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2002
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
WORKPLACE RELATIONS AMENDMENT
(TRANSMISSION OF BUSINESS) BILL 2002
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Employment and Workplace Relations,
the Honourable Tony Abbott MP)
WORKPLACE RELATIONS AMENDMENT (TRANSMISSION OF BUSINESS) BILL
2002
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 or for a specified
period.
When a transmission of business occurs, the new operator is bound
by the awards and agreements that bound the former operator. Under section 149
of the WR Act, the Commission has the power to order that the new operator is
not bound by an award that bound the former operator of the business. However,
no similar provision applies in relation to certified
agreements.
Submissions in response to the Ministerial Discussion Paper
Transmission of Business and Workplace Relations Issues, 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
The
measures in this Bill will have no significant impact on Commonwealth
expenditure.
REGULATION IMPACT STATEMENT
The amendments proposed by the Bill are based on amendments initially
proposed in the Workplace Relations Legislation Amendment (More Jobs, Better
Pay) Bill 1999, and later included in the Workplace Relations Amendment
(Transmission of Business) Bill 2001.
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 reforming provisions of the Workplace Relations Act 1996 (WR Act)
that regulate the transmission of certified agreements would be to amend the WR
Act in terms proposed by this Bill:
“...Parliament could
re-establish the test originally contained in the IR Act, by which the
transmission of certified agreements occurred ‘subject to any order of the
Commission’. Under the IR Act, the definition of an award included a
certified agreement. Accordingly, the opening words of s149 applied equally to
awards and certified agreements. This option has the advantage of involving
minimal redrafting, and giving transmittee employers an option to alter the
application of, or the provisions in transmitted certified agreements.”
(page 33).
Twenty one submissions were received in response to the
Ministerial Discussion Paper, from twelve employer organisations, four employers
(including two labour hire firms), the Australian Council of Trade Unions
(ACTU), one union, the Queensland and Western Australian Governments, and the
federal Joint House Department.
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 first
employer’s business (or part of the business), the new employer is bound
by the certified agreement to the extent that it relates to the whole or the
part of the business.
As at 30 September 2001, there were 11,755 current
federal certified agreements, covering an estimated 1,362,100 employees.
Several submissions made 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.
As a result of
the operation of section 170MB, a transmittee employer can find itself bound by
two or more different agreements in relation to the same group of
employees.
A transmitted certified agreement will apply to the
transmitted business, subject to the priority system established by the WR Act
regarding the interrelationship of certified agreements. Section 170LY
provides 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.
The effect of this provision is that an employer
acquiring a business may have to apply a certified agreement that transmits with
the business over an agreement that it negotiated with its employees before the
transmission. The employer has no control over which agreement takes priority
– this is simply determined by the respective certification dates of the
agreements.
Further, the employer may not simply be able to negotiate a
new, replacement certified agreement that is appropriate to the needs of the
transmittee’s business. A new agreement cannot have effect unless the
agreement is made after the expiry date of existing and transmitted agreements,
or existing agreements are terminated (which requires agreement of all parties
as well as approval by a valid majority of all employees whose employment is
subject to the agreements being terminated – which could include employees
in other businesses).
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 the new employer’s business. A number of difficulties that
employers have reported to the Government, affecting the administration of their
businesses, include:
• 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. This 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. A variation or termination of an agreement
requires the agreement of all parties as well as approval by a valid majority of
employees whose employment is subject to the agreement. This agreement and
approval can be difficult to organise, especially in cases where, as a result of
transmission of business, a certified agreement binds a number of employers with
employees whose employment is subject to the agreement; and
• the
above 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.
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
provide the Commission with the power to address problems that might arise from
the inappropriate interaction of industrial instruments, 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 avoidance of obligations through changed business
arrangements).
Amend the WR Act to allow the Commission to make orders that a
transmittee employer is not bound by a transmitting certified agreement, or is
only bound to the extent ordered by the Commission.
To ensure that this
mechanism is not used to avoid obligations under a certified agreement, it is
proposed that the Commission give interested persons (including employers,
employees and representatives of employees) an opportunity to make submissions.
