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Monday, 11 August 2003
Page: 13068


Senator JACINTA COLLINS (9:15 PM) —As you would expect from its title, the Workplace Relations Amendment (Transmission of Business) Bill 2002 deals with the issue of the transmission of business—in other words, what happens to workers' rights and entitlements when their employer sells or otherwise passes on the business to another employer. At one level there is an elegant simplicity in the way the law deals with this issue. However, award regulation of employment together with formalised bargaining and resultant certified agreements and an increasing trend to outsourcing, contracting out and labour hire have led to recent judicial attention on the issue of transmission of business from the High Court and the Federal Court of Australia.

From a practical and a legal perspective, there are two interrelated issues that arise for employees and employers in a transmission of business situation. First, what right does an employee have to accept or reject the transmission? Second, if the transmission is effected and the employee starts with a new employer, under what terms and conditions of employment will the employee be engaged?

In relation to the first question, an employee's right to reject a transfer to a new employer, the classic statement in law comes from Lord Aitkin in the 1940 English case of Nokes v. Doncaster Amalgamated Collieries. Lord Aitkin said:

I confess that it appears to me astonishing that apart from overriding questions of public welfare power should be given to a Court or anyone else to transfer a man without his knowledge and possibly against his will from the service of one person to the service of another. I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he will serve: and that this right of choice constituted the main difference between a servant and a serf.

The essential distinction made in the above passage is that goods, chattels and livestock can readily be sold from one owner to another but a contract of service—a contract of employment—simply cannot be passed from one employer to another. This is because when a worker contracts to a particular employer the personal nature of that relationship requires that the worker should not be compelled, especially against his or her will, to work for another person. It is simply unfair and it affronts the dignity of workers to allow them to be shuffled between one employer and another, and more so if the conditions under which they are expected to work are in any way reduced or compromised.

But with realities of commercial life requiring that businesses pass from one owner to another it is recognised that there needs to be a fair and sensible regime that governs the right of employees in a transmission situation. Indeed, in many instances employees will work from one firm one day and another the next day without noticing much difference at all apart perhaps from the name of the enterprise or a different CEO. Under such occasions the transmission of business is just part of a vibrant and dynamic economy in action, and for the employees the transmission may be to their advantage, opening up new prospects for promotion or enhanced conditions of employment.

Returning to the first question that arises in the transmission of business situation, namely the right of an employee to accept or reject transfer from one employer to another, at common law the ruling in Nokes stands as part of Australian law. This was confirmed as recently as September 2002 by the Federal Court in the case of McCluskey v. Karagiozis. In this matter, the presiding judge, Justice Merkel, not only cited with approval passages from the Nokes case; he stated in relation to the employing bodies that they:

... appeared to have pursued their own interest in disregard of the entitlements and interest of their long serving and loyal employees by transferring the employment of the employees, and the responsibility of their entitlements to shell companies thereby treating those employees as if they were serfs, rather than free citizens entitled to choose their own employer.

This is in 2002. As can be inferred from this passage in the McCluskey case, the purported transmission of the employees' employment was ineffective for want of the employees' assent to the transfer. And, indeed, I am sure that if asked the employees in question would have given only one answer on whether they consented to being transferred from the principal asset holding entity in the business to worthless shell companies.

Herein lies the role of the common law as a real and effective protector for employees in a transmission situation. Before a business can effect a transfer of its employees to another business as part of a sale it must secure the consent of the employees affected. If the employer offers the employees appropriate guarantees as to future conditions and the security of the employees' accrued entitlements, the natural response from employees would be to accept the transfer—and then the issue is disposed of in a fair manner all around.

On the other hand, what happens if the employees take the view that the transfer is not in their interests and they refuse to agree to it? The real prospect is that they will lose their jobs but this may also stand in the way of the employer selling or passing on the business. This then compels the parties to negotiate and reach agreement.

It should be noted that in many federal certified agreements the prospect of a transmission of business is a matter contemplated in advance by the parties, and the obligations on the employer in a transmission situation are well known ahead of the event. For example, clause 9 of the Walkers Pty Ltd certified agreement 2002 reads:

In the event of Walkers Pty Limited (the Company) business or businesses activities thereof is sold or closed leading to a transmission of business and transfer or termination of employment, the company commits to:—

(i) Identify all accrued entitlements of affected employees.

(ii) Consult with the Combined Unions regarding the impact of such a transmission of business on the accrued annual and long service leave entitlements of employees up to the date of transmission.

(iii) Consult with the parties in relation to the extent of any national employee entitlements scheme in place at the time, with a view to agreement between the parties to avail themselves of it, and/or establishing a trust fund into which such entitlements could be transferred. Such trust funds, if used, would be subject to any reasonable legal, accounting, taxation or fiduciary requirements in place at the time.

