AG2001/5082, Transcript of Proceedings [2001] AIRCTrans 2500 (1 October 2001)

AUSCRIPT PTY LTD
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TRANSCRIPT OF PROCEEDINGS


O/N 0124
AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

SENIOR DEPUTY PRESIDENT WILLIAMS

AG2001/5082
AG2001/5083

APPLICATION FOR DETERMINATION
OF DESIGNATED AWARD FOR
CERTIFIED AGREEMENT

Application under section 170XF of the Act
by Tricon Restaurants Australia Pty Ltd and
Another for determination of designated
award for certified agreement

APPLICATION FOR CERTIFICATION
OF AGREEMENT

Application under section 170LJ of the
Act by Tricon Restaurants Australia Pty Ltd
and Another for certification of the Pizza
Hut - SDA National Employee Relations
Agreement 2001

MELBOURNE

2.13 PM, THURSDAY, 6 SEPTEMBER 2001

PN1

MR S. CHAMPION: Your Honour, I appear in the award designation matter - designated award matter for Tricon Restaurants Australia Pty Ltd and Victorian franchisees, for whom we hold authorities to act, trading as Pizza Hut Australia. In the certification matter, the LJ matter, I appear for the same parties but also, additionally, for franchisees in Queensland, New South Wales, ACT, Victoria and Tasmania. And with me is Mr D. HARRISON from the company, from Tricon Restaurants Australia.

PN2

MR J. MERLINO: I appear on behalf of the Shop Distributive and Allied Employees Association.

PN3

THE SENIOR DEPUTY PRESIDENT: Yes, Mr Champion?

PN4

MR CHAMPION: Your Honour, the application for designation of an appropriate award has been lodged under section 170XF and rule 63 of the Act. The application is for determination by the Commission of an award as an appropriate one for the purposes of determining whether the Pizza Hut SDA National Employer Relations Agreement passes the no disadvantage test. It may not however be entirely clear from the application but the application only relates to the State of Victoria, the other states having appropriate award coverage. Under section 170XF(3):

PN5

The Commission must determine an award as regulating terms or conditions of employment of employees engaged in the same kind of work as that of those employees under the agreement.

PN6

By consent, as I understand, between the parties it has been agreed that the appropriate award that we recommend to the Commission as being the designated award is the KFC National Enterprise Award 2001. I note that we are still awaiting final orders relating to that award to be issued by the Commission, to include recent decisions of the Commission. However all items under that award have been resolved by the Commission.

PN7

The parties are recommending that the KFC Award as the appropriate award, given that it is a proper award of this Commission. It covers the same kind of work as that of persons under the agreement in Victoria. I just note that there is a Pizza Hut national award, but that award does not apply to any employees in Victoria. And given the particular circumstances applying in Victoria, but without prejudice to any future position that perhaps the union may want to take relating to Victorian award coverage, the SDA has consented to the KFC National Award being an appropriate one for the purposes of a designated award. So if the Commission pleases, we would ask that that award be so designated.

PN8

THE SENIOR DEPUTY PRESIDENT: Do you still want to go ahead and address this application as well, Mr Champion?

PN9

MR CHAMPION: Your Honour, I just note that the CA that has been lodged - certified agreement that has been lodged does not apply in far north Queensland. There are no employers party to the agreement in either West Australia or South Australia. So the agreement applies in Northern Territory, south-east Queensland, New South Wales, ACT, Victoria and Tasmania. The parties have lodged the appropriate statutory declarations as required by the rules.

PN10

The statutory declaration that has been lodged by the employer parties notes that the certified agreement would result in a reduction in conditions of employment of Victorian employees. It is also possible the Commission might conclude, from the information supplied in the statutory declaration, that there could be a reduction in overall terms and conditions of some employees in some states other than Victoria. Making that sort of a judgment as to whether employees are overall disadvantaged can at times be a fine judgment to make.

