Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional instruments

The Association Of Professional Engineers, Scientists And Managers, Australia

TAHMOOR COAL PTY LIMITED MANAGEMENT TEAM WORKPLACE AGREEMENT 2006

Application to extend the default period for Tahmoor Coal Pty Limited Management Team Workplace Agreement 2006

[1] The Association of Professional Engineers, Scientists and Managers, Australia (APESMA or the Applicant) has made an application under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) to extend the default period for the Tahmoor Coal Pty Limited Management Team Workplace Agreement 2006 (the Agreement).

[2] The Commission's records indicate the Agreement is a collective agreement that was made under the Workplace Relations Act 1996 (Cth) (WR Act) and approved under that Act by the Workplace Authority. The Agreement is a 'WR Act instrument' within the meaning of item 2(2) of Schedule 3 of the Transitional Act. It is classified by item 2(5)(c)(i) of Schedule 3 as a 'collective agreement-based transitional instrument'. Agreements of this kind are commonly referred to as 'zombie agreements'.

[3] The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) to provide for the automatic termination of all remaining transitional instruments. Pursuant to items 20A(1) and (2) of Schedule 3 to the Transitional Act, the Agreement would have terminated on 6 December 2023 (the end of the default period) unless extended by the Commission. The main features of item 20A of Schedule 3 to the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd.[1]

[4] Under Subitem 20A(6) of Schedule 3, where an application is made under subitem 20A(4) for the default period to be extended, the Commission must extend the default period for a period of no more than four years if either subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so, or it is reasonable in the circumstances to extend the period. Subitem (7) applies if bargaining for a replacement agreement is occurring. Subitem (8) relates to individual agreement-based transitional instruments and does not apply here as the Agreement is a collective agreement-based instrument. Subitem (9) applies if the application relates to a collective agreement-based transitional agreement and it is likely that as at the time the application is made the award covered employees, viewed as a group, would be better off overall if the agreement continued to apply than if the relevant modern award applied to their employment.

[5] APESMA submits that employees would be better off overall under the Agreement than they would be under the Black Coal Mining Award 2020 (Award), which covers the employees and will apply to the employees if the Agreement terminates.

[6] Tahmoor Coal Pty Ltd (the Respondent Employer) objects to the application and asserts that the employees have in place common law contracts of employment that contain the same or similar conditions, and will not be worse off if the Agreement terminates in accordance with the Transitional Act.

[7] The application seeks an extension under either subitem 20A(6)(a) and (9) (the better off overall ground) or alternatively, because it is reasonable in the circumstances pursuant to subitem 20A(6)(b).

[8] The Agreement covers approximately 77 employees (the relevant employees) engaged in what are termed "staff" roles within the Tahmoor underground, longwall coal mine and its associated coal preparation plant. The roles covered by the Agreement are professional, technical, managerial, supervisory or administrative roles within the operation. The relevant employees primarily work on day shift between Monday and Friday each week.

[9] The Agreement contains only a small number of substantive terms in the main body of the document, including an anti-discrimination clause and a dispute resolution procedure as well as a number of operative terms.

[10] Notably, the Agreement includes at clause 7, titled "Management Team Contracts", a requirement that "The Company and an employee to whom the Agreement applies will enter into a Contract in accordance with the terms in Schedule 1 and which contains a rate of pay which is not less than the rates of pay set out in Schedule 2 for the applicable classification."[2]

[11] Clause 7 also relevantly provides:

• (a) "7.2 The Contract will operate for the period of the Agreement unless otherwise terminated."

• (b) "7.3 The terms of any contract entered into in accordance with this clause shall have the same force and effect as every other term of this agreement. For the avoidance of doubt, if there is any inconsistency between the terms of a Management Team Contract and the terms of the main body of this Agreement, then, to the extent of the inconsistency, the terms of the Management Team Contract shall prevail."

