to carry on a common enterprise, is not made out to a degree that establishes a common enterprise."

[32] On the submissions before the Commission, although each Franchisee has a contractual relationship with Bakers Delight, there does not appear to be a "declared collective intent" between the Franchisees. While operations may be close to identical between Franchisees, there is no evidence that the Franchisees share operations or resources. Subject to the restraints imposed by the franchise agreements between Bakers Delight and each Franchisee, the Franchisees operate independently of one another.

Is each Franchisee engaged in a common enterprise with Bakers Delight? Can this mean that all of the employers are engaged in a "single business"?

[33] In re McDonald's & SDA - Australian Capital Territory - Certified Agreement 2001 (22 March 2002, Print PR915681), Lawson C stated that each McDonald's franchisee is mutually interdependent upon McDonald's Australia. From Mr Burns' submissions it would appear that a similar degree of mutual interdependence exists between Bakers Delight and each individual Franchisee.

[34] Albeit that Bakers Delight may not itself be an employer of any persons covered by the Agreement (no statutory declaration was filed on behalf of Bakers Delight, nor has the Agreement been signed on behalf of Bakers Delight), it may be arguable that each individual Franchisee is engaged in a common enterprise with Bakers Delight, as that concept was explained by Mason J in Australian Softwood Forests.

[35] To the extent that Bakers Delight is an employer and is engaged in a common enterprise with each Franchisee, then each Franchisee/Bakers Delight common enterprise may be a single business within the meaning of the Act. For example, there may be a single business (being a common enterprise between Bakers Delight and Reinsma Enterprises Pty Ltd - one of the Franchisees) to carry on the Bakers Delight Lanyon Bakery, and another single business (being a common enterprise between Bakers Delight and MBJ Pty Ltd - another of the Franchisees) to carry on the Bakers Delight Manuka Bakery.

[36] However, if that is the case, I am not satisfied that the single business which conducts the Bakers Delight Lanyon Bakery is in common enterprise with the Bakers Delight Manuka Bakery. Notwithstanding all of the submissions of Mr Burns, I find the conclusion inescapable that those two bakeries are in competition with one another. That being the case, I cannot accept that the two bakeries are in common enterprise with one another.

[37] While there may be interdependence between Bakers Delight and each of the Franchisees, there does not appear to be any direct interdependence between any of the Franchisees themselves.

[38] Notwithstanding the uniformity between the various Franchisees, in terms of staffing, systems, inputs, output, visual appearance, promotional activity and contractual obligations to Bakers Delight, I am not satisfied that the various Franchisees and Bakers Delight are engaged in a single business within the meaning of section 170LB the Act.

[39] Since the hearing of this matter I have referred the Agreement to Giudice J, the President of the Commission, for the empanelling of a Full Bench to hear the application for certification of a multi-business agreement. It may be that the similarities between the operations of each of the Franchisees are relevant to the Full Bench's consideration of subsection 170LC(4) of the Act.

[40] During the hearing of this matter (transcript, PN83-111 and PN123-126) I raised a number of issues relating to the No Disadvantage test (sections 170LT(2) and 170XA). Because of my decision that this is a multi-business agreement, which ought be dealt with by a Full Bench, Mr Burns did not have the opportunity to address me on those aspects of the No-Disadvantage test. Such considerations are not part of my decision whether the Agreement covers a single business. At future hearings of this matter, it may be appropriate for the Applicants to address the No-Disadvantage test in some detail.

Mr P Burns of Freehills on behalf of the applicants

Printed by authority of the Commonwealth Government Printer

1 Corporations Act 2001 (Cth) sections 9 and 50. See also Workplace Relations Act 1996 (Cth) subsection 170LB(2)(b).

2 _Qantas Airways Limited v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (_Munro J, 8 May 2000, Print S5768); re NTFS/ Ascot, Dry Creek Enterprise Agreement, 1996 (Hancock SDP, 19 August 1996, Print N4127); re Lend Lease Corporation Limited Enterprise Development Agreement 1993 (Maher DP, 8 March 1994, Print L2210); Re South Grafton Abattoir Certified Agreement 2001 (8 February 2002, Print PR914228)

3 Australian Softwood Forests Pty Ltd v Attorney General (New South Wales) ex rel Corporate Affairs Commission [1981] HCA 49; (1982) 148 CLR 121 (Gibbs CJ, Stephen, Mason, Murphy, Wilson JJ).