FCA applies High Court 3-step

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FCA applies High Court 3-step

In Construction, Forestry, Mining and Energy Union v Henry Walker Eltin Contracting Pty Ltd, [2001] FCA1009 (2 August 2001), Branson J found that the part of the business operated by a contractor retained the same character as it had under the original employer and owner.

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Australian Business Ltd 

 

The Federal Court of Australia has confirmed and applied the three-step process developed by the High Court last year to identify the existence of a transmission of business.

In Construction, Forestry, Mining and Energy Union v Henry Walker Eltin Contracting Pty Ltd, [2001] FCA1009(2 August 2001), Branson J found that the part of the business operated by a contractor retained the same character as it had under the original employer and owner.

In an application by the Construction Forestry, Mining and Energy Union (the Union), it was claimed that Henry Walker Eltin Contracting Pty Ltd (Henry Walker) was bound by the Ebenezer Mining Company Pty Ltd Certified Agreement 1997 (the Agreement). It was claimed that Henry Walker was bound to the Agreement in relation to the operations of a Coal Handling Operations Plant at the Ebenezer Coal Mine that was previously operated by the Ebenezer Mining Company Pty Ltd. In addition, the Union also sought an order requiring the payment to employees who worked at the Coal Handling Preparation Plant (the CHPP) of the shortfall between the amount which they had been paid by Henry Walker and the amount which they should have been paid under the Agreement.

Henry Walker denied that it was bound by the Agreement. Rather, Henry Walker contended that it was not the successor, transmittee or a signee of the business or any part of the business of Ebenezer Mining Company within the meaning of sec 170MB(2)(c)of the Workplace Relations Act 1996.

Background facts  

In January 1989, Ebenezer Mining Company Pty Ltd purchased the mining lease and the freehold title to the land on which the Mine is operated. Since that time Ebenezer has engaged a contractor to mine coal. Between 1994 and January of 2000 Ebenezer Mining Company engaged Eltin Pty Ltd to mine the coal. During that period the Australian Industrial Relations Commission on 25 November 1997 certified an agreement. That Agreement was to remain in force until 28 August 2000. In late 1999 Ebenezer Mining Company and Henry Walker discussed a proposal for Henry Walker to take over the operations of the CHPP as well as the operation of the mine. That agreement was reached in January of 2000 at which time Henry Walker assumed the responsibilities of Eltin Pty Ltd at the Mine.

From a practical perspective the Ebenezer Mining Company terminated the employment of all its employees who had worked in the CHPP. These employees were paid out all their entitlements under the Agreement. Henry Walker advertised positions in the CHPP and invited employees who had previously worked for Ebenezer Mining Company to apply for the advertised positions. They were however, not guaranteed employment with Henry Walker.

By late February 2000, Henry Walker employed six permanent employees in the CHPP. These employees were employed pursuant to staff contracts. The terms of the staff contracts differed significantly from the terms of the agreement. At least one person who had worked for Ebenezer Mining Company as a Plant Technician at the CHPP was employed by Henry Walker to perform substantially the same duties.

Consideration  

Central to these proceedings was the question of whether Henry Walker was bound by the Agreement. It was the contention of the Union that in a practical sense the operations of the first employer, that being the Ebenzer Mining Company and its operation of the CHPP, had been delivered into the hands of the successor employer and had retained the same character. The second employer according to the Union being Henry Walker. Henry Walker on the other hand argued that the submission of the union wrongly conflated industry with business and while the work of Henry Walker at the Mine placed it in the Coal Mining Industry, it was not in the same business as the Ebenezer Mining Company.

Both parties to these proceedings contended that the appropriate test to be applied was that developed by the High Court in PP Consultants Pty Ltd v Finance Sector Union of Australia, [2000] HCA 59 (PP Consultants). In PP Consultants the High Court gave consideration to whether a Pharmacy business in Byron Bay was the successor, assignee or transmittee of the business or part of the business of St George Bank Limited. The majority decision in PP Consultants found that the question of whether one person takes over or succeed to the business or part of the business of another is a mixed question of fact and law. As a general rule, the High Court developed a three-step test to identifying the transmission of a business or part of a business. The first step required the identification or characterisation of the business or the relevant part of the business of the first employer. The second step was the identification of the character of the transferred business activities in the hands of the new employer. While the final step was to compare the outcomes of the first two steps.

Accordingly, Branson J sought to apply the test developed in PP Consultants. There was limited evidence placed before the Court as to the relevant nature of the business of either the Ebenezer Mining Company or Henry Walker. Her Honour concluded that the overall business of the Ebenezer Mining Company was, broadly speaking, that of causing coal to be extracted from the mine, rendered fit for sale, and sold either for export or domestic consumption. As to Henry Walker, the evidence revealed that it operated the Mine as a contractor to the Ebenezer Mining Company. On the basis of this limited evidence, Branson J concluded that the overall business of Henry Walker was that of contractor to the Mining and Construction Industries.

The first step for her Honour in applying the test developed in PP Consultants was that she identify or characterise the operation of the CHPP. The operation of the CHPP was in this sense, a distinct part of the business of the Ebenezer Mining Company. In operating the CHPP, the Ebenezer Mining Company was itself rendering the coal that it had mined, fit for sale.

It was noted that the transferred business activity, that being the operation of the CHPP, was now an aspect of Henry Walker's total contracting business. The Ebenezer Mining Company now relied on Henry Walker to operate the CHPP. It was her Honour's opinion that in the hands of Henry Walker, the business activity that was the operation of the CHPP retained the same character as it had when it was in the hands of the Ebenezer Mining Company. It continued to be the means whereby coal that was extracted from the mine was rendered fit, so that the Ebenezer Mining Company could sell it at a later stage.

Counsel for Henry Walker attempted to contrast the manner in which the Ebenezer Mining Company generated income from the CHPP with that of Henry Walker. It was claimed that the income received by the Ebenezer Mining Company was function of the demand for Coal, whereas Henry Walker's income from operation of the CHPP was calculated by tonne. 

Branson J held that the differences in the way in which the Ebenezer Mining Company and Henry Walker respectively generated income was a matter of limited assistance in determining whether the business of operating the CHPP had the same character in the hands of Henry Walker as it had in the hands of the Ebenezer Mining Company. Her Honour held that were it otherwise, the intended operation of sec 170MB(2)(c) could be avoided by simply sub-contracting the conduct of parts of a business to a wholly owned subsidiary company and agreeing on a method of remuneration which did not involve the subsidiary in profit sharing with the parent company.

To this end, her Honour concluded that upon commencing to operate the CHPP in February 2000, Henry Walker became bound by the Agreement as 'the successor, transmittee, or assignee ... of the whole or a part of the business concerned', within the meaning of sec sec 170MB(2)(c)of the Act. Branson J declared that Henry Walker was bound by the Agreement, and that employees of Henry Walker had been underpaid in that there was a shortfall between the amounts they had been paid by Henry Walker and the amounts they should have been paid under the Agreement.

 

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