Book still being written on transmission of business

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Book still being written on transmission of business

Employers should not take too much comfort in the High Court's ruling that an organisation with a substantially different character than the business that was previously performing its functions was not bound by a previous industrial agreement, according to the Australian Industry Group.

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Employers should not take too much comfort in the High Court's ruling that an organisation with a substantially different character than the business that was previously performing its functions was not bound by a previous industrial agreement, according to the Australian Industry Group.

Principal advocate Matt Moir told the AiG's conference on redundancy, outsourcing and protection of entitlements held in Sydney on Friday that the 'business character' test in the PP Consultants decision (see 128/2000 and 141/2000) was a 'common-sense approach, welcomed by many employers'.

In that case, the High Court ruled that a Byron Bay pharmacy which had taken on extra functions as a St George Bank agency did not have to abide by the St George banking award because it had a substantially different business character. While performing the activities of a bank, it was not engaged in the banking business, the full bench said.

Two reasons to beware

But Moir said a subsequent Federal Court decision (see 90/2001) had revealed it was still likely that many private sector outsourcing arrangements would be found to be transmissions.

In that decision, Federal Court Justice Catherine Branson considered the High Court's 'business character' test. She ruled that when a coal mine outsourced its coal washing facility to another private sector employer, that organisation was found to indeed be a distinct part of the coal mining business, and was thus bound to employ staff on the terms and conditions of the old employer's certified agreement.

'What that appears to suggest in my view is that many private sector outsourcing cases will continue to be a transmission of business, especially where it forms a core part of the business and the previous employer is no longer engaged in that area of business,' Moir said.

He said the High Court decision also left open the approach to be taken where a private sector employer took over functions previously undertaken by a public sector agency. Moir said the lack of guidance from the High Court in this area was not good news for employers who decided to take up Government contracts.

He cited the Federal Court's ruling in the South Australian bus case as an example (see 144/2000). In that case, Justice John Mansfield agreed with the Rail, Tram and Bus Union that when the SA Government contracted out Adelaide bus services there was a transmission of business to both the private bus company and the labour hire company which supplied its labour.

He said nothing in the High Court's decision led him to use what he considered the narrow 'business character' decision in this case. Instead, Justice Mansfield relied on the 'substantial identification of activity' test, saying there was a substantial identity between the activities of the private operator and those previously conducted by the public sector agency. In practical terms, the labour hire firm had taken over part of the business of the government body by hiring bus drivers.

A prime example of companies who would be affected by this decision were private sector firms who had taken over the outsourcing of Government IT requirements, Moir said.

What are the options?

Employers had three options to minimise their exposure to transmission of business claims, Moir said. The first was to provide equal or better terms and conditions in a new employment agreement than under the transmitted award or agreement. He conceded that this option would have limited use for most employers, as it was a 'generally unfinancial' option for private sector employers to have to compete with the public sector.

The second option was to negotiate a new award or agreement, although Moir said in a highly unionised environment workers would be 'extremely reluctant' to agree and, in any case, this option was not available until the previous agreement had expired.

The final option was the 'most interesting' and should not be overlooked, Moir said. It involved approaching the federal Industrial Relations Commission to conciliate or arbitrate on the matter, and had been used successfully by a number of employers when compared with the treatment by the courts, 'especially the Federal Court'.

For example, in CPSU v Employment National the AIRC had rejected the Community and Public Sector Union's claims that the previous Commonwealth Employment Service public sector award should apply to the new government-owned body, Employment National. A full bench said as EN was competing with private sector organisations, its employment conditions should reflect those in the private sector.

However, Moir said, this was only an option in terms of possible transmission of awards. The avenue for certified agreements was more complicated, with the Commission required to make an 'exceptional matters' order to prevail over any existing CA.

Moir concluded by saying proposed legislation dealing with transmission of business 'doesn't go nearly far enough'. There was, in his view, 'a very compelling argument' that transmission of business provisions should only apply in awards, not agreements, as he did not see why the agreement of one employer should be 'foisted upon' another.

Another speaker at the conference said he was increasingly aware of unions bringing what should be transmission of business cases before the tribunals as freedom of association cases, under s298K of the federal Workplace Relations Act.

The AiG's NSW executive officer, David Hargraves, said while it was too early yet to say a trend was emerging, he felt the Australian Services Union had brought the Greater Dandenong City Council case (see 42/2001) as a freedom of association matter because it was easier to seek injunctive relief.

In that case, a full bench of the Federal Court made it clear that it was not a genuine reason to outsource if the objective was to avoid payments under an industrial instrument.

He said FoA also 'arguably' carried a lower test than transmission of business, and the reverse onus of proof meant it was up to the company to prove its case.

 

 
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