Fair Work Act 2009

s.318 - Application for an order relating to instruments covering new employer and transferring employees

s.319 - Application for an order relating to instruments covering new employer and non-transferring employees

Facilities First Australia Pty Ltd T/A Facilities First Australia Pty Ltd

Application for orders relating to instruments covering new employer and transferring and new non-transferring employees.

[1] On 2 August 2019, Facilities First Australia Pty Ltd (the applicant/Facilities First) lodged an application in the Fair Work Commission (the Commission) for orders under ss.318 and 319 of the Fair Work Act 2009 (the FW Act) which relate to an instrument covering a new employer and transferring employees and non-transferring employees in the context of a transfer of business.

[2] The applicant is the new employer of the business to which this application relates and therefore has standing to apply for the orders under ss.318(2)(a) and 319(2)(a) of the FW Act.

[3] The transferable instrument to which this application relates is the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 [AE422556] (the Agreement). The Agreement came into operation on 14 December 2016 with a nominal expiry date of 30 June 2017.

[4] On 23 January 2019, an application was made by Menzies International [Aust] Pty Ltd T/A Menzies International pursuant to s.225 of the FW Act to terminate the Agreement. On 8 April 2019, the Commission granted the application and ordered the termination of the Agreement to take effect from 8 October 2019.[1]

[5] The applicant seeks the following orders:

"1. An order pursuant to section 319(1)(b) of the FW Act that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 which covers the Applicant by reason of the transfer of business provisions of the FW Act, covers, or will cover, all non-transferring employees who perform the transferring work for the Applicant from 1 March 2019.

2. An order pursuant to section 318(1)(a) of the FW Act that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 not cover the Applicant and any transferring employees from 8 October 2019.

3. An order pursuant to section 319(1)(c) of the FW Act that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 not cover the Applicant and any non-transferring employees from 8 October 2019."

[6] The applicant submitted that in or about November 2018 it was awarded a contract with the NSW Government to deliver cleaning services to government sites across Northern Sydney NSW, including Department of Education locations (schools), TAFE campuses and government agency locations (the Contract). The Contract took effect on 1 March 2019.

[7] Prior to 1 March 2019, the cleaning services in Northern Sydney were provided by Broadspectrum Ltd (Broadspectrum). Employees of Broadspectrum were offered and accepted employment with the applicant to provide cleaning services under the new Contract (Transferring Employees).

[8] The Transferring Employees were the first employees recruited by the applicant to provide cleaning services under the Contract. Non-transferring employees were also recruited to supplement the number of transferring employees. Transferring and non-transferring employees started work on the same date, being the date of the commencement of the Contract, 1 March 2019.

[9] At the time the Contract commenced, the applicant had purchased a significant amount of cleaning equipment (the Assets) from Broadspectrum, to be used in the performance of the Contract. The applicant submitted that the persons responsible for that purchase did not realise that the purchase of the Assets had implications under the Transfer of Business provisions of the FW Act, being Part 2-8 - Transfer of Business.

[10] The purchase of the Assets was not discovered by the applicant's human resources team until about mid-July 2019 when investigations were undertaken into allegations of non-compliance with the Cleaning Services Award 2010 (the Award) by the United Voice.

[11] The applicant submitted in its application that the purchase of the Assets and the engagement of the Broadspectrum employees meant that the transfer of business provisions in the FW Act applied. The Transferring Employees therefore continued to be covered by the Agreement.

[12] In addition to covering Broadspectrum, the Agreement covers three other employers:

• Menzies International [Aust] Pty Ltd T/A Menzies International,

• ISS Property Services Pty Ltd and

• Colin Joss & Co Pty Ltd.

[13] The Transferring Employees have been overpaid under Award conditions since the Contract commencement, and the applicant does not seek to recover any of those overpayments from Transferring Employees.

[14] Section 317 of the FW Act provides that the Commission may make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.

[15] As mentioned above, the applicant's Contract took effect on 1 March 2019 and the Transferring Employees were offered and accepted employment with the applicant to provide cleaning services under the new Contract.

[16] Section 312(1) of the FW Act defines the meaning of a transferable instrument. Pursuant to s.312(1)(a) of the FW Act, the Agreement constitutes a transferable instrument for the purposes of the Act.