[12] Schedule 1 of the Agreement then provides what could be said to be a proforma employment contract (Schedule 1 Contract) that contains a number of substantive provisions setting the conditions of employment for the relevant employees.

[13] The Schedule 1 Contract includes terms referencing the annual "Total Employment Compensation" and the amount of "Notional Base Salary" as a basis for payment of entitlements on termination, with the actual amount to be inserted referred to as "($insert)".

[14] The actual rates of pay are included in the Agreement as Schedule 2. The rates of pay are not set out on an annual basis in that Schedule but rather as an amount for each period of time worked (for example, a rate paid for each 35 hours worked).

[15] The Respondent Employer submits that the "[e]mployees are remunerated on a basis significantly exceeding the minimum rates provided in Schedule 2."[3] They note the rates in the Agreement are now "substantially less than those provided by the relevant modern award."

[16] It is our understanding that Schedule 1 provides the proforma contract and each employee was subsequently offered an individual, specialised contract (employment contract) by the Respondent Employer.

[17] The Respondent Employer argues that as each of the relevant employees has in place an employment contract in the same, or similar[4], terms to a Schedule 1 Contract, the conditions contained in the Schedule 1 Contract (as part of the Agreement) are preserved for each employee. The Respondent states in their submission: "As a matter of contract law, those terms are binding on Tahmoor Coal Pty Ltd and each of the employees employed under the Contract or a contract on substantially similar terms."[5] The Respondent Employer accepts that they cannot alter the pay and conditions of employment as set out in the employment contract without the consent of each relevant employee.

[18] The Applicant asserts that the employees will be better off overall if covered by the Agreement and sets out a number of conditions they assert are more beneficial in the Agreement, inclusive of Schedule 1.

[19] The Agreement itself contains a Dispute Resolution Procedure which is more beneficial than the Award. Clause 8 of the Agreement allows for binding arbitration of matters raised in accordance with the procedure, where the Award allows for arbitration if consent is given by the parties.

[20] The Schedule 1 Contract contains a number of conditions that are more beneficial than the Award, summarised by the Applicant as:

(a) Up to 3 weeks' per year of service for severance pay on redundancy (depending on the circumstances causing the redundancy)[6] as compared to 1 week per year of service in the Award;

(b) 78 weeks of accident pay compared to 52 weeks in the Award;

(c) Clauses addressing workplace safety, environmental protection and anti-discrimination that are absent in the Award;

(d) Entitlements to a motor vehicle novated lease, mobile telephone and personal expenditure salary sacrificing absent in the Award;

(e) 6 months' of sick leave for each illness and injury and special family leave of 3 weeks per year as compared to 105 hours per year of personal leave in the Award;

(f) A flexible approach to time off in lieu where operational requirements demand an extended period of lengthy working hours that is not provided for in the Award, and which the Applicant submits the Respondent Employer does not intend to apply in the same manner if the default period is not extended.

[21] The Respondent Employer's submissions argue that employees "will be better off under the terms of the Contract (or a contract substantially similar to it) which has been entered into between the Company and employees covered by the Zombie Agreement. Those contracts will continue to operate despite the Zombie Agreement terminating."[7] Their submissions strongly assert that employees will not be worse off if the Agreement is terminated because the conditions in the employment contracts will remain in force.

[22] The Respondent Employer provided a copy of a presentation made to employees regarding the effect of the termination of the Agreement.[8] In that presentation, employees were assured that the Employer would preserve appropriate terms and conditions of the Agreement through the employment contracts and "ensure employees are not disadvantaged by the termination of the Agreement." The presentation goes on to note "your current terms and conditions of employment as outlined in your Employment Contract will continue to apply and, where applicable, be read in conjunction with any relevant industrial instrument/ Award/ National Employment Standards (NES)."