These provisions show how the parties—in this case Walkers, an engineering firm, and the relevant unions: the AMWU, the AWU, the CFMEU, the CEPU and the TWU—are capable of sorting out their own arrangements. However, under this bill the provision in the agreement I have just cited could be replaced with an order of the commission. Isn't this tantamount to the commission taking on the role of a player and not that of an umpire? Haven't we heard this phrase before, and where did it emanate from? So here is an example of the government throwing out its stated principles where it is convenient or expedient to do so.

For the sake of completeness, there are other issues that arise in the severing of an employment contract in a transmission, such as the possibility of an entitlement to redundancy pay; and, as the Federal Court recently held in the Amcor case, an entitlement to severance pay on redundancy will arise even where employees accept a transmission with continuity of service. This case turned on the natural and literal meaning assigned to the terms in the prevailing certified agreement. Again it demonstrates that, under our current system, parties to an agreement can expect to get what they agree on—but not if this bill goes through. Furthermore, what is worrying for employees is that this bill proposes that the commission have reposed in it the power and discretion to alter agreed terms on a transmission, but that power and discretion would not be guided to preserving the benefits that accrue to the employees under their agreement.

A second consideration is what conditions of employment apply to employees transferred over to a new business. Here, the existing law is designed to have a certified agreement follow the employee to the new business as long as the test set down in section 170MB is met. This test is not materially different to that found in section 149(1)(d), which deals with when award conditions of employment flow on in a transmission of business. The test that triggers a certified agreement or an award flowing over is whether the new employer is a successor, transmittee or assignee, whether immediate or not, of the whole or a part of the business concerned—that is section 170MB(1)(c). A recent High Court judgment, in the PP Consultants case, emphasised the importance of the word `business' in that phrase. It is only where the successor takes on the business or a part of the business of the transmittor that the award or agreement flows. This meant in the PP Consultants case that bank employees who transferred from a branch of the bank into the employ of a pharmacy which also carried on banking functions as an agency of the bank were not entitled to the benefit of the relevant banking award. The High Court held that the pharmacy did not carry on the business of banking, notwithstanding its bank agency function, so the award did not transmit.

While this decision is not particularly helpful for outsourced employees, it shows that the existing laws already cater for businesses that divest functions to agencies, contractors or other service providers. Nevertheless, the current law ensures that the primary policy objective of the transmission of business provisions continues—namely, employers cannot avoid their award and agreement obligations simply by transferring their employees to a different employing entity. This means that in conventional situations such as takeovers, buy-outs and other forms of acquisition, one could with some confidence expect the transmission of business provisions to do the work they are expected to do and ensure that the award or agreement conditions of the old employer come across to the new employer.

If a successor finds the conditions of employment that come across with an acquired business objectionable or otherwise incompatible with the successor's other businesses, the successor may enter into negotiations with the employees of the newly acquired business and, if agreement is reached, the new agreement or a variation of an existing agreement can be ratified. Again, the solution to a business's problems in such circumstances lies in the principle so keenly espoused by this government—namely, agreement making between employees and employers. Recourse to the commission in such circumstances, which is what this bill provides for, is the antithesis of the government's stated approach to workplace relations. As was said before, principle is so readily discarded by this government when it impedes business getting its own way over employees and reducing their conditions.

Moreover, if one digs a little deeper into the bill, one can find another example of inconsistency in the government's proposed treatment of employee rights in a transmission of business. The bill only modifies the scheme of succession for the terms of certified agreements and, whilst consistency is one of the stated objectives, does not spread to Australian workplace agreements. Why the government has left Australian workplace agreements out of the equation is unclear, but one can draw the inference that AWAs are being given special treatment. This issue has, as I recall, been before the government for several years and no clear answer has been supplied to the Senate or to the committees that have investigated these proposals.

On the subject of AWAs generally, I can remark that, for all the government's attempts to promote AWAs, they remain unpopular, with less than two per cent of wage and salary earners on AWAs. Perhaps the government has left AWAs out of this bill because they are so rare that business has not lobbied the government to act on AWA employees. At any rate, without speculating further on the government's motives for leaving AWAs out of this bill, consideration should be given to how the exclusion of AWAs could affect labour law generally. If AWAs are to be afforded greater scope to protect an employee's agreed conditions of employment vis-a-vis collective agreements in a transmission of business, this would amount to discrimination against those who choose to bargain collectively. This principle is repugnant to Labor, and Labor will stick to its principles and give this as sufficient reason by itself to reject this bill.

In conclusion, this bill has the potential to undermine the sanctity and certainty of certified agreements. If it is passed, workers who have bargained and reached a deal with their boss could have the boss trigger a revision of their agreement simply by assigning the business to a new employer. This is unacceptable to Labor. Workers deserve better when they reach agreements. If the prospective purchaser of a business is not attracted to the workers' existing agreement, the purchaser should reconsider the buy or negotiate a new, mutually acceptable agreement with those existing workers.