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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
WORKPLACE RELATIONS AMENDMENT
(TRANSMISSION OF BUSINESS) BILL 2001
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Employment, Workplace Relations
and Small Business, the Honourable Tony Abbott MP)
WORKPLACE RELATIONS AMENDMENT
(TRANSMISSION OF BUSINESS) BILL 1999
OUTLINE
This Bill will amend the Workplace Relations Act 1996 (the WR Act) to empower the Australian Industrial Relations Commission (the Commission) to make an order that a certified agreement does not bind an employer as a result of a transmission of business, or only binds the employer to a specified extent.
When a transmission of business occurs, the new operator of the business is bound by the awards and agreements that bound the former operator of that business. Under section 149 of the WR Act, the Commission has the power to order that the new operator of the business is not bound by an award that bound the former operator of the business. The Commission has exercised this power on several occasions. However, no similar provision applies in relation to certified agreements.
Submissions made in response to the Ministerial Discussion Paper Transmission of Business and Workplace Relations Issues that was issued in September 2000 by the then Minister for Employment, Workplace Relations and Small Business, the Hon Peter Reith MP, emphasised the difficulties that arise where an employer becomes bound by multiple certified agreements as a result of transmission of business.
FINANCIAL IMPACT STATEMENT
There will be no significant impact on Commonwealth expenditure.
REGULATION IMPACT STATEMENT
Policy development and consultation
The amendments proposed by the Bill reflect changes initially proposed in the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999.
In September 2000, the then Minister for Employment, Workplace Relations and Small Business, the Hon Peter Reith MP, issued a Discussion Paper entitled Transmission of Business and Workplace Relations Issues . That Discussion Paper noted that a possible option for reform was an amendment of the WR Act to give the Commission the power to exempt an employer from being bound by a certified agreement as a result of a transmission of business or to modify the circumstances in which the employer is bound (as is proposed in this Bill).
Several submissions in response to the Discussion Paper highlighted difficulties that can arise from the interaction of existing and transmitted certified agreements following a transmission of business.
Analysis of the Bill
Background
Section 170MB of the WR Act currently provides that, subject to constitutional limits, where an employer is bound by a certified agreement and a new employer becomes the successor, assignee or transmittee of the business or part of the business concerned, the new employer is bound by the certified agreement to the extent that it relates to the whole or the part of the business.
Problem identification and specification of regulatory objectives
An employer can find itself bound by two or more different agreements (its own agreement and other agreements that transmit to it as a successor, assignee or transmittee of another employers business) in relation to the same group of employees.
Inconsistencies between multiple agreements binding an employer are resolved by the priority system established by the WR Act (i.e. that a certified agreement has no effect to the extent of any inconsistency with another agreement certified before it, whose nominal expiry date has not passed: section 170LY). The effect of this is that the transmittee employer may have to apply a transmitted certified agreement over its own agreement based on an event outside its control (the earlier certification date of the transmitted agreement).
The priority rule in the WR Act also imposes
limitations on the ability of the parties to negotiate a new
certified agreement which is appropriate for the needs of the
transmittee’s business, as any such agreement could not
be negotiated by the
transmittee have
effect unless certified after the expiry of earlier
(pre-existing and transmitted) agreements, or such existing agreements are terminated
(which requires agreement of all parties as well
as approval by a
valid majority of employees whose employment is
subject to the
agreement) .
