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[82]
[2023] FWCFB 158
General information, not legal advice.
Fair Work Commission (Full Bench)
2023-09-07
Original judgment source is linked above.
[2023] FWCFB 158 [Note: A copy of the zombie agreement to which this decision relates (AG848751) is available on our website.]
Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional instruments
KIRINARI COMMUNITY SERVICES LIMITED HUME RIVERINA BRANCH - CERTIFIED AGREEMENT 2006-2008
Application to extend the default period for the Kirinari Community Services Limited Hume Riverina Branch - Certified Agreement 2006-2008
[1] The Health Service Union (Victoria No. 2 Branch) (the Applicant) has applied under item 20A(4) of Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) to extend the default period for the Kirinari Community Services Ltd Hume Riverina Branch Certified Agreement 2006-2008 (Agreement) for a period of two years.[1]
[2] The Agreement was approved on 21 April 2006 under s.170LT of the Workplace Relations Act 1996 (Cth). It is a collective agreement-based transitional instrument within the meaning of item 2(5)(c) of Schedule 3 to the Transitional Act. Such instruments continue to apply to employees and employers covered by it because of item 3 of Schedule 3 of that Act. Agreements of this kind are commonly referred to as 'zombie agreements.'
[3] Under the terms of the Agreement, the parties bound by it are Kirinari Community Services Ltd (Kirinari) and the Health Services Union of Australia. Kirinari supports the application to extend the default period.
[4] The Australian Services Union (ASU) has filed submissions in relation to the proposed extension of the default period. It submitted that it has members employed under the agreement in New South Wales and under two other agreements with Kirinari that apply in New South Wales. The ASU says that Kirinari has indicated that the outcome of the present application may influence its response to the pending termination of those two other agreements. The ASU opposes the extension of the default period.
[5] The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) to provide for the automatic termination of all remaining transitional instruments. Pursuant to subitems 20A(1) and (2) of Schedule 3 to the Transitional Act, the Agreement will terminate on 6 December 2023 unless it is 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[2] and we rely upon what is said in that decision.
[6] Under subitem (6) of item 20A of Schedule 3 to the Transitional Act, upon application, the Commission is required to extend the default period for an agreement-based transitional instrument for a period of no more than four years 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.
[7] The application is advanced on the basis that subitem (9) of item 20A has been met and it is otherwise appropriate in the circumstances to extend the default period. Further, the Applicant says that subitem (6)(b) has also been satisfied and it would be reasonable in the circumstances to extend the default period.
[8] Subitem (9) applies if:
(a) the application relates to a collective agreement-based transitional instrument; and
(b) it is likely that, as at the time the application is made, the award covered employees for the instrument under subitem (10), viewed as a group, would be better off overall if the instrument applied to the employees than if the relevant modern award or awards referred to in that subitem applied to the employees.
[9] Under subitem (10) of item 20A, 'award covered employees' for a collective agreement-based transitional instrument are those employees covered by the instrument who, at the time an extension application is made under subitem (4), are covered by one or more modern awards that are in operation in relation to the work to be performed under the instrument, and are employed at that time by an employer who is covered by the instrument and the modern award(s).
[10] It is not in dispute that the employees of Kirinari covered by the Agreement were, at the time the extension application was made, covered by the Social, Community, Home Care and Disability Services Industry Award (SCHADS Award) which was in operation in relation to the work to be performed under that Agreement and were employed at that time by an employer covered the agreement and that award.
[11] The Applicant advances the following grounds in support of its application:
(i) The Applicant contends that employees would be better off overall if the Agreement continued to apply to them than if the relevant modern award applied.
(ii) The Agreement contains several entitlements that are superior to those provided by the SCHADS Award.
(iii) The Applicant submits that the criteria in subitem (9) are met, and further, that it is appropriate to extend the Agreement for the following additional reasons:
a) The Applicant has consulted with its members covered by the Agreement and the membership have indicated a firm desire to continue to be covered by it.
b) A review of the National Disability Insurance Scheme (NDIS) is currently underway and due to provide a final report in October 2023. The outcome of that review may change the bargaining position of the covered employees. For this reason, it is appropriate to extend the coverage of the Agreement to allow the parties to consider bargaining after accounting for any changes resulting from that review.