PN11

The statutory declaration provides a run down of what conditions are reductions and what terms and conditions might result, on balance, in there being no reduction in overall terms and conditions of employees covered by the agreement. However in any event we would put to the Commission that the situation as to whether there has been a reduction or not is probably adequately covered by section 170LT(3) and (4) of the Act. And they state as follows:

PN12

If the only reason for not certifying the agreement is that it does not pass the no disadvantage test ...(reads)... to pass the no disadvantage test and therefore is to be certified.

PN13

We would contend, your Honour, that even - that the situation could even offend the public interest in fact not to certify the agreement, which is actually a higher standard, and I will shortly provide some elaboration on reasons for that contention. In relation to the meaning to be imported to section 170LT(3) of the Act we note, her Honour, Senior Deputy President Harrison's comments in the Chubb Security v Darling Harbour Rangers case, which I have copies of and can submit if you would like me to do so, your Honour.

PN14

THE SENIOR DEPUTY PRESIDENT: Yes, thank you. Thanks. Well, these actually weren't comments, were they, of Senior Deputy President Harrison?

PN15

MR CHAMPION: This - - -

PN16

THE SENIOR DEPUTY PRESIDENT: Or has she quoted in that decision?

PN17

MR CHAMPION: She has quoted in this - sorry, this is the actual - - -

PN18

THE SENIOR DEPUTY PRESIDENT: This is the Full Bench decision.

PN19

MR CHAMPION: This print, which is print Q3596 is actually an appeal from her Honour's decision in that case. And - - -

PN20

THE SENIOR DEPUTY PRESIDENT: I think for the record the print is R0015.

PN21

MR CHAMPION: Right.

PN22

THE SENIOR DEPUTY PRESIDENT: Her Honour's decision was print Q3596.

PN23

MR CHAMPION: Right. Thanks for correcting that, your Honour. So in this appeal judgment the Full Bench quoted, or repeated the quote of her Honour in that earlier - in the case that was under appeal, and her Honour said:

PN24

I note that the relevant test for the Commission is to consider whether certifying the agreement ...(reads)... to public interest. This agreement provides such an example.

PN25

And I note that their Honours, in that case, stated that her Honour actually asked herself the right question in that case and therefore they had no cause to argue with her contention that in fact an item - or a matter may not be contrary to the public interest whilst, on the other hand, it may still not be in the public interest. Perhaps a fine distinction, but I think an important one because it actually therefore becomes a negative test that the Commission is called upon to consider.

PN26

As I stated before, we would contend that for the Commission to refuse to certify this agreement under consideration today, we would actually - we would contend anyway, with all respect to the Commission, that it would actually offend the public interest and therefore this agreement actually meets a higher standard than that which the Commission is called upon to exercise. Let me now turn to explain some of the reasons for our view on that.

PN27

Firstly, I would like to turn to some of the objects of the Act. And section 170L, at the start of part VIB of the Act, states that:

PN28

The object of that part VIB of the Act is to facilitate the making and certifying, by the Commission, of agreements.

PN29

I also note that section 170LA specifically provides that the Commission is not to take into account section 90 of the Act, which relates to the Commission taking into account the public interest. This agreement before you today, your Honour, was the result of very long and difficult negotiations between the parties. Due in part - I guess those negotiations were very difficult, due in part to the very competitive nature of the industry which is further compounded by the almost disastrous industry trading conditions presently operating. Both parties to the negotiations formed the view, during those negotiations, that the agreement as it stands was the best deal that either was going to be able to achieve from the negotiations.

PN30

I think it would be fair to say that the agreement is not one that either side would say they are particularly overwhelmed with, or over satisfied with. However the parties felt it was probably the best that could be done in the circumstances - the alternative being probably no agreement at all. And I think both parties have come to an acceptance that not to reach an agreement would be against the sentiment of section 170L, which was - which I guess encourages the Commission to actually facilitate the making of agreements.

