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Wednesday, 25 June 2003
Page: 17456


Mr McCLELLAND (11:50 AM) —The Workplace Relations Amendment (Transmission of Business) Bill 2002 addresses a highly significant issue. Indeed, the debate with respect to the Australian maritime industry that we have just witnessed in the House touched on that issue as well. It is becoming an ever-increasing issue in our workplaces and our communities. There is no doubt that the rapid movements of global capital that we see in the modern economic environment as a result of globalisation mean that we repeatedly see instances where capital comes in and out of the country and we see resulting business sales, transfers, mergers and contracting-out arrangements. It is fair to say that very few workers have not been retrenched or seen one of their workmates lose their job as a result of one of these phenomena. Increasingly, as I said, these transmissions and the consequent insecurities that they can cause are a feature of modern working life. Those consequences can often be the source of considerable resentment. The communities that I have visited that are demoralised tend to be those where the forces of the modern global economic environment have brought about a significant amount of corporate restructuring, with people losing their jobs or positions as a result of that phenomenon. That can itself be the source of considerable resentment within communities.

There is particular outrage when that restructuring is the result of corporate manoeuvring rather than for legitimate business reasons. Regrettably, there have been some very disturbing examples of transmissions of business occurring for strategic purposes—indeed, for strategic industrial relations purposes—as opposed to legitimate business interests. Perhaps the most infamous example of that was with respect to the Patrick group of companies in 1998. People are well aware of the Patrick Operations dispute. I will refer to some passages from the Federal Court decisions and, subsequently, the High Court decision. The Federal Court said in its decision of 21 April:

The cancellation of the labour supply contract and the appointment of administrators on April 7 1998—

this is with respect to the Patrick companies—

were made possible by a complex, inter-company transaction which occurred in September 1997. By dividing the functions of employing workers and owning the business between two companies, the Patrick group put in place a structure which made it easier to dismiss the whole work force.

The High Court decision also referred to similar phenomena. It said:

Thus the security of the employer company's businesses was extremely tenuous. The security of the employees' employment was consequentially altered to their prejudice.

The High Court further said:

There is no express denial that a reason for undertaking the restructure in this particular way was to facilitate the termination of the employees' employment.

Further, at page 22, it stated:

... in effecting the 1997 reorganisation, the employer companies disposed of their assets including their stevedoring businesses, reduced their issued capital and disposed of a substantial amount of money by the buy-back of their shares and became the mere suppliers of labour, they exposed their continued commercial viability to the discretion of Patrick Operations No 2 (and later Patrick Operations) in the event of any disruption in the supply of labour.

In a speech in the Senate on 14 May 1998, Senator Kerry O'Brien went through in some detail the corporate restructuring and summarised it by saying:

Up until the third week of September, Patrick Stevedore's companies Nos 1, 2 and 3 employed waterside workers, owned equipment, ran terminals and had contracts with shipping companies. But the business was sold for $300 million to a company further up the corporate chain while assets were sold for $7 million.

The employer companies reduced their capital base by almost $70 million by buying back and then cancelling shares. This soaked up all their cash. Patrick Stevedore's No. 2 paid $24.4 million in buying 609,922 shares at a $1 par value, a $39 premium per share. Patrick Stevedore's No. 1 paid $36.9 million for 45.4 million $1 shares, a 19c discount on par value. Patrick Stevedore's No. 3 paid $6.8 million for 13.5 million shares, a 50 per cent discount on the par value of the $1 shares.

I have referred in my speech to the High Court decision which said that there was no doubt in the High Court's mind that the restructuring at least had a purpose of making it easier to dismiss workers. I have to say that in terms of the government proposing this bill we have to look at their track record and point out to the Australian community that we do not think they come here with entirely clean hands. Without having a debate, as would be objected to no doubt by my colleague the member for Canning, on the Patrick Stevedore's events, all I would point to is the fact that on 10 March 1997 departmental officers of the department of transport outlined the circumstances in a memorandum by which employees could be terminated. They said in that memorandum:

Stevedores would need to activate well prepared strategies to dismiss their work force and replace them with another quickly ...

... ... ...

. . a dispute would not, of itself, remove or alter MUA coverage, remove or suspend registration, or cancel the award or terminate any agreement ...

What would be needed for the MUA's influence on the waterfront to be significantly weakened would be for a range of affected service users and providers to take decisive action to protect or advance their interests.

I also point to the government's interconnection with those Patrick Operations events. I think it was 9.30 a.m. on the morning after the dismissals were announced—at approximately 10 p.m. to 11 p.m. the night before—that the government introduced into the House the Stevedoring Levy (Collection) Bill 1998. To assume that the government had not prearranged its bill on the basis of those technical corporate manoeuvrings being undertaken in the Patrick group of companies defies all logic and analysis. I point out that, in advancing a cause of employee interests in terms of a desire to protect the security of employees, all one needs to do is refer to the government's intimate and intricate involvement in that Patrick Operations scenario for Australian workers to be very concerned indeed about government motives.