[12] In its written submissions, the Applicant also contended that a two-year extension would be consistent with that sought by Kirinari in respect of two of its other agreements with substantially similar terms and conditions. On that basis it was argued that it was reasonable in the circumstances to extend all three agreements by two years to maintain operational stability and to facilitate a fair and consistent approach to bargaining.
[13] Having regard to the grounds advanced in the application, we propose to determine firstly whether subitem 6(a) applies by reference to subitem (9). As is noted above, the Agreement is a collective agreement-based transitional instrument, which satisfies the requirements of subitem 9(a). The remaining requirement under subitem 9(b) will involve an assessment of the Agreement as against the relevant modern award and the application of the better off overall test referred to in that subitem. If we conclude that the award covered employees, viewed as a group, would be better off overall if the Agreement applied to them, we will then consider whether it would also be otherwise appropriate to extend the default period for the Agreement. If we decide the requirements of subitem 6(a) are not satisfied, we will consider whether it would be 'reasonable in the circumstances,' within the meaning of subitem 6(b), to extend the default period.
[14] The Agreement applies to employees of Kirinari who are community support workers and home care workers (in Victoria and New South Wales), and clerical workers (in Victoria). It operates to the exclusion of all other awards and previous agreements.[3] Community support workers and clerical workers under the Agreement are engaged in classifications covered by the Social and Community Services stream in the SCHADS Award (Schedule B) and home care workers are engaged in classifications under the Home Care stream in that award (Schedule E).
[15] The rates of pay provided by the Agreement are set out in clauses 8 to 10 of the Agreement. Those clauses include pay tables that specify an hourly rate for the various grades under the three classification streams whether engaged on a full-time or casual basis. The rates set out in these clauses are all below the current SCHADS Award rates for each of the equivalent classifications.
[16] Clause 11 of the Agreement describes the mechanism for pay increases. It provides that in respect of community support workers and clerical workers, the rates are to be increased by 3 per cent on the first pay period commencing on or after the anniversary of the certification of the Agreement and that the wage rates in clauses 8 and 9 are paid in substitution for any safety net increases during the life of the Agreement. In relation to home care workers, clause 11.3 provides that the rates of pay in clause 10 are to 'move in concert with and not fall below' the relevant state award or any successor to that award.
[17] If wage rates were determined by the terms of the Agreement alone, only the rates payable to those employees classified as home care workers would have kept pace with movements in the rates contained in the SCHADS Award. However, the Transitional Act makes provision for the extension of the base rates of pay provided for in modern awards to those covered by agreement-based transitional instruments in certain circumstances.
B. The Transitional Act and the Equal Remuneration Order
[18] Schedule 9 of the Transitional Act deals with the base rate of pay for employees to whom an agreement-based transitional instrument applies after the 'FW (safety net provisions) commencement day'[4], that is, after 1 January 2010. Item 13 of that schedule relevantly provides as follows:
13 Base rate of pay under agreement-based transitional instrument must not be less than the modern award rate or the national minimum wage order rate etc.
(1) If employee is covered by a modern award that is in operation
(a) an agreement-based transitional instrument applies to an employee; and
(b) a modern award that is in operation covers the employee;
the base rate of pay payable to the employee under the transitional instrument (the instrument rate) must not be less than the base rate of pay that would be payable to the employee under the modern award (the award rate) if the modern award applied to the employee.
(2) If the instrument rate is less than the award rate, the transitional instrument has effect in relation to the employee as if the instrument rate were equal to the award rate.
[19] In relation to this Item, the Explanatory Memorandum for the Transitional Act provides, under the heading 'Part 4 - Universal application of minimum wages to employees', as follows:
478. This item (together with the continued AFPCS interaction rules in item 22 of Schedule 3, described earlier) ensure that, on or after FW (safety net provisions) commencement day all employees are entitled to at least the relevant safety net minimum wage - from either the relevant modern award, transitional APCS or, if the employee is award/agreement free, the national minimum wage order.
479. If an agreement-based transitional instrument provides a lesser base rate of pay, the relevant safety net minimum wage applies.
