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Monday, 11 August 2003
Page: 13072

Senator MURRAY (9:30 PM) —I rise to give the Democrats' opinion on the Workplace Relations Amendment (Transmission of Business) Bill 2002. Like all workplace relations matters, it is far from easy to draw a conclusion on. Transmission of business provisions have been part of workplace relations laws since 1914. At heart, the intention behind these provisions was to provide a protective mechanism for employees, but there has always been a corresponding understanding that business sales should be facilitated. Transmission of business has been the subject of lengthy litigation, and litigation clearly shows the issues are complex and they become more complex as the nature of agreements diversifies, as the nature of work circumstances diversifies and as the nature of sales agreements change. To date, by and large the courts have determined cases in a manner that has been beneficial to the employees. In that regard, a full court of the Federal Court in the Construction, Forestry, Mining and Energy Union v. the Australian Industrial Relations Commission, quoting from an earlier decision, affirmed:

The first point to be made about the operation of S.149 is that it should be beneficially construed so that employers do not `avoid the settled rights of employees', see George Hudson v Australian Timber Workers Union (1923) 32 CLR 413 at 435-436, per Isaacs J. Thus, in my opinion, whether there has been succession, transmission or assignment of a business should not be approached on some narrow basis.

A recent article in Employment Law entitled `Transfer of undertaking: international comparisons'notes:

Over the last couple of years, the Federal Court has significantly expanded the operation of the transmission of business provisions. Under the new approach, a transmission of business may occur wherever there is a “transfer of work” from one employer to another. As a result, the transmission provisions could apply where there is a substantial identity of work between that performed by employees of the transmittee and that previously performed on behalf of the transmittor. Consequently, a wide range of outsourcing or contracting out situations now fall within the scope of the provisions.

The article further notes:

PP Consultants Pty Ltd v Finance Sector Union [2000] HCA 59 (16 November 2000) increased the uncertainty that has attached to these provisions. In the main judgment of a unanimous decision of the High Court of Australia, it was held that “it was not possible to formulate any general test to ascertain whether ... one employer has succeeded to the business or part of the business of another”. However, at least in relation to nongovernmental transmissions, the court stated that a comparison of the identification or characterisation of the business (or the relevant part of the business) of the former employer and business activities of the new employer is required. If these bear the same character, there would usually have been a transmission.

It is acknowledged that this has raised further uncertainty and practical difficulties within the context of a complex industrial framework. It was the first wave of industrial relations reform by Keating and Brereton in 1993 and the second wave of the coalition-Democrats law which helped increase this complexity. It did so because it increased the number of industrial agreements and instruments which could operate outside the award system. The consequence is that transmission of business issues have become more particular and more specific to individual circumstances than was the case under the award system.

Businesses naturally want to avoid their original employees being on different wages and conditions to their newer employees in the acquired business. Awards have general application—award conditions easily transfer across businesses—so conditions for old and new workers in those circumstances are more than likely to remain the same. Certified agreements and Australian workplace agreements have specific application. Unlike awards, they are instruments determined by the parties in the business—between the employees and the employer—and are not determined through the Industrial Relations Commission. Consequently, conditions for old and new workers are as likely to be different as to be similar.

Certified agreements continue until their nominal expiry date, which is no less than three years, which means a certified agreement cannot be replaced by another certified agreement until the expiry date has passed. Therefore, on the transmission of business, the new business retains the certified agreements it takes on until their expiry date. On the other hand, one business acquiring another only has to wait out the unexpired portion of the certified agreement before negotiating a new one. Certified agreements can be terminated before their expiry date but only under specific circumstances, including where employees and/or the relevant union have agreed to the instrument being terminated and the termination is then approved by the Industrial Relations Commission.

The key change in this bill is to give the Industrial Relations Commission discretion to review the applicability of existing certified agreements in a new business without employee approval. This is the case at present with awards—as I said earlier, they are not agreements between employees and employers, but general instruments—but it is not so with certified agreements or Australian workplace agreements. It should be noted that certified agreements were regarded as awards under the Industrial Relations Act 1988; thus the transmission provisions applying to awards also applied to certified agreements. This is no longer the case under the Workplace Relations Act 1996— and I suspect it was not the case under the 1993 act, but I am not sure.

This bill has been introduced because employers have expressed concern at the possibility of meeting the obligations of a variety of employment instruments following a business acquisition. The Democrats appreciate the complexities that might arise from multiple agreements for the one work force, especially if those agreements cover performance of the same work. Here you have an odd contest. The chamber as a whole has cooperated in recent years to make the market work very effectively. Corporations Law has been changed to ensure that mergers and acquisitions proceed as easily as possible, with tax law there have been consolidation provisions and there has been general agreement overall that fluidity in business transactions should be encouraged and made easier through law. Here on the employee side there is the impediment of a time frame which, as far as I can see, is of three years or less. It is notable that within the government's bill no real attention is given to the time frames occurring within certified agreements.