[17] Section 313 of the FW Act provides for the transferable instrument to transfer to the applicant, being the new employer, along with the employees who are transferred.

[18] Therefore, the applicant and the Transferring Employees will be covered by the Agreement until its termination comes into operation on 8 October 2019.

[19] The applicant seeks in its proposed orders referred to above that the Agreement, by reason of the transfer of business provisions of the FW Act, covers, or will cover, all non-transferring employees who perform the transferring work for the Applicant from 1 March 2019 when the Contract commenced. The applicant also seeks that the Agreement does not cover the applicant, the Transferring Employees and non-transferring employees from 8 October 2019 when the termination of the Agreement comes into operation.

[20] The relevant sections of the FW Act which allow for the Commission to make the orders sought are:

"S.318 Orders relating to instruments covering new employer and transferring employees

(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."

"S.319 Orders relating to instruments covering new employer and non-transferring employees

(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 non-transferring employee because of subsection 314(1) does not, or will not, cover the new employer and the non-transferring employee;

• (b) an order that a transferable instrument that covers, or is likely to cover, the new employer, because of a provision of this Part, covers, or will cover, a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer;

• (c) an order that an enterprise agreement or a modern award that covers the new employer does not, or will not, cover a non-transferring employee who performs, or is likely to perform, the transferring work for the new employer."

[21] Sections 318(3) and 319(3) of the FW Act set out in identical terms the considerations that the Commission must take into account in deciding whether to make the order:

(3) In deciding whether to make the order, the FWC must take into account the following:

(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."

[22] The applicant in its application has addressed each of the matters the Commission is required to consider when issuing an order under ss.318 and 319 of the FW Act, each of which are addressed below.

[23] The applicant's application was accompanied by a Statutory Declaration signed on 16 August 2019 by Ms Kim Dodd (First Statement), the applicant's Head of Human Resources and Payroll, setting out:

• A chronology of the transfer of business and the offers of employment to the Transferring Employees to perform work under the Contract;

• The circumstances surrounding the applicant's error regarding the purchase of the Assets as part of the transfer of business and the subsequent implications for the applicant under the transfer of business provisions of the FW Act, being Part 2-8 - Transfer of Business of the Act;

• A copy of a letter sent to all employees advising of the error and setting out the steps that would be taken to rectify the situation;

• A spreadsheet comparison of the pay rates between the Agreement and the Award to demonstrate that the terms and conditions of the Award are overall more advantageous to employees than the Agreement; and

• Confirmation that while the majority of employees have been overpaid under Award conditions since the Contract commencement, the applicant does not seek to recover any of those overpayments from employees.

[24] The applicant wrote to chambers on 6 September 2019 confirming that it was taking preparatory steps to calculate overpayments and underpayments for each of the 670 affected employees to not delay payments of any underpayments, and to consult with affected employees about Award working arrangements from 8 October 2019, when the Agreement termination take effect.

[25] The applicant confirmed that overpayments are being calculated on the basis that transferring and non-transferring employees are all covered by the Agreement, but are now being paid in accordance with the Award. The applicant again confirmed that no overpayments will be recovered.

Views of the new employer or the likely new employer

[26] The application is made and supported by the applicant, being the new employer.

Views of the employees who would be affected by the order

[27] The applicant provided four Statutory Declarations of employees who are current employees of the applicant and who had transferred from Broadspectrum to the applicant to perform work under the Contract. The four employees deposed in each of their Statutory Declarations in identical terms as follows:

"1. I am employed as a Cleaner at Facilities First Australia Pty Ltd, the Applicant in this matter.

2. I have been recently advised that the NSW Government Cleaning Contractor Multi Enterprise Agreement 2016 (the Agreement) covers my position.

3. Until that advice, I understood that I was employed under the Cleaning Services Award 2010 (the Award). Since I started work for the Applicant I have been paid in accordance with the Award.

4. Prior to starting work for the Applicant, I worked for the contractor who previously held the contract in this area. In that employment, I was paid in accordance with the Agreement.