The Commission would need to take account of these submissions in making a
judgment as to whether, or to what extent, a transmitting certified agreement
should bind the new employer.
Submissions in response to the Discussion Paper highlighted difficulties
for businesses 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 negotiated 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
Submissions received in response to the Ministerial Discussion Paper have
stated that the consequences of a transmission of business in relation to
certified agreements cause significant problems.
The problems identified
above cause complications for the administration of businesses and the
determination of pay and conditions of employment for employers and
employees.
This is especially a problem in situations where labour hire
employers provide services to a number of other businesses which each have their
own certified agreements in place. There is a risk that contracting labour hire
or other service providers will amount to a transmission of business and that
the labour hire employer could become bound by several different certified
agreements.
Without legislative amendment, these problems will continue, and
the provisions of the WR Act regulating transmission of certified agreements
will act as a disincentive to the transmission of business and the development
of business, and interrupt the efficient management of business
projects.
Maintaining the status quo will ensure that the pay and conditions of
employees who continue to be employed in a business following the transmission
of the business to a new employer cannot be altered until after the nominal
expiry date of their certified agreement.
There will be a small additional caseload for the Commission. This
increase is not expected to be significant when compared with the
Commission’s current caseload.
There is a possibility that in some
cases, where transmitting certified agreements are not appropriate to the
business arrangements of the new employer, the pay and conditions of employees
who transmit with a business may be affected by an order of the
Commission.
This option has the advantage of allowing the Commission to address
difficulties associated with the interaction of certified agreements, and so
avoid or reduce the difficulties identified above. This is consistent with
retaining the enterprise focus of agreements.
The option also protects
the interests of employees 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 the Commission
has exercised its jurisdiction to make an order that an award (rather than a
certified agreement) 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 outsourced information technology
and related services to a number of businesses, was not bound, as a result of a
transmission of business, by 68 awards that bound one or more of those
businesses. The Commission considered that the making of the order did not
disadvantage the employees.
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;
and
• addresses some of the practical problems that have arisen in
connection with the operation of the current legislation.
The proposed reform measure is to be given effect by amendments to the WR
Act. The Department of Employment and Workplace Relations will monitor the
impact of the legislation.
The legislation will also be reviewed through
formal mechanisms for consultation already in place. In particular, the
National Labour Consultative Council will have an ongoing role in monitoring the
legislation and any issues that may arise.
Consultation with interested
parties and groups will continue.
NOTES ON CLAUSES
Clause 1 - Short title
This is a
formal provision specifying the short title of the Act.
Clause 2 -
Commencement
This clause specifies when various provisions of the
Bill are proposed to commence.
Clauses 1 to 3 will commence on Royal
Assent.
Schedule 1 will commence on a day to be fixed by Proclamation.
However, if the Schedule has not commenced within six months after Royal Assent,
subsection 2(3) has the effect that the Schedules will commence on the first day
following that six-month period.
Clause 3 –
Schedule(s)
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.
1.1 This Schedule proposes amendments to the provisions of the WR Act, in
particular those provisions governing the application of certified agreements
following a transmission of business.
Item 1 – Paragraph 45(3)(a)
Item 2 – After
paragraph 45(3)(aa)
1.2 These items would amend subsection 45(3) of
the WR Act, which sets out who can appeal Commission decisions to a Full Bench
of the Commission. An organisation or person who participates in proceedings
about whether the Commission should make an order that a certified agreement
does not apply following a transmission of business, or should only apply to a
limited extent or for a limited period, would be able to appeal against an order
that was subsequently made by the Commission. If the Commission refused to make
an order, the organisation or person who applied could appeal against the
decision.
Item 3 – Paragraph 45(3)(ba)
1.3 Item 3
would correct a drafting error in the WR Act.
Item 4 – At the
end of subsection 45(3)
1.4 This item would insert a note after
section 45, to draw attention to the fact that the new provisions to be inserted
by Item 2 (above) would also operate to give the same appeal rights where a
business transmits to a Victorian employer. New subsection 494(3) (see item 11
below) would extend the operation of proposed subsection 170MBA(2) in
Victoria.