[20] The effect of this provision is to ensure that any base rates of pay in an agreement-based transitional instrument that are less than the corresponding rates in the relevant modern award do not apply and that the instrument rates that do apply are equal to the modern award rate. There is an equivalent provision in the Fair Work Act 2009 (FW Act) in relation to base rates of pay in enterprise agreements made under that Act.[5]
[21] It is also necessary to refer briefly to an equal remuneration order[6] (ERO) that was made by the Fair Work Commission in 2012 and which has application to employers and employees within the scope of the SCHADS Award. That order covers employers in the Social, Community and Disability Services Industry (as defined in the order) and their employees in the classifications listed in Schedules B and C of the SCHADS Award.[7] It provides for the applicable minimum wage in clause 15 of the SCHADS Award, and, in addition, a Final Equal Remuneration Payment from the first pay period on or after 1 December 2020.
[22] As we apprehend the submission of the Applicant, they contend that the rates provided for by the ERO should be taken into account and be treated as forming part of the Award rate for the purposes of the better off overall comparison in subitem 9(b).[8] The ASU supported that submission and said that their members employed by Kirinari receive base rates of pay in line with the ERO and SCHADS Award.[9]
[23] In our view it is unnecessary to consider the effect of the ERO in any detail for the purposes of the better off overall analysis. The relevant comparison to be undertaken under subitem 9(b) is between the terms and conditions provided for in the Agreement and those provided for in the SCHADS Award. The increased rates of pay provided for in the ERO derive from the operation of that order, not because of the operation of the SCHADS Award. They apply in addition to applicable minimum wage in clause 15 of the SCHADS Award. To the extent that the rates of pay in the SCHADS Award are less beneficial than those provided for in the ERO, they are of no effect[10] and the rates in the ERO apply. However, the fact that the additional rates of pay in the ERO apply to at least some employees of Kirinari covered by the Agreement and the fact that those rates are, as a matter of practice, paid to those employees, does not advance the BOOT argument because they are not matters that are dependent on the existence and terms of either the SCHADS Award or the Agreement. Those additional rates owe their existence to the ERO.
[24] In summary, the rates of pay that are provided for by the SCHADS Award appear in the award as varied from time to time. The rates of pay provided for by the Agreement are those provided for by the agreement itself, but subject to the operation of item 13 of schedule 9 of the Transitional Act referred to above. The effect of item 13 of schedule 9 is that the base rates of pay that apply to employees of Kirinari employed under the Agreement are no less than those that apply to the corresponding classifications in the SCHADS Award. The remainder of our analysis for the purposes of the better off overall comparison is therefore conducted on that basis, that is, that the base rates of pay in the SCHADS Award and those in the Agreement, are the same.
[25] The Fair Work Commission's Agreements Team conducted a comprehensive review of the terms of the Agreement for the purposes of the better off overall analysis. A copy of that document was provided to the Applicant, Kirinari and the ASU. In summary, the Commission's analysis concluded that the award covered employees for the Agreement viewed as a group, would not be better off overall if the Agreement applied to the employees than if the SCHADS Award applied. The Applicant and the ASU provided submissions in response to the matters set out in the Commission's document. The Applicant submitted that the overall conclusion reached by the Commission's analysis was not correct. The ASU agreed with the conclusion in the Commission's analysis.
[26] The Commission analysis identified the following less beneficial entitlements in the Agreement:
(i) The Agreement provides that the spread of hours for clerical workers is 7am to 6:30pm Monday-Friday, but employees are not entitled to a penalty payment for work outside these hours (Clause 16). Shift and weekend penalties in clauses 17 and 18 do not apply to clerical workers. For clerical workers required to work outside of these hours, the award provides the following more beneficial entitlements compared to the Agreement:
(a) Award dayworkers are entitled to overtime for work performed outside 6am to 8pm Monday to Sunday (clauses 25.2 and 28).
(b) Award dayworkers and shift workers are entitled to penalty rates for all non-overtime work done on Saturdays and Sundays.
(c) Shift workers are entitled to afternoon and night shift penalties under clause 29 of the award for regular afternoon and night shifts.