PN31

For the Commission to find against certifying the agreement would also therefore seem against the facilitation of agreement making, which is actually an encouragement provided to the Commission by section 170L. For a very large majority of employees to vote in favour of the agreement, and I believe the figure - Mr Merlino can correct me if I am wrong, but I believe the figure was 80 per cent voted in favour of the agreement, would - and then the agreement not to be certified, could create uncertainty in the minds of employers, unions and employees over the outcome of agreement negotiations.

PN32

It is evident from the statutory declarations that the union took great lengths to fully explain the agreement to all employees - whether union members or not - and still the employees voted in favour of it. For the Commission to find against certifying the agreement, with all due respect we would contend would require the Commission to have very strong reasons for doing so, and we do not believe that those strong reasons exist. I now turn to a bit of a discussion about conditions existing in the industry.

PN33

As I previously indicated, the negotiations were very difficult. The pizza industry is a very competitive industry. There are very low barriers to entry for new entrants with the capital cost of setting up a pizza outlet not being very high. There is a proliferation of family run pizzerias who often use family labour, or are able to depend upon the labour of the owner. There is a very low - or there is a low ability to control the cost of inputs for participants in the industry. Grated cheese, meat and vegetable toppings and tomato sauces are hardly very proprietary items and therefore it is a situation where participants in the industry just have to take the prices that pretty much are offered to them by suppliers.

PN34

There is a low ability to control the cost - sorry, a low ability to exercise control over purchases as well. They often follow price and have low levels of loyalty - you are only as good as your last pizza, your Honour. So the result of all these factors is that prices in the industry tend to be very low, the prices of the product. And the cost of a pizza in Australia is actually lower, in relative terms, than anywhere else in the world. I was advised this morning, also, that pizzas cost in nominal terms - so the actual nominal dollar price is what they were 11 years ago, despite inflation operating over that period.

PN35

So I guess the people that I represent find themselves in a situation where even though Pizza Hut may be the largest single owner or brand of outlets in the pizza industry, it is still in a situation where it cannot unilaterally lift its labour costs and hope to remain competitive. So I guess the summation of that background is that we are in a situation where our costs very much are important to our ability to remain viable and we don't have the ability to unilaterally lift those labour costs without making ourselves uncompetitive.

PN36

In terms of general economic conditions, the industry competitiveness situation is compounded by the current state of the economy, which has had a particular impact on the fast food industry. I should note that the fast food industry actually calls itself the Quick Service Restaurant, or QSR segment, to get the terminology right. The GST implementation and the economic downturn have caused an overall industry decline of 10 to 12 per cent of the QSR segment, as a whole, over the same period last year.

PN37

Pizza Hut sales would be down, or are down - and this is the latest figures, I understand, to the July quarter - are down - 12 per cent down on the same period last year. I actually spoke to a franchisee representative yesterday, who advised me that 90 per cent of Pizza Hut franchisees would not presently be making a profit. Pizzas have been particularly hard hit because there is a conception, or perhaps a misconception, amongst consumers that frozen supermarket pizzas are GST free.

PN38

I understand there has been a significant increase in sales of frozen pizzas from restaurants. And I think that those frozen pizza sales have gone up something like 9 or 10 per cent. In any event, whether they are misconceived or not, consumers do not have to pay a GST on the service component of ordering a pre-cooked pizza - sorry, of ordering a frozen pizza, but they do have to pay GST on the service component for a pizza prepared by the people that I represent.

PN39

Combined with the present economic uncertainty, consumers are taking their dollars elsewhere, or perhaps just keeping their dollars in their pockets, but they are certainly not selling them - or spending them in either the industry sector, generally, or in Pizza Huts, specifically. So the sales reduction has been even greater in some previous quarters than the figures I just quoted just previously, as well as the downturn has been more extreme in some geographical areas and in some parts of the segment. And pizza - the pizza segment has been probably harder - at least as hard hit as any segment of the QSR segment.

