No transmission of business in outsourcing, Federal Court finds

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No transmission of business in outsourcing, Federal Court finds

The Federal Court rejected a claim for underpayment — ruling there was no transmission of business between the applicant’s former employer and the utility that outsourced the work — so the industrial agreement covering the utility did not apply.

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The Federal Court rejected a claim for underpayment — ruling there was no transmission of business between the applicant’s former employer and the utility that outsourced the work — so the industrial agreement covering the utility did not apply.

The decision dealt with the law on transmission of business when work is outsourced. The argument of the former employee that a meter-reading business was bound by the industrial agreement of the power company (utility) that handed over the meter reading role should apply to him because the business had been ‘transmitted’ was rejected by Justice Kenny.

No transmission

Justice Kenny concluded that Powercor did not convey ownership of any tangible or intangible assets to the meter-reading business. It could not be said that Powercor disposed of any part of Powercor’s business. The court concluded:

‘In effect, the joint judgment in PP Consultants 201 CLR 648 set out two tests for succession, assignment and transmission — a characterisation test ... and a disposal test. Both tests must be satisfied in order for the operation of the award (under s 149(1)(d)) or the certified agreement (under s 170MB(2)) to be attracted to the new employer …

… Under the 2002 contract, the business of Powercor did not pass (and was not transmitted). Rather, under the contract, AMRS was to carry on a new business of meter reading for Powercor …

The foregoing notwithstanding, I might still be in some doubt as to the correct analysis to be followed had PP Consultants not been succeeded in the High Court by Gribbles 222 CLR 194. The combined effect of these two decisions is, so it seems to me, to make the relevant state of the law reasonably clear with respect to provisions like ss 149(1)(d) and 170MB(2) of the Workplace Relations Act.

In Gribbles, the High Court confirmed that the characterisation test (identifying the business or part of a business) and the disposal test (determining whether the business or part of a business so characterised was disposed of) are separate and distinct questions …

… The uncontroverted evidence was that Powercor had and retained ownership of the relevant tangible assets. Under the 2002 contract, the meters and certain equipment (such as the PDE devices, sealing tongs and seals, and magnetic logos) were and remained Powercor’s property, although AMRS’s employees used this equipment in reading Powercor’s meters …

The licence to distribute was and continued to be held by Powercor …

These fundamental differences in perspective and approach have been the subject of scholarly discussions, which have proposed alternative analyses: see, for example, Trent D Sebbens, "‘Wake, O Wake’ — Transmission of Business Provisions in Outsourcing and Privatisation" (2003) 16 Australian Journal of Labour Law 133. This Court is, however, bound to follow PP Consultants and Gribbles, which provide a clear answer in this case …

In summary, by the transactions in question, Powercor did not convey ownership of any tangible or intangible assets to AMRS. It cannot be said that Powercor disposed of, or that AMRS enjoyed, any part of Powercor’s business, however characterised. AMRS is, therefore, not a transmittee of Powercor’s business or part thereof …’
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