[23] In respect of the Dispute Resolution Procedure that sits in the main body of the Agreement and not in Schedule 1 of the Agreement, the Respondent Employer provided a copy of a letter sent to employees advising that the Dispute Resolution Procedure will cease to apply on termination of the Agreement at the conclusion of the default period. The correspondence confirms that the "dispute resolution procedure as defined under the Fair Work Act" will then apply, without specifying what that procedure is or the source of the Commission's power to resolve disputes between the parties. It is likely that should the default period not be extended, the relevant dispute resolution process that will apply will be the process contained in clause 32 of the Award. Clause 32 allows the Commission to assist to resolve a dispute using "any method of dispute resolution that is permitted by the Act", up to and including consent arbitration.

[24] When asked by the Commission to set out the terms and conditions in the Agreement that were more beneficial to employees than the Award, the Respondent Employer set out the terms of the Employment Contract that they say are more beneficial.

[25] The preservation of the relevant conditions in any contract of employment is not relevant to our consideration of whether items 20(A)(6) and (9) have been met and the default period ought to be extended. Subitem (9) applies if:

"[I]t is likely that, as at the time the application is made, the award covered employees for the agreement under subitem (10), viewed as a group, would be better off overall if the agreement applied to the employees than if the relevant modern award or awards referred to in that subitem applied to the employees."

[26] We must determine if the relevant employees, viewed as a group, would be better off overall if the Agreement applied to their employment rather than the Award.

[27] What we have referred to as the Schedule 1 Contract is simply the contents of a Schedule to the Agreement. The Agreement somewhat unusually prescribes that the parties covered by the Agreement "will enter into a Contract" in accordance with terms contained in Schedule 1, creating a common law employment contract that includes the conditions in Schedule 1 and otherwise particularises the pay and conditions for each employee entering into the contract. The contract expected by the Agreement to be entered into by the parties is a legal instrument, separate and distinct from the Agreement.

[28] Whether the parties enter into a separate employment contract or not has no bearing, in our view, on whether the conditions contained in the Agreement apply to the relevant employees. The Agreement is operative and applies to these employees as a matter of law. Schedule 1 and 2 contain a number of conditions of employment and rates of pay that apply to the parties as the schedules form part of the Agreement. Other than the term requiring the parties to enter into a common law employment contract containing the same terms, the Agreement is not otherwise extraordinary.

[29] The existence of a common law contract that predominantly mirrors the conditions in the Agreement is no different to any other employment relationship whereby an employee is covered by an enterprise agreement and also a contract of employment. The application of the two instruments to the employment of the employee is the same whether they contain conditions that are the same or different to the Agreement itself.

[30] The Applicant made a number of submissions to the effect that the default period should be extended because if the conditions of employment were only preserved in a contract of employment new employees would not be afforded the same conditions, current employees could have pay increases made conditional upon signing a contract with inferior conditions, new contracts could include Guarantees of Annual Earnings clauses, thereby removing the application of the Award to the relevant employees, and contractual arrangements may not transfer with an employee in a transfer of business.

[31] These matters are not relevant to the matters we must consider in determining if the default period should be extended.

[32] As we have determined that the Agreement, including the conditions set out in Schedule 1, applies to the relevant employees we must now reach a view as to whether the employees that would otherwise be covered by the Award, as a group, would be better off overall than if the Award applied to their employment.

[33] We accept the submissions of the Applicant regarding the numerous terms in the Agreement that are more beneficial than those in the Award. Whilst we also accept the Respondent Employer's analysis that the rates of pay in the Agreement are less beneficial than the Award, the Employer is compelled to at least pay the relevant Award rates. The Employer has confirmed that in practice employees are paid in excess of Award and Agreement rates. We note, in particular, the disparity in redundancy entitlements, accident pay, and sick and family leave between the more beneficial terms Agreement and the less beneficial terms in the Award. We also accept the Applicant's submissions that the Dispute Resolution Procedure in the Agreement is preferable to that in the Award.

[34] We find that it is likely that, at the time the application was made, the award covered employees in this enterprise, viewed as a group, would be better off overall if the Agreement applied to them than if the Award otherwise applied.