5. I am paid more under the Award than I was under the Agreement.

6. I do not consider that I will be disadvantaged if the Commission makes the order sought by the Applicant and I support the application to the Commission seeking orders that the Agreement no longer cover my position."

[28] It is noted that the 4 employee statements only concern Transferring Employees and represented only a small percentage of affected employees. Ms Dodd confirmed in her First Statement that the applicant employs 670 cleaners to work on the Contract, which is made up of a combination of Transferring and non-transferring employees. In response to further correspondence from the Commission the applicant has advised on 4 October 2019 that there are 206 non-transferring employees.

[29] On 11 September 2019, the Commission issued directions (the Directions) seeking the views of all other employees who would be affected in the event that the orders sought by the applicant, pursuant to ss.318 and 318 of the FW Act, were made by the Commission. The Directions were as follows:

"1. On 2 August 2019, an application was made by Facilities First Australia Pty Ltd (the employer) for 3 orders in relation to a transfer of business. The orders sought by the employer, as identified in the applicant's application, are as follows:

1. An order pursuant to section 319(1)(b) of the Fair Work Act 2009 (the Act) that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 which covers the Applicant by reason of the transfer of business provisions of the FW Act, covers, or will cover, all non-transferring employees who perform the transferring work for the Applicant.

2. An order pursuant to section 318(1)(a) of the Act that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 not cover the Applicant and any transferring employees from 8 October 2019.

3. An order pursuant to section 319(1)(c) of the Act that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 not cover the Applicant and any non-transferring employees from 8 October 2019."

2. Pursuant to ss.318(3)(a)(ii) and ss.319(3)(a)(ii) of the Act, if an application for orders in relation to a transfer of business is made under ss.318 or 319 of the Act, the Commission must take into account the view of the employees who would be affected by the orders.

3. Pursuant to ss.318(3)(a)(ii) and ss.319(3)(a)(ii) of the Act, the Commission invites any employees who would be affected by the orders for any views they may wish to express.

4. The employer is required to make available to all affected employees a copy of these Directions and advise the Commission on how this has been achieved by no later than 4:00pm on 16 September 2019.

5. The views, if any, of employees who would be affected by the orders are required to be provided in writing to my chambers via email chambers.bull.dp@fwc.gov.au by no later than 4:00pm on 18 September 2019."

[30] On 16 September 2019, the applicant provided a further Statutory Declaration of Ms Dodd (Second Statement) which advised the Commission that the applicant had complied with Direction 4 of the Directions above. The Statutory Declaration attached a letter dated 13 September 2019 which was sent to all affected employees on 13 September 2019 notifying them of the Directions and attaching a copy of the Directions.

[31] No other affected employees have expressed any views to the Commission regarding the application and the orders sought by the applicant as at the date of this decision.

Whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment

[32] The applicant submits that it is reasonable and appropriate that all employees, including non-transferring employees joining the applicant to work on the Contract, who are performing the transferring work, should be subject to, and derive the benefits of, a common set of conditions, namely those derived from the Agreement. The applicant submits that it is reasonable and appropriate that all employees performing work on the Contract are covered by the same industrial instrument.

[33] The applicant submits that the Award is, in the Applicant's view, overall more generous than the Agreement. The following provisions of the Award represent the most significant advantages to the transferring employees:

• the rates of pay under the Award are overall higher than the Agreement;

• the penalties, loadings and allowances payable under the Award are generally higher than the Agreement; and

• the Award provides three classifications for employees as opposed to one in the Agreement. Accordingly, there will be greater opportunity for employees to move between classifications or to be promoted to a higher classification under the Award.

[34] Ms Dodd in her First Statement stated that while the majority of employees have been overpaid under Award conditions since the Contract commencement, the applicant does not seek to recover any of those overpayments from employees.

[35] Ms Dodd stated that the applicant will end the payment of overtime for secondary employment from the pay period commencing 3 August 2019 until the Award covers the employees. The applicant will also not pass on the 2019 3% minimum wage increase to part-time and casual employees until the Award covers the employees on the basis that the rates those employees are currently paid under Award conditions exceed the Agreement rate of pay.

[36] The Agreement has a nominal expiry date of 30 June 2017. A Commission decision to terminate the Agreement was made on 8 April 2019. The termination of the Agreement comes into effect on 8 October 2019.