The fact that certified agreements are
generally negotiated on an enterprise basis and are therefore
specific to the needs of that enterprise can mean that a
transmitted certified agreement may not be appropriate to a new
employers business. A number of difficulties that employers have reported to the Government
that affect the administration of their businesses
include can arise that :
§ ·
a transmitted agreement may contain impediments to productivity and
efficiency which adversely affect the ongoing viability and
profitability of the transmittee’s business;
§ ·
the provisions in the transmitted agreement may be irrelevant to
the business operations of the transmittee, and/or prevent or
hinder the transmittee from implementing appropriate workplace
arrangements;
§ ·
there may be practical difficulties involved in applying
transmitted agreements (e.g. the certified agreement may
incorporate or refer to policies and procedures that the
transmittee does not have access to and there may be differences in
job and work design and organisation);
§ ·
following a consolidation of the two businesses at the same site,
employees working side by side at the same job may have different
entitlements under their respective agreements
- t his anomaly can arise as a transmitted certified agreement only applies to the extent that it relates to the whole or the part of the business that has been transmitted ; and
· there can be practical difficulties in attempting to vary or terminate a certified agreement (as this requires the agreement of all parties as well as approval by a valid majority of employees whose employment is subject to the agreement , which can be difficult to organise, especially in cases where, as a result of transmission of business, a certified agreements binds of number of employers w ith employees whose employment is subject to the agreement ).
These difficulties can act as a disincentive to the transmission of business and the risk of these difficulties can act as a disincentive to the development of business and cause interruption to business projects .
As at 31 December 2000, t here wa s 10,183 certified agreements in operation under the WR Act covering around 1,400,000 employees .
The Commission does not have a power to make orders addressing the interaction of certified agreements, as it does in relation to awards.
The desired objective is to reduce the cost
to business of managing certified agreements when there is a
transmission of business. The proposed amendment will provide
an additional low cost and more flexible mechanism by which
businesses can manage this issue by providing the Commission with
the power to address problems that might arise from the interaction
of industrial instruments in appropriate cases by ordering that a
transmittee employer is not bound, or is bound only to a specified
extent, by a certified agreement, while maintaining the integrity
of the agreement-making process (e.g. by not allowing an
employer to unilaterally avoid avoidance of its obligations under a certified agreement through
changed business arrangements).
The amendments require the Commission to give all those bound
by the agreement an opportunity to make submissions before making a
decision as to whether, or to what extent, the certified
agreement should bind the new
employer (provided that, in the case of a union that
is bound by an agreement made directly with employees, the union
may only make submissions where an employee who they are entitled
to represent requests that they do so).
Options
Option 1: Status Quo
Option 2: Amend the WR Act
Amend the WR Act to allow the Commission to make orders that exempt a transmittee employer from being bound by a certified agreement, as it can with awards (in appropriate cases). To ensure that this mechanism is not used to avoid obligations under a certified agreement, it is proposed that the Commission give persons bound by the certified agreement an opportunity to make submissions before making such an order.
Parties’ Views
Submissions in response to the Discussion Paper highlighted difficulties that can arise from the interaction of existing and transmitted certified agreements following a transmission of business.
The ACTU is concerned to ensure that employees should retain benefits when the ownership of the business or part of the business changes.
Impact Analysis
This Bill will impact on employers, employees and their representatives and the Commission.
Option 1: Status Quo
Costs
Submissions received in response to the
Ministerial Discussion Paper have argued that the consequences of a transmission of
business in relation to certified agreements
cause significant problem s , including complication for the
management administration of businesses and
the determination of pay and conditions of employment for employers
and employees.
Benefits
The status quo ensures that the effect of agreements can only be modified by agreement of the parties.
Option 2: Amend the WR Act
Costs
There will be a small additional caseload for the Commission. This increase is not expected to be significant in the context of the Commission ’s overall caseload.
Benefits
This option will provide a lower cost and more flexible additional mechanism for the management of certified agreements when there is a transmission of business, especially when multiple employers are bound by the same certified agreement. This has the advantage of allowing difficulties with the interaction of certified agreements to be addressed, and so avoid or reduce the difficulties identified above that would otherwise result. This is consistent with retaining the enterprise focus of agreements.
It also ensures that the interests of employees are protected by allowing them or their representatives to make submissions to the Commission before an order is made. It would then be a matter for an independent body (the Commission) to consider the application and take account of the submissions of the parties when deciding whether to make an order, and the form of any such order.
An example of how th e Commission has exercised its jurisdiction to make an order that an award does not bind a transmittee employer is the EDS (Australia) Pty Ltd case decided in November 2000 . In that case the Commission took account of submissions from the relevant parties and ordered that EDS (Australia) Pty Ltd , which provides information technology and related services to a number of businesses , was not bound by 49 awards (binding on those to whom it provided services) that were potentially applicable.