Because the concerns that have been raised have some validity, the Democrats consider this issue to be worthy of further consideration. One concern is that there is potential for a seller to offer a prospective employer a `package' of lower cost operations through the elimination of current terms of employment. Related to this point, the Australian Council of Trade Unions is concerned that `weakening an already inadequate transmission of business provision will further encourage the types of contracting out and corporate restructuring which we have seen can have such an unfair effect on employees'. The flip side of the coin is that an acquiring business has the right to reshape the new business in the manner which will produce the best outcome for it.

Affording rights to the outgoing employer to make an application to the Industrial Relations Commission about the extent to which a current certified agreement will bind a future purchaser of the business, as this bill does, will only serve to facilitate behaviours which might be regarded as contrary to employees' interests. It should be noted that providing particular rights of the outgoing employer to have a certified agreement not bind a future employer is not available under the award transmission provisions. That surprises me, might I say, where you might have a state award and a federal award circumstance.

The amendments provide no assistance to the commission in determining the relevant circumstances or grounds for making or refusing an order. Also there is no requirement that an order to set aside be subject to a no disadvantage test or some similar mechanism to ensure that, for the short period remaining within a certified agreement, employees are not disadvantaged. Where two awards have `collided' following a transmission of business, it has been the case that the superior terms have been applied. In the current bill there are no guidelines of this sort for certified agreements. I might add that, in approving a certified agreement, the Industrial Relations Commission does and can apply a no disadvantage test.

Repercussions of the proposed new provisions have been quoted elsewhere. The Australian Rail, Tram and Bus Industry Union, in its submission to the Senate committee inquiry into this bill's predecessor, stated:

Whilst some may argue that it is up to the Industrial Relations Commission to make any order and that this caveat will protect employees, it will be cold comfort to them. The fact is that the capacity will exist to remove the agreement in whole or in part. Where employees feel threatened or have little confidence in the system, the potential for industrial disputation increases exponentially.

You can understand why it would take that view. In a privatised circumstance, and it does not seem to matter what colour government is doing the privatising, typically the number of employees falls and their wages and conditions change.

Only employers are allowed to make applications; employees and/or their unions are not, which seems odd. The Australian Democrats, however, have a long tradition of supporting the Industrial Relations Commission having an independent discretion to determine industrial relations matters on their merits. What the 1996 act did—and this bill seems to go against that intention—was to try to keep the Industrial Relations Commission out of as much action between employers and employees as possible. The whole basis of the enterprise bargaining system originally introduced in Labor's 1993 bill is to ensure that employers and employees, independent of a third party, work out their own circumstances. This bill takes it back to the Industrial Relations Commission. That is not something we have a problem with, but it does seem a bit of a backtrack in government philosophy.

I have said previously in our minority contribution to the report that discretion is never open-ended. It has long been the Democrats' view that, wherever possible, such discretion is a better guarantor of fairness and flexibility—and, of course, I am referring to the discretion of the Industrial Relations Commission. However, we do recognise that discretion can lead to uncertainty and cost until such time as orders have been made, and that is another characteristic of the transmission of business. Somebody buying a business simply does not want to wait around longer than is necessary for due diligence to ensure the transference of assets and understanding of where they are going, and the employees of course also want certainty.

It seems self-evident that the IRC should have discretion in respect of transmission of employee conditions in business acquisitions, particularly when more than one certified agreement affects `old', `transferred' and `new' employees in a business. This is an alternative to the courts, which are notoriously slow and are a notoriously blunt instrument in these circumstances. The Industrial Relations Commission needs to determine which agreement should prevail—provided, that is, that the Industrial Relations Commission continues to recognise that the intention behind the transmission of business provisions is, in the interests of fairness, to provide a protective mechanism for employees. The IRC must do this while taking into account the need to provide new or reformed businesses with necessary operational flexibility. Whether we keep the current system, which allows employees and employers to terminate the agreement in special circumstances, or whether we introduce a new provision for the Industrial Relations Commission to weigh up the repercussions for both parties does need to be determined. But where does this lead us?

It seems to lead us to this: the government are only going part way along the road. They say that applications should be made to the Industrial Relations Commission. I cannot disagree with that, as a general intent. They say that the Industrial Relations Commission should have arbitration powers—in other words, the Industrial Relations Commission should have a final decision making ability, subject to the normal appeals based on matters of fact which are available. I cannot disagree with that. The whole purpose and basis of the Industrial Relations Commission was that it should have an arbitration ability. They say that employers should have the ability to make submissions or applications. I cannot disagree with that but I would surely envisage circumstances in which unions or employees would have similar rights, because that allows maximum flexibility.

There is the question of time. I would think that you would need to enforce a rapid process. In the case of the Corporations Law, when you are looking at the merger provisions and the takeover panels there is a speedy fast-track process which you can access. That is desirable in a transmission of business circumstance. When you are dealing with a certified agreement I am not sure you would want these provisions in the bill to operate if the certified agreement had a relatively short period still to run. Why would you want to get into this activity if—within the last year, anyway—the employees were starting to gear themselves up for renegotiating their agreements?

I have an inclination that the government are on the right track in a number of areas but I do not think, to borrow some words we were using in the earlier debate, they have `covered the field' of their intent sufficiently. I will be very interested to see how the debate stacks up and how we will be able to manage the various amendments, and the bill itself, to reach an appropriate outcome.

Debate interrupted.