(ii) The award provides a maximum of 10 ordinary hours per shift (clause 25.1(b)) with overtime payable beyond 10 ordinary hours (clause 28). The Agreement provides no maximum ordinary hours for clerical workers other than providing that shifts must be no more than 12 hours (clause 16.5(c)) and no overtime is provided in the agreement for work in excess of 10 hours per day.
(iii) Casual employees are not entitled to overtime outside of 38 hours per week in the Agreement because there are no overtime entitlements for casuals. The award provides casuals overtime beyond 38 hours per week (clause 28.1(b)(i)).
(iv) The Agreement provides a 2-hour minimum engagement for part time and casual clerical workers. Clause 10.5 of the award provides a 3-hour minimum engagement for social and community services employees (except when undertaking disability services work).
(i) The Agreement does not provide an ordinary span of hours for dayworkers. The award provides an ordinary span of 6am to 8pm Monday to Sunday with employees entitled to overtime outside of the span (clauses 25.2 and 28).
(ii) The award provides a maximum of 10 ordinary hours per shift (clause 25.1(b)) with overtime payable beyond 10 ordinary hours (clause 28). The Agreement provides no maximum ordinary hours for these workers other than providing that shifts must be no more than 12 hours (clause 16.5(c)) and no overtime is provided in the agreement for work in excess of 10 hours per day.
(iii) Casual employees are not entitled to overtime outside of 38 hours per week in the agreement because there are no overtime entitlements for casuals. The award provides casuals overtime beyond 38 hours per week (clause 28.1(b)(i)).
(iv) Clause 17 of the Agreement pays shifts at 112% for permanent employees and 137% for casual employees inclusive of the casual loading. This is less than the entitlement under the award for permanent employees of 112.5% or 115% and for casual employees (who also receive a 25% loading in addition to these shift penalties)
(v) The Agreement provides a 2-hour minimum engagement for these part time and casual employees. Clause 10.5 of the award provides a 3-hour minimum engagement for social and community services employees (except when undertaking disability services work).
(vi) Where applicable, sleepover entitlements appear to be less beneficial than the award.
(i) The award provides that dayworkers are entitled to overtime for work performed outside 6am to 8pm on Monday to Sunday (clauses 25 and 28). Whilst the Agreement provides the general spread of hours for home care workers is 7am to 8pm on Monday to Sunday at clause 12.3, employees are not entitled to overtime for work outside these hours. Instead, they are entitled the following less beneficial entitlements in the Agreement:
(ii) Casual employees are not entitled to overtime outside of 38 hours per week in the Agreement. The award provides casuals overtime beyond 38 hours per week (clause 28.1(b)(i)).
(iii) Weekend penalties for casual employees at clause 18 of the Agreement are 170% on a Saturday and 220% on a Sunday both inclusive of the casual loading. Award provisions at clause 26 are 175% on a Saturday and 225% on a Sunday both inclusive of the casual loading.
(iv) The award at clause 29 provides a 12.5% loading for any shift which finishes after 8pm and at or before midnight and a 15% loading for any shift which finishes after midnight or commences before 6am. These loadings are payable for all ordinary hours worked on the shifts. If an employee under the Agreement would be considered an award shift worker, the Agreement provides less beneficial entitlements of 110% for permanent employees and 130% (inclusive of the casual loading) for only the hours worked by permanent and casual employees after 8pm and before 7am.
(v) The Agreement provides a 1-hour minimum engagement for these part time and casual employees (Clause 16.2(h)). Clause 10.5 of the award provides a 2-hour minimum engagement for home care employees.
(vi) Where applicable, sleepover entitlements appear to be less beneficial than the award.
[27] The Commission analysis identified a number of entitlements in the Agreement that were more beneficial than the award including the following:
All employees (clerical workers, community support workers and home care workers)
(i) If an employee is a shift worker that works to an RDO system and they have an RDO on a public holiday, they get a substitute day as a public holiday under clause 20.8 of the Agreement. The award does not provide this.
(ii) Clause 16.4(c) of the Agreement provides that employees required to work more than 6 consecutive periods of ordinary duty without 24 hours off get paid 300% until they get 24 hours off. The award does not provide this entitlement.