Item 5 - Paragraph 170LX(4)(b)
1.5 This item
proposes an amendment that is consequential to the insertion of new section
170MBA (see item 10 below).
Item 6 - Paragraph
170MB(1)(d)
Item 7 - Paragraph 170MB(1)(f)
Item 8 -
Paragraph 170MB(2)(d)
Item 9 - Paragraph
170MB(2)(f)
1.6 These items would make consequential amendments to
clarify that the transmission of a certified agreement to a new employer under
section 170MB is subject to any order made by the Commission under proposed
section 170MBA.
Item 10 - At the end of Division 6 of Part
VIB
1.7 This item proposes to insert a new section 170MBA into the WR
Act.
1.8 Under section 170MB of the WR Act, where an employer acquires or
takes over a business or part of a business from another employer, a certified
agreement that bound the original employer will bind the new employer (the
‘successor, assignee or transmittee’ of the business), as far as the
agreement relates to the business or the part of the business that is
transmitting. If the certified agreement was made under Division 2 of Part VIB
of the Act, then the agreement can only transmit to a new employer that is a
constitutional corporation or the Commonwealth.
1.9 New section 170MBA
would allow the Commission to order that a certified agreement that would
ordinarily transmit to a new employer under section 170MB has no binding effect
on the new employer, or only binds to a limited extent or for a limited period.
This provision is intended to allow the Commission to make orders to avoid
problems that may arise where a certified agreement that would ordinarily bind
the new employer is not appropriate to the new employer’s business, and
problems associated with the interaction of multiple certified agreements
following transmission.
1.10 Proposed subsection (1) defines the
terminology used in proposed section 170MBA:
• The outgoing
employer is the employer bound by a certified agreement who will transmit,
or has transmitted, the whole or a part of their business to another
employer.
• The incoming employer is the employer who, at a
later time, becomes or is likely to become the successor, transmittee or
assignee of the outgoing employer’s business.
• The
business concerned is the whole or that part of the business that is
transmitted by the outgoing employer to the incoming
employer.
• The transfer time is the time when the business
or part of the business transmits from the outgoing employer to the incoming
employer.
Commission may make order that certified agreement does not
bind incoming employer
1.11 Proposed subsection (2) would give the
Commission power to make an order as to whether, or to what extent, an incoming
employer is bound by a certified agreement. The order would be required to
specify the day from which it takes effect, and could not be
retrospective.
1.12 Proposed subsection (3) would clarify that one of the
orders the Commission can make under subsection (2) is that an agreement binds
an incoming employer, but only for a specified period of time.
When
application for order can be made
1.13 Proposed subsection (4) would
clarify that an application for an order under subsection (2) can be made at any
time – before, at, or after transmission.
Who may apply for
order
1.14 Proposed subsections 170MBA(5) – (7) would set out
who may apply for an order under subsection (2).
1.15 Proposed subsection
(5) would provide that before transmission, an application for an order under
subsection (2) may only be made by the outgoing employer.
1.16 Proposed
subsection (6) would provide that where an application is made at or after
transmission, it may be made by a number of people,
including:
• the incoming employer; or
• an employee
of the incoming employer whose employment is subject to the certified agreement
in question; or
• a registered organisation (for instance, a union)
that is bound by the certified agreement and is entitled to represent the
industrial interests of employees of the incoming employer, whose employment is
subject to the agreement, in relation to work that is subject to the
agreement.
1.17 However, proposed subsection (7) clarifies that in the
case of an organisation bound by an agreement made under section 170LK of the WR
Act (that is, a certified agreement made directly between an employer and the
employer’s employees), the organisation may only apply for an order under
subsection 170MBA(2) if the organisation has at least one
member:
• who is an employee of the incoming employer and whose
employment is subject to the certified agreement; and
• whose
industrial interests the organisation is entitled to represent in relation to
work that is subject to the agreement; and
• who requested the
organisation to apply for an order under subsection (2).
Applicant to
give notice of application
1.18 Proposed subsection (8) would require
the applicant to take reasonable steps to give notice of the application to
those people who are entitled to make submissions. Subsections 170MBA(9) to
(13) set out who may make submissions.