PN40

I now turn to the particular circumstances applying to Victorian franchisees. From the statutory declaration and the analysis of the changes brought about by the certified agreement and the comparison done against the designated award - which if we presume for the time being that you do find that the KFC award is an appropriate award as a designated award - I just want to deal with the particular situation which applies in Victoria and which perhaps explains why there is an apparent reduction in the Victorian conditions - terms and conditions.

PN41

It would appear from the statutory - yes, the first point I would make, I guess, is that the Pizza Hut employees in Victoria are not covered by awards of this Commission. The Commission will be aware that there are no state awards applying in Victoria, and the Federal Pizza Hut Australia Employee Relations Award 2000 does not currently apply to Victorian franchisees. The matter of the designated award, for the purpose of the no disadvantage test, actually creates a bit of an anomalous situation in Victoria because the comparison of a certified agreement against the award compares, I guess, conditions of an award that don't presently apply to the employees in that particular state.

PN42

And those employees are going to be covered by a certified agreement and therefore are required to do this no disadvantage comparison. The Commission also needs to bear in mind that most of the direct competitors to Pizza Hut operations in Victoria are also not covered by awards of this Commission.

PN43

I am told that according to Australian Business of - sorry, ABS - Australian Bureau of Statistics figures, there are 1800 local pizzerias in metropolitan Melbourne alone. It seems that every street corner has got a local pizzeria on it. And as small family run outlets, very few of these - if any - would have been roped into federal awards. If I am wrong on that and they have been roped into those federal awards, very few of them would be called to actually pay under those awards, or under those - the rates under those awards, because they are actually family run operations.

PN44

So the Victorian franchisees are in a position of meeting a no disadvantage test that does not apply to their competitors - well, their direct competitors - nor for that matter to themselves. So I would say that that is a further compelling reason why failure to pass a no disadvantage test in Victoria, and generally, I guess, is not against the public interest. However, despite the fact that the Victorian franchisees and their competitors aren't covered by federal awards, this particular agreement before you today provides for additional increases of $8 in Victoria, and also in Tasmania, over the life of the agreement.

PN45

And that $8 wage increases are an addition to the general increases applying under the agreement for all the states. So what you find is that Victorian franchisees have done the best they can to provide real wage increases to their employees under this agreement. And that was an outcome of the very long and fairly painful negotiations between the franchisees, the company and the SDA. For the Commission not to certify this agreement would ultimately deny those employees those increases that have been negotiated.

PN46

In south-east Queensland there is an additional $12 of increases over and above the general inflation-related increases under the agreement. So the additional $12 of increases, in addition to the other general increases, would come in in three tranches over the life of the agreement. South-east Queensland is a bit different than the rest of the other states in that it is predominantly operated by company stores and - which is run by Tricon. There is only a few franchise operations in south-east Queensland.

PN47

But, again, failure to certify the agreement would also deny those employees these additional increases that have been provided for in the certified agreement. Delivery drivers - under the agreement there are additional wage increases being paid to delivery drivers, over and above those increases being applied to restaurant staff or in-store staff in New South Wales and ACT and the Northern Territory, etcetera. And those additional increases have been made despite the very difficult trading conditions that are applying in the industry.

PN48

This has been done, in part, to address higher driver operating costs brought about by increases in fuel costs and other increases in operating costs the drivers have been confronted by. However our competitors, many of whom use contractors in the various states and not employees, are not bound to pay the increases that we are providing under this agreement. So again we would say that the Commission should certify this agreement so that these increases will be paid.

PN49

So in my submissions I have covered some various areas, including firstly I would state that any reduction is not against the public interest - sorry, any reduction of terms and conditions provided by the agreement would not be against the public interest and in fact, failure to certify the agreement on one view might even be against the public interest in itself. The test, as I have just stated, is a negative test as stated by her Honour, Senior Deputy President Harrison in that case that was quoted, or has been provided to you.