Of course, other examples of corporate manoeuvring for the purpose of avoiding employee entitlements exist, and we must be aware of those in considering the proposals contained in this bill. There is a good example with respect to the Coogi Group, a textile company. It is referred to in a case called McCluskey v. Karagiozis, a 12 September 2002 decision of Justice Merkel of the Federal Court of Australia. He referred to the restructuring that occurred in that case. He said:

The aspect of the restructure that is before the Court is the purported transfer of the employment of approximately 240 employees, employed by the pre-structure employer in the Coogi group to the proposed post-restructure employer in the Coogi group (“the transferred employees”).

He then set out how those allocations to the restructured companies were to take place. He said:

It appears that the post-restructure companies have no assets of substance and will be unable to pay the transferred employees their employee entitlements, which are said to total in excess of $2,500,000.

His Honour said:

Although the post-restructure companies accepted the employment of the transferred employees and paid salaries, taxes and other payments in respect to those employees, the majority of whom were women from non-English speaking backgrounds performing largely unskilled work, the employees were never consulted about the cessation of their employment with the pre-restructure employer or about the commencement of their employment with their post-restructure employer. It appears that the only information received by the employees about their new employer was the appearance of its name on the pay-slips and group certificates issued since 2 March 2000.

His Honour summarised the situation in this way:

... on the material presently before the Court the controllers—

that is, the controllers of the companies—

appear to have pursued their own interests in disregard of the entitlements and interests of their long serving and loyal employees by transferring the employment of the employees, and the responsibility for their employee 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 another dramatic example of corporate manoeuvring and restructuring for the advantage of those controlling the corporations and for the purpose of avoiding employee entitlements.

Another recent example that came to my attention was with respect to a company called Datem Moore Pty Ltd, which ceased to trade on 11 April 2003. It was an electrical contracting company operating in the Hunter region. Obviously it was a substantial company, but workers there have been denied accrued entitlements of some $202,000. Unfortunately, most of that shortfall is made up of unpaid superannuation entitlements totalling some $172,360, which will not be recoverable under the GEER Scheme. Surprise, surprise! As I understand it, those employees of Datem Moore Pty Ltd were transferred from a related company called Datem Moore Technical Services back in July 2002—another example of corporate manoeuvring at the expense of workers.

What is the government's position on these transmissions of business in circumstances where Australian workers lose their jobs and/or entitlements? Certainly, with regard to the maritime industry—which was the topic of the debate in the Senate message immediately before this item of business—it is demonstrated in the case of the CSL Yarra. As I understand the facts, the CSL Yarra was sold to a related company, which proposed to operate—and, as it has turned out, in fact has operated—that vessel on pretty well the same shipping route in Australian waters but with a foreign crew.

What is the position of the Australian government on that circumstance? It appeared in the Australian Industrial Relations Commission to oppose an application for the vessel to be covered by Australian award conditions to prevent the use of foreign crews undermining the terms and conditions of Australian maritime workers. More recently, as I understand it, it has also appeared in the High Court of Australia to oppose or seek prerogative relief against an Australian Industrial Relations Commission order that Australian award conditions flow on to that vessel. That says volumes about this government's commitment to Australian jobs and to fair terms and conditions for Australian workers. Indeed, it says volumes about the extent and expense to which it is prepared to go to allow the terms and conditions of Australian workers to be undermined by cheap foreign labour. That can occur as a result of contracting-out arrangements, as these examples indicate.

Another case worth referring to is PP Consultants Pty Ltd v. Finance Sector Union of Australia, a case that went to the High Court of Australia. In that case, the Byron Bay branch of the St George Bank was closed and, in its place, a `bragency'—short for branch agency—was opened. A pharmacist who took over that `bragency' employed an employee of the bank. Despite the Federal Court of Australia saying that the situation was a transmission of business situation, the High Court said that, because the business of the pharmacy was different from the business of the bank, there was not a transmission of business. That decision was welcomed by Minister Reith in a press release issued on 16 November 2000, but he did not go into the fact that the decision can only encourage that sort of event—the closure of businesses, contracting out of services and reducing services.

The loss of services, which is encouraged if we make it easier for businesses to undermine or reduce their obligations to employees through these contracting-out arrangements, affects local communities like Byron Bay—which is not an insubstantial regional centre, albeit a desirable one to visit. So, as well as employee entitlements and jobs, the interests of local communities—particularly in regional centres—can be drastically affected by these contracting-out arrangements.

The effect on the rights of employees in a transmission of business situation is significant, because it effectively permits the undermining of their terms and conditions of employment. If their collective agreement does not follow their employment into the new establishment, the only test that applies with the new employer is the no disadvantage test. As a result of amendments this government has made to the Workplace Relations Act, that no disadvantage test is a basic 20 core conditions; and, very much as a result of its amendments and decisions of the commission, it is now very much a basic, low award rate of pay—a basic safety net level of pay—not the actual terms and conditions. So if you can avoid the contractual obligation through the collective agreement—it being a form of collective contract, if you like, albeit with statutory force—you are in a position where you can undermine the entitlements of workers, again commencing the spiralling down to lower conditions rather than skills enhancement and improvement in wages.