1.19 Proposed subsection (9)
requires the Commission to give specified people and organisations an
opportunity to make submissions before it decides whether to make an order under
subsection 170MBA(2). In all cases, the applicant for an order is to be given
the opportunity to make submissions. The other people and organisations who can
make submissions will depend on when the application for an order under
subsection (2) is made.
Submissions – before
transmission
1.20 Where Commission hearings regarding an application
for an order under subsection 170MBA(2) occur before transmission, subsection
(10) specifies that, in addition to the applicant, the following people and
organisations must be given an opportunity to make
submissions:
• employees of the outgoing employer, who are employed
in the business that is likely to transmit to the incoming employer, and whose
employment is subject to the agreement; and
• the incoming
employer; and
• employees of the incoming employer whose
employment may become subject to the agreement if the agreement transmits;
and
• an organisation that is bound by the agreement and entitled
to represent the industrial interests of the employees of the outgoing or
incoming employer (whose employment is or may become subject to the agreement)
in relation to work that is subject to the agreement.
1.21 However,
proposed subsection (11) clarifies that in the case of an organisation bound by
an agreement made under section 170LK of the WR Act (that is, a certified
agreement made directly between an employer and the employer’s employees),
the organisation may only make submissions if the organisation has at least one
member:
• who is an employee of the outgoing employer whose
employment is subject to the agreement and who is employed in the business
concerned; or an employee of the incoming employer whose employment may become
subject to the certified agreement; and
• whose industrial
interests the organisation is entitled to represent in relation to work that is
subject to the agreement; and
• who requested the organisation to
make submissions.
Submissions – at or after
transmission
1.22 Where Commission hearings regarding an application
for an order under subsection 170MBA(2) occur at or after transmission of
business, subsection (12) specifies that, in addition to the applicant, the
following people and organisations must be given an opportunity to make
submissions:
• the incoming employer; and
• an
employee of the incoming employer, whose employment is subject to the agreement;
and
• an organisation that is bound by the agreement and entitled
to represent the industrial interests of employees of the incoming employer
whose employment is subject to the agreement, in relation to work that is
subject to the agreement.
1.23 However, proposed subsection (13)
clarifies that in the case of an organisation bound by an agreement made under
section 170LK of the WR Act (that is, a certified agreement made directly
between an employer and the employer’s employees), the organisation may
only make submissions if the organisation has at least one
member:
• who is an employee of the incoming employer, whose
employment is subject to the agreement; and
• whose industrial
interests the organisation is entitled to represent in relation to work that is
subject to the agreement; and
• who requested the organisation to
make submissions.
Item 11 - Subsection 494(3)
1.24 This
item proposes to amend Part XV of the WR Act, to provide for the expanded
operation of sections 170MB and 170MBA within Victoria. In 1996, the Victorian
Government referred many of its industrial relations powers to the Commonwealth
Government under the Commonwealth Powers (Industrial Relations) Act 1996
(Vic).
1.25 Existing subsection 494(3), which currently provides for
the expanded operation of existing section 170MB within Victoria, will be
repealed and replaced by two new subsections.
1.26 Proposed new
subsection 494(3) would provide that section 170MB, as amended by this Bill,
applies so that a certified agreement made under Division 2 of Part VIB (an
agreement made between an employer who is a constitutional corporation or the
Commonwealth and its employees or organisations representing its employees) will
transmit with a business or part of a business to bind the successor, assignee
or transmittee employer where the successor, assignee or transmittee is a
Victorian employer. Normally, under section 170MB, a Division 2 agreement can
only transmit to an employer that is a constitutional corporation or the
Commonwealth. However, due to the referral of powers by the Victorian
Government, this provision will have wider application in Victoria, so that
Division 2 agreements can transmit to any Victorian
employer.
1.27 Proposed subsection 494(4) would modify the operation of
proposed new section 170MBA in Victoria. Subsection 494(4) would allow the
Commission to make orders about the extent to which a successor, assignee or
transmittee employer within Victoria is bound by a transmitting certified
agreement. The intention is to give the Commission the same powers in relation
to making orders about when certified agreements transmit to Victorian
employers, as are proposed in respect of certified agreements generally (see
item 10 above).