PN50

Also in furtherance of the objects of the Act, as stated by section 170L, we believe to so certify the agreement - there are particular industry conditions applying in the pizza industry which give good cause for the Commission to certify the agreement. Those conditions have meant that the - it has been a very difficult set of negotiations and basically the parties have done the best they can in the economic situations that are applying. In Victoria, where perhaps it is most obvious that employees are being disadvantaged as against the designated award in this case, special circumstances apply there, given the nature of competition in the industry and the nature of award coverage.

PN51

And also I would finally say that all the additional increases provided over the life of this agreement are other good reasons why the Commission should find that it is not contrary to the public interest to certify this agreement. On the other hand, I would say that there is no evidence before you, your Honour, to show that certification of this agreement would be against the public interest and we therefore ask that you so certify this agreement. If the Commission pleases.

PN52

THE SENIOR DEPUTY PRESIDENT: Thank you. Yes, Mr Merlino?

PN53

MR MERLINO: Thank you, your Honour. In regards to the application under 170XF, we do not oppose the designation of the KFC National Enterprise Award for the purposes of the certification of this agreement. In regards to the certification itself, as stated in the statutory declaration of Ian Blanthorne, the Assistant National Secretary of the association, we do have concerns regarding the no disadvantage test and those areas of concerns were outlined in the statutory declaration.

PN54

However, as Mr Champion has already stated, we highlighted in the statutory declaration that these were quite protracted and difficult negotiations. After over 12 months of negotiations both parties agreed to cease those negotiations and put what we had agreed, up to that point, to the employees for a vote. Across New South Wales, Tasmania, Victoria, Queensland and Northern Territory, an average of approximately 80 per cent of employees voted in favour of the agreement.

PN55

Your Honour, in light of the submissions put to the Commission by Mr Champion, it is the view of the association that certification of this agreement would not be contrary to the public interest. The association relies on the statutory declaration of Ian Blanthorne and, unless your Honour has any questions, we seek that the agreement be certified to be operative from today's date, 6 September 2001.

PN56

THE SENIOR DEPUTY PRESIDENT: Thank you, Mr Merlino.

PN57

MR MERLINO: Thank you.

PN58

THE SENIOR DEPUTY PRESIDENT: The first of the matters before me today is an application made in accordance with the Workplace Relations Act 1996 for the making of a determination that under section 170XF(2) of that Act, the KFC National Award 2001 is the appropriate award for the purpose of determining whether a proposed agreement passes the no disadvantage test, insofar as that agreement applies to employees in Victoria. The agreement in question is the Pizza Hut - SDA National Employee Relations Agreement 2001. On the basis of the material now before me, and the submissions that have been made today, I am satisfied that the application should be granted. An appropriate determination will therefore be issued as soon as possible.

PN59

The second of the applications before me is an application for certification of the agreement that I have referred to. From the submissions that have been made by the parties, and the material that is performing, it may well be possible to conclude that the agreement does not satisfy the no disadvantage test. Assuming, however, I were to reach such a conclusion, I would then be required to have regard to the provisions of section 170LT(3) of the Act.

PN60

In relation to the requirements of that sub-section, Senior Deputy President Harrison, in Chubb Security Australia Pty Ltd - a decision which appears in print Q3596 - had this to say, and I quote:

PN61

I note that the relevant test for the Commission is to consider whether certifying the agreement is ...(reads)... its certification may not be contrary to the public interest.

PN62

That is the end of the quote from the Senior Deputy President. I would indicate that I have the - that I am inclined to the same view as her Honour. On the basis of the material that is before me, and the submissions that have been made, and having regard to the objects of the Act specified in section 170L, I am satisfied that certifying the agreement would not be contrary to the public interest. It follows, therefore, that the agreement is to be taken to have passed the no disadvantage test. Again on the basis of the statutory declarations filed by the parties, and the submissions made today, I am now of the view that having regard to the applicable provisions of the Act I am required to certify the agreement.

PN63

An appropriate certification will be issued as soon as practicable. The agreement will operate from today's date and remain in force, according to its terms, for a period of three years. The matter is adjourned on that basis and the Commission itself is adjourned.

ADJOURNED INDEFINITELY [2.42pm]