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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)
ISBN: 0642 468850
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
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.
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.
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 have effect unless certified after the expiry of earlier
(pre-existing and transmitted) agreements, or 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 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
- 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 (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 with 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, there was 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 avoidance of obligations
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).
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.
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.
This Bill will impact on employers, employees and their representatives
and the Commission.
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 problems, including complication for the
administration of businesses and the determination of pay and conditions of
employment for employers and employees.
The status quo ensures that the effect of agreements can only be modified
by agreement of the parties.
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.
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 the 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 68 awards (binding on those to whom it provided
services) that were potentially applicable.
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.
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.
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.
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].