(iii) The Agreement provides full time employees with minimum engagements of 2 hours per day whereas the award does not.
(iv) Accident pay provided in the Agreement at clause 43 is not provided for in the award.
(v) Permanent employees are all entitled to 5 weeks of annual leave under clause 31.2. The modern award provides employees with 4 weeks of leave rather than 5 weeks unless they meet the requirements in clause 31.2 (definition of a shift worker).
(vi) Clause 30 provides the potential for 5 hours study leave per week for permanent employees when an employee does part time study for an approved course.
(vii) Clause 31 provides 5 days paid emergency services leave for permanent employees.
(viii) Employee delegate training leave provided at clause 47 is not provided for in the award.
(ix) Long service leave entitlements in clause 27 are better than the NES (the award is silent on long service leave) as it provides for 3 months long service leave every 10 years, an extra 3 months once 15 years is reached and then 8 2/3 weeks for every 5 years thereafter.
(x) Employees accrue more sick leave per year under the Agreement when compared to clause 32/the NES, with employees accruing between 12 to 27 days per year depending on the type of work they perform and years of service per clauses 24 and 25.
(xi) The overtime rate on Monday to Saturday for full time employees who get overtime outside of 76 hours per fortnight (clause 16.1(c)) is 150% (first 2 hours) and 200% (thereafter) under the Agreement which is more beneficial than the 150% (first 3 hours) and 200% (thereafter) in the award at clause 28.1(a).
(xii) The overtime rate on Monday to Saturday for full time employees who get overtime outside of 76 hours per fortnight per 16.1(c) is 150% (first 2 hours) and 200% (thereafter) under the Agreement which is more beneficial than the 150% (first 3 hours) and 200% (thereafter) in the award at clause 28.1(a).
(xiii) In some circumstances under the Agreement, employees will receive a shift penalty where they would not otherwise be entitled to one under the award. In clause 17 of the Agreement, employees receive a shift penalty when they have rostered hours of ordinary duty that finish between 6.00pm and 8.00am or commence between 6.00pm and 6.30am. The circumstances in which a shift penalty is payable under clause 29 of the award is more limited, however it is noted the award provides a higher penalty.
[28] The Applicant made a number of submissions relating to the Commission's comparison between the provisions of the Agreement and the award. They argued that the analysis had overlooked the fact that clause 10.5 of the award excluded 'disability services work' from the 3-hour minimum engagement period. They said that in this event, the 2-hour minimum engagement period was the same as the award and should not be counted as a less beneficial entitlement in the overall assessment. The ASU agreed that for employees engaged in disability services work, the Agreement provided an equivalent entitlement to the award. They submitted however that in NSW, Kirinari employed or may employ workers not engaged in disability services who would be entitled to the 3-hour minimum if the award applied to them.
[29] The Applicant also argued that the Commission analysis accorded insufficient weight to the superior leave entitlements provided for by the Agreement and that it adopted an 'overly pedantic' approach to the comparison 'without giving due consideration to the likely realities of the employment arrangements of the relevant cohort of employees and the likelihood of particular provisions being utilised and applied.' The ASU said its members did not place significant weight on the value of the leave entitlements in the Agreement. They said that less favourable overtime provisions and lower weekend penalty rates left workers significantly worse off overall. They submitted that a survey of their members at Kirinari had indicated that 64.3% reported working shifts of longer than 12 hours and 85% reported working on weekends and that both of these cohorts had experienced disadvantage because of the inferior terms of the Agreement.
[30] We turn firstly to the issue relating to the comparison of the minimum engagement periods. As is noted above, the award provides for a 3-hour minimum engagement period for social and community services employees (except when undertaking 'disability services work'). We note that 'disability services' is referred to in the following definition of the 'social and community services sector' in Clause 4 of the award:
social and community services sector means the provision of social and community services including social work, recreation work, welfare work, youth work or community development work, including organisations which primarily engage in policy, advocacy or representation on behalf of organisations carrying out such work and the provision of disability services including the provision of personal care and domestic and lifestyle support to a person with a disability in a community and/or residential setting including respite centre and day services (emphasis added)
[31] In our view the scope of the classifications provided for in the Agreement extends to community support workers and clerical workers who would not necessarily fall within the exclusion relating to disability support work within the meaning of that expression in the award. For employees who are so employed, the 2-hour minimum engagement period in the Agreement can be considered a less beneficial entitlement compared to the award. If we are wrong about that, we note that this provision is but one a number of matters that need to be taken into account and even accepting it to be a neutral consideration, we do not believe this would change the final result of the better off overall assessment.
