Do employment conditions go with outsourced work? 7/9/99


Do employment conditions go with outsourced work? 7/9/99

Outsourced work may attract the same wages and conditions as applied before the work was outsourced, according to a recent Federal Court decision.


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Outsourced work may attract the same wages and conditions as applied before the work was outsourced, according to a recent Federal Court decision.

Organisations contracted to operate outsourced functions of a business may now be considered as "successors, assignees or transmittees" within the meaning of s149(1)(d) and s170MB(1) of the Workplace Relations Act 1996. The Federal Court addressed this issue in CPSU, Community & Public Sector Union v Stellar Call Centres Pty Ltd [1999] FCA 1224 (3 September 1999), holding that it is not necessary that a transmitted part of a business be free standing and commercially viable.



The respondent, Stellar Call Centres, was in the business of assisting organisations to improve their interface with customers through call centre solutions. To this end the most significant component of Stellar's business was a contract with Telstra for the provision of a call centre to handle any overflow of customer inquiries. The intention of the contract was that Telstra customers would be unaffected, in dealing with Stellar employees rather than Telstra employees. The Stellar call centre was to function as a seamless part of Telstra's Sales Centre services.

The questions concerning transmission of business arose as a result of the CPSU's request to enter the Stellar's premises, pursuant to the provisions of s285Cof the Workplace Relations Act 1996. Stellar challenged the union's right to enter the premises, claiming that Stellar was not bound by Telstra awards and certified agreements, and that CPSU did not have coverage of any of its employees.

The union in turn responded by commencing proceedings in the Federal Court for declaratory and injunctive relief. The essence of the application was that s149(1)(d) and s170MBof the federal Actprovide that awards and certified agreements are binding upon any successors, assignees or transmittees to a business or part of a business. Given that Stellar intended to identify as part of Telstra's operation of customer call centres, Stellar must then be viewed as a "successor, assignee or transmittee" of that part of Telstra's business.


"No acquisition" argued

Stellar disagreed with this line of reasoning, claiming instead that there had not been an acquisition either of a business or of employees, and that no assests had been transferred. Stellar argued that for sections 149(1)(d) or 170MB(1) to apply, there must be a transfer from one employer to another of a business or a part of a business that is of itself a commercially viable entity.


Substantial identity of work

Justice Wilcox agreed with the union's submission, holding the relevant precedent to be the decision of a Full Court in North Western Health Care Network v Health Services Union of Australia [1999] FCA 897 (2 July 1999). That decision related to government activities that were outsourced to another body, which in turn was subject to government supervision. His Honour identified that in relation to the current proceedings, the critical point of the North Western Health case was the fact that there was a substantial identity of work between that performed by the employees of the new employer and that previously performed on behalf of the old employer. It was held that the focus of these proceedings should not necessarily be upon whether there was a legal transaction between the old and new employer, but rather to the matter of substantial identity of work. Once "identity of work" is established then it becomes apparent that an outsourcing arrangement, of the kind that may fall within realm of s149(1)(d) and s170MB(1), may exist.

His Honour disagreed with Stellar that the provisions of s149(1)(d) and s170MB(1) required, in relation to part of a business, that a commercially viable part of the business be transmitted. A commercially viable part of a business that is free standing, according to his honour, is itself a business. Whilst there was no assignment of assets, Wilcox J held that Stellar took on part of Telstra's burden of customer contact. To this end, it was held, Stellar is the "successor" of Telstra.


Telstra awards and agreements apply

The Federal Court ordered that the relevant Telstra awards and certified agreements applied in relation to the employees of Stellar Call Centres Pty Limited engaged in work to be done in the performance of the Telstra agreement. Accordingly, Stellar was also ordered to refrain from contravening s285Eof the Actby refusing the union entry to the premises. Stellar was also fined $2,000.


Implications of decision

The full impact of this decision (as it stands) is considerable. The underlying reasons for, and logic behind, outsourcing would have to be reassessed if the wages and conditions of the outsourced work "go with the work".

HR Link will re-visit this case in an upcoming issue.


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