Whether the transferrable agreement would have a negative impact on the productivity on the new employer's (the applicant) workplace

[37] The Applicant submits that having one industrial instrument that covers all employees performing work on the Contract would not have any negative impact on the productivity of the Applicant's workplace and would enable administrative simplicity, promote organisational consistency, and enable the Applicant to provide internal equity in the terms and conditions of employment between the transferring employees and non-transferring employees.

Whether the applicant would incur significant economic disadvantage as a result of the Agreement covering it

[38] The Applicant submits that the costs of setting up and administering two separate configurations and interpretations for rostering and payroll for transferring employees and non-transferring employees would be economically inefficient, confusing for employees and problematic for the applicant.

The degree of business synergy between the Agreement and any workplace instrument that already covers the new employer

[39] The applicant submits that there are some differences between the terms of the Agreement and the Award, including different classification structures, different shift arrangements, different allowance structures and different RDO accrual methodologies. If the Applicant was required to operate two distinct rostering and payroll configurations and interpretations to accommodate those arrangements, the applicant submits this would cause a lack of operational efficiency for the applicant and a disparity between terms and conditions of employment for the two groups of employees. There is a lack of business synergy with the operation and application of both the Agreement and the Award in servicing the Contract.

[40] The Applicant submits that the making of the orders sought would not be contrary to public interest, noting that the decision to terminate the Agreement could not have been against the public interest, and would promote consistency of industrial standards for employees performing work under the NSW government contract.

[41] I note that in the Decision to terminate the Agreement, Senior Deputy President Hamberger stated that the application to terminate the Agreement was approved on the basis that "the Agreement is now somewhat out of date and provides worse terms and conditions of employment for at least some employees, when compared to the applicable modern award."[2]

[42] I am satisfied that the Agreement is a transferable instrument as described in s.312(1)(a) of the Act and that the circumstances described are a transfer of business within the meaning of s.311 of the Act.

[43] The Act requires the Commission to take into account the circumstances of the transmission of business under the various headings listed above and then to balance these considerations in reaching a conclusion.

[44] Having regard to the grounds and reasons stated in support of the application and taking in account all the matters under ss.318(3) and 319(3) of the Act, particularly ss.319(3)(b) and 319(3)(g) of the Act, I am not satisfied that all the orders as sought should issue.

[45] It was not made clear to the Commission the utility of issuing orders that the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 does not cover transferring or non-transferring employees from 8 October 2019 when that Agreement will cease to operate from 8 October 2019 having been terminated with effect from that date by the decision of Hamberger SDP referred to above. On the basis that the application for such orders are made for the purpose of clarity an order as sought concerning transferring employees will issue.

[46] In respect of non-transferring employees it was put that due to the operation of s.314(d) of the Act, and that there was no enterprise agreement or modern award that covered the work at the time the non-transferring employees were employed, the transferrable agreement NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 also covers the non-transferring employees. Irrespective of this the employer sought an order stating that the Agreement operates from 1 March 2019 in respect of non-transferring employees.[3]

[47] As per s.48 of the Act it would appear that the Award covered the work at the time and s.314(1)(d) of the Act would not therefore be invoked. In any event the employer has operated on the basis that the Award had application to the non-transferring employees since 1 March 2019, and as such I am not satisfied that it is in the public interest that an order issue that the Agreement retrospectively apply from 1 March 2019, which on the employer's own submissions are inferior terms and conditions in comparison with the Award.[4]

[48] Further, it is not apparent what administrative efficiencies are achieved until 8 October 2019 when they have been paid Award benefits at least up until 29 July 2019 as per the employer's correspondence to all employees of the same date.[5]

[49] For the reasons set out above, an order [PR713060] will issue that:

"Pursuant to s.318(1)(a) of the Act the NSW Government Cleaning Contractors Multi Enterprise Agreement 2016 does not cover the Applicant, being Facilities First Australia Pty Ltd, and any transferring employees from 8 October 2019."

[1] [2019] FWC 2353

[2] (Menzies International [Aust] Pty Ltd T/A Menzies International [2019] FWCA 2353 at [9]).

[5] Attachment A to statement of Kim Dodd

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