Conclusion and Recommended Option
Option 2 is recommended over the status quo because it:
- provides greater flexibility in the agreement making process following a transmission of business;
- provides appropriate safeguards for the parties, for example, through the requirement for certain parties to be allowed to make submissions prior to an order being made;
- addresses some the practical problems that have arisen in connection with the operation of the current legislation.
Implementation and Review
The proposed reform measure is to be given effect by amendments to existing legislation.
NOTES ON CLAUSES
Clause 1 - Short title
1. This is a formal provision specifying the short title of the Act.
Clause 2 - Commencement
2. This clause specifies when the various provisions of the Act are proposed to commence. Subclause 2(1) provides that the Act commences on a day to be fixed by proclamation.
3. Subclause 2(2) has the effect that if the Act is not proclaimed to commence within six months of the Act receiving Royal Assent, it will commence on the day following that period of six months.
Clause 3 - Schedules
4. This clause provides that an Act that is specified in a Schedule is amended or repealed as set out in that Schedule, and any other item in a Schedule operates according to its terms.
SCHEDULE 1 - TRANSMISSION OF BUSINESS
1.1 This Schedule proposes amendments to the provisions of the WR Act that govern the application of certified agreements following a transmission of business.
Workplace Relations Act 1996
Item 1 - Paragraph 170MB(1)(d)
Item 2 - Paragraph 170MB(1)(f)
Item 3 - Paragraph 170MB(2)(d)
Item 4 - Paragraph 170MB(2)(f)
1.2 These items propose technical changes consequent upon the insertion of new subsections 170MB(2A) - (2D) [item 5 of this Schedule].
Item 5 - After subsection 170MB(2)
1.3 This item proposes to insert new subsections 170MB(2A), (2B), (2C) and (2D) into the WR Act.
1.4 Section 170MB provides for agreements in respect of a single business to bind a successor, transmittee or assignee employer (whether immediate or not).
1.5 New subsections 170MB(2A)-(2D) would allow the Commission to order that a certified agreement has limited or no binding effect on a successor, transmittee or assignee of the business, or part of the business, to which a certified agreement applies. This is intended to bring the successor provision in relation to certified agreements into line with equivalent provisions regarding award respondency (section 149).
1.6 Subsection (2A) would provide the Commission with the power to make an order as to whether, or to what extent, the new employer is bound by the agreement. The order would be required to specify the day from which it takes effect, and could not be retrospective.
1.7 Proposed subsection (2B) would provide that an order under the section may be made on the application of the employer bound by the agreement. It is envisaged that the Commission might make an order on application by:
· the successor employer after the succession, assignment or transmission has occurred; or
· an employer that is contemplating a transfer of its business. In this situation, the Commission order would only take effect if a succession, assignment or transmission occurred.
1.8 It is intended that this amendment should be applicable to all successions, assignments and transmissions of business, whether they occurred before or after the amendment commenced.
1.9 New subsection (2C) would require the Commission, before it makes an order, to give the persons bound by the agreement an opportunity to make submissions.
1.10 However, under new subsection (2D) an organisation bound by an agreement made directly between an employer and the employer’s employees (i.e. an agreement made in accordance with section 170LK) would only to be entitled to make submissions if asked to do so by a member of the organisation:
· whose employment is subject to the agreement; and
· whose industrial interests the organisation is entitled to represent.
Item 6 - Subsection 494(3)
1.11 This item proposes to amend Part XV of the WR Act, which provides for the expanded operation in Victoria of provisions contained in other Parts of the WR Act.
1.12 Subsection 494(3) provides for certified agreements to bind a successor, assignee or transmittee employer in circumstances where one of the employers is an employer within the meaning of Part XV of the WR Act. The amendment proposed by item 6 would replace subsection 494(3) to ensure that the Commission had the same powers in relation to such agreements as are proposed in respect of certified agreements generally [items 3-5 of this Schedule].