[32] In accordance with the principles outlined in Suncoast Scaffolding we are required to undertake a broad evaluative judgment based upon an overall comparison of the terms of the transitional instrument and the relevant award in its application to the cohort of award covered employees. We have taken into account each of the various entitlements provided for by the Agreement and the award, including the superior leave entitlements to which the Applicant referred. We consider that the inferior provisions of the Agreement in relation to overtime and weekend and shift penalties in particular weigh against a conclusion that the employees are better off under the agreement. We are of the view that it is likely that, as at the time the applications were made, employees under the Agreement, viewed as a group, would not be better off if the Agreement applied to them than if the award applied.
[33] Consequently, the requirement in subitem 9(b) has not been met, and it is unnecessary to consider whether it is 'otherwise appropriate' to extend the default period under subitem 6(a).
Is an Extension Reasonable in the Circumstances?
[34] As to whether it would be 'reasonable in the circumstances' within the meaning of subitem 6(b) to extend the default period, we note that the Applicant has indicated that it is likely that bargaining for a new agreement will commence before 6 December 2023 and that this is a view shared by Kirinari. The Applicant also submitted that bargaining is likely to be logistically and industrially complex given that Kirinari has two other zombie agreements that are due to expire on 6 December 2023.
[35] The ASU submitted that it had invited Kirinari to commence bargaining for a replacement agreement and that it believed that it was possible to negotiate such an agreement before the sunsetting of the existing zombie agreements. They noted that it was the wish of all parties to negotiate a single consolidated agreement to cover employees in New South Wales and Victoria.
[36] The Applicants also pointed out that a review of the National Disability Insurance Scheme is currently underway and is due to report in October 2023. They said the final report of the Royal Commission into Violence, Abuse, Neglect and Exploitation of People with a Disability (Royal Commission) is due by 29 September 2023. They contended that the outcome of the NDIS Review and the recommendations arising from the Royal Commission may change the bargaining position of the covered employees and/or Kirinari and that bargaining should not formally commence until after the final reports are published as this could be prejudicial to the parties.
[37] The Applicant submitted that if the employees were to revert to the Award because of the automatic sunsetting of the Agreement during bargaining for a replacement agreement, it would create a chaotic and uncertain industrial environment. It would also be an unreasonable burden on Kirinari's operations as Kirinari would be required to overhaul its industrial and payroll arrangements for an indefinite and potentially short-lived period of time. They submitted that this would likely have a hindering and delaying effect on any bargaining occurring at the time of the automatic sunsetting.
[38] We are conscious that complications can arise in circumstances where parties are seeking to consolidate multiple agreements into a single instrument. More time may be required to finalise an agreement in this case. We also note the unusual circumstances involving two trade unions with different industrial coverage in different states. On the other hand, there are considerations that weigh against an extension. The parties have been on notice since at least late 2022 that the Agreement was likely to cease to operate on 6 December 2023, but beyond preliminary discussions, have not formally commenced bargaining for a replacement agreement. Moreover, our conclusion that employees as a group are not better off overall under the Agreement weighs heavily against an extension of the default period. Employees should not be disadvantaged by the continuing application of such an agreement.
[39] On balance, we are of the view that it is reasonable in the circumstances to extend the default period but that the extension should be of a limited duration only. We consider that a 4- month extension will allow sufficient time for meaningful negotiations to occur for a replacement agreement.
[40] The default period for the Agreement is extended until 6 April 2024. An order giving effect to this decision has been published separately in PR766002.
[1] The application as filed sought an extension of 4 years. The Applicant subsequently submitted that the extension should be for 2 years only.
[2] [2023] FWCFB 105 ('Suncoast Scaffolding').
[4] See Schedule 2, Item 2 of the Transitional Act.
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