Otherwise appropriate to extend the default period

[35] Pursuant to item 26A(6) of the Transitional Act, the Commission must extend the default period if it is satisfied that subitems (7), (8) or (9) apply and it is "otherwise appropriate" in the circumstances to do so.

[36] As we have found that subitem (9) does apply in these circumstances, we must now consider if it is otherwise appropriate to extend the default period.

[37] In the matter of Suncoast Scaffold Pty[9](Suncoast), the Full Bench held that:

"'Appropriate', on its ordinary meaning, connotes that it is 'suitable' or 'fitting' to grant the extension. 'In the circumstances' connotes the relevant matters and conditions accompanying the particular case. The inclusion of the adverb 'otherwise' indicates that appropriateness must be assessed by reference to circumstances other than those addressed by subitem (7), (8) or (9), as applicable. A broad evaluative judgment is required to be made." (footnote omitted).

[38] In our view, extending the default period is otherwise appropriate in the circumstances for the following reasons:

• (a) a refusal to extend the operation of the Agreement and a transition to award safety net conditions would likely create confusion amongst the industrial parties about the nature of conditions that apply to the relevant employees;

• (b) such a transition would produce a harsh result for employees with significant service (of which the Applicant asserts there are several) if any redundancies were executed, because of the significant reduction in the entitlements of the relevant employees; and

• (c) considering our findings above regarding whether the employees are better off overall under the Agreement, we also note a refusal to extend the default period will leave employees worse off with respect to a number of other conditions of employment.

[39] Given our findings above regarding employees being better off overall if the Agreement applies to them and an extension being otherwise appropriate, there is no need for us to determine whether alternatively, it is reasonable in the circumstances to extend the default period.

[40] As we have found that subitem 20A(9) applies, subitem 20A(6) requires that we must extend the default period for no more than four years.

[41] Full Benches of the Commission have said a number of times that the purpose of the sunsetting arrangements introduced in the SJBP Act[10] is that zombie agreements are to be replaced by contemporary instruments made under the Fair Work Act 2009 (FW Act).

[42] Replacement of this Agreement with a modern instrument reflecting current standards remains of importance here. The Applicant has sought an extension for a period of 12 months, considering that is "sufficient time for the parties to bargain and conclude a replacement agreement."[11]

[43] We accept that submission, considering the size of the workforce covered by the Agreement and the experience of the industrial parties, who are well accustomed to bargaining.

[44] Pursuant to item 20A(4) of Sch 3 to the Transitional Act, we order that the default period for the Agreement is extended to 6 December 2024.

[45] The Agreement is published, in accordance with item 20A(10A)(c) of Schedule 3 to the Transitional Act, as an annexure to this decision.

[1] [2023] FWCFB 105 at [3] to [18].

[2] Tahmoor Coal Pty Limited Management Team Workplace Agreement 2006 at clause 7.1.

[3] Submissions of Respondent dated 22 December 2023.

[4] Noting that the Respondent Employer submits that terms of the contracts have been "updated from time to time to reflect changes in legislation and the Group company which the employer forms part of" - see submissions of Respondent dated 22 December 2023 at paragraph h.

[5] Submissions of Respondent dated 22 December 2023 at paragraph h.

[7] Submissions of Respondent dated 22 December 2023 at paragraph j.

[8] FWC Zombie Agreement Review Tahmoor Coal Pty Ltd Management Team Workplace Agreement 2006 Summary as at 7 Sept 2023.

[9] [2023] FWCFB 105 at [16].

[10] See for example Quinn Transport Pty Ltd Enterprise Agreement 2009 [2023] FWCFB 195 at [23] and One HPA Certified Agreement 2004-2007 [2023] FWCFB 137, at [32].

[11] Submissions of the Applicant dated 10 January 2024 at paragraph 25.

Printed by authority of the Commonwealth Government Printer