That is why this bill is so significant. It would enable the Australian Industrial Relations Commission to make orders that, despite a transmission of business situation occurring, the terms and conditions of employees as set out in a certified agreement would not follow—or would not follow totally—the employee to the new employer or establishment. It is a dislocation of the responsibilities of government to actually promote that occurring. The responsibility of government should be to ensure that employee entitlements are protected so that these sorts of corporate manoeuvrings, corporate restructurings, are not used as a means of undermining workers. I refer to the position at common law, which was set out in a case in 1940 by Lord Aitken in Nokes v. Doncaster Amalgamated Collieries. It is much the same as the view taken in the decision by Justice Merkel in the Coogi case, to which I have referred. In the decision in the Nokes case, Lord Aitken 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 with 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.

When we interfere with this area—and the reality is that employees do not have a say in when these corporate restructures occur—we are effectively reducing employees, workers of this country, to the position of serfs. They are beholden to these massive influxes and outpourings of global capital and vagaries unless we give them protection. Even if employees obtain protection through their own certified agreement, such as with the Walkers Pty Ltd Certified Agreement 2002—which sets out procedures for consultation in the case of any proposed restructuring, including notification of relevant employees and trade union representatives, identifying entitlements and impacts the restructure would have on them—that can be set aside by the commission. So, even if the parties assist themselves to moderate the effect of modern capital and the effect on economic activity, that very condition of identifying what would happen in the event of restructuring can be set aside by the commission because that certified agreement can be ordered not to flow, in part or in whole, to the new enterprise. Again, this is something that is extremely concerning.

This bill reflects the fundamental difference in approach between the government and the Labor opposition to industrial relations. The government's entire approach is to get an outcome, without worrying about the consequences along the way. It does not worry about how that outcome is achieved or whose rights are trammelled; it just looks for the outcome—hence the ability to avoid employee entitlements through a contracting-out or restructuring arrangement. I have to pause and ask at this point in time: in what other area of commercial life would this government, which professes the notion of freedom of contract and the sanctity of contract, tolerate a situation where a commercial contract could be set aside by a tribunal without any consideration of the rights of, or compensation for, those who had the benefit of the contract or instrument?

This bill is fundamentally objectionable because it enables negotiated rights—often hard fought and hard negotiated—to be simply set aside as a result of a contracting-out or transmission of business situation. From the point of view of workers, it has the effect of causing a difference in their place of work, their time of work, the roster they may be engaged on, the duties they may perform, their seniority and their remuneration, including whether or not they will receive penalty rates—which are increasingly falling away as a result of the very low no disadvantage test that applies under the government's legislation. That is in a context where the bill does not provide any criteria for the commission to consider when it will or will not permit the terms and conditions of a certified agreement to flow to a new employer.

It has been argued, and no doubt the minister would argue, that these provisions would enable the commission to keep a struggling business afloat by allowing the business to restructure itself and remove a struggling part of that business from the burdens imposed by an existing collective agreement. I think the minister would say that is a purpose of the bill. I say there are no criteria contained in the bill for that to occur. And how sincere is that? Instead of promoting a system where the parties to a struggling business are assisted to actually sit down and talk through the issues and resolve their differences—perhaps through changed arrangements, whether they be short term or permanent—and instead of giving employees the option of sitting down to work through methods whereby they can contribute to the success of the business, the government want to simply say, `We'll get around the problems by contracting out. Forget the employees' rights; forget what has been negotiated and agreed to. We'll just undermine their entitlements by contracting out.'

Unfortunately, I can see why the government are proposing this bill. Because of their philosophy, it is, effectively, the only way for them to address the matter. They do not believe in third-party involvement—they regard the involvement of the Australian Industrial Relations Commission in the employment relationship as unwarranted third-party intervention—and they have opposed on numerous occasions, including recently, our proposals to establish good faith bargaining positions to enable the Industrial Relations Commission to direct parties to bargain in good faith. They have also removed from federal awards the obligation to consult about redundancy situations. That obligation has been taken out as part of the 20 core matters to which I have referred.

While this is the only game in town from the point of view of the government's philosophies, it is a game that ignores the rights of workers. It is a game that is not sincere in that it does not confront the obligations on employers to sit down and rationally exchange information and try to work through issues. For the reasons that I have outlined, Labor will be opposing this bill. I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not denying to give the bill a second reading, the House condemns the Govern-ment for:

(1) further reducing workplace democracy by removing the right of employees to vote on whether a certified agreement should not apply following a transmission of business; and

(2) further increasing job insecurity by enabling the termination of certified agreements, without employee consent, in corporate restructur-ing and contracting out.”


The DEPUTY SPEAKER (Mr Wilkie)—Is the amendment seconded?


Dr Emerson —I second the amendment and reserve my right to speak.