Australian Liquor, Hospitality and Miscellaneous Workers Union, Queensland Branch, Union of Employees v Bayton Property Services Pty Ltd [2002] QIRC 46 (2002) 169 QGIG 307

12 April, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 307 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 278 – application for recovery of unpaid wages Australian Liquor, Hospitality and Miscellaneous Workers Union, Queensland Branch, Union of Employees AND Bayton Property Services Pty Ltd (No. W14 of 2002) COMMISSIONER BLADES 28 March 2002 Application for payment of outstanding wages – S. 278 Industrial Relations Act 1999 – Severance pay – Transfer of employee to another employer – Whether a “transfer” or a dismissal – Held employee dismissed and re-employed – Redundancy occurred – Whether transmission of a business – Termination, Change and Redundancy Policy of Commission – Nature of business taken over – Business not comparable – Held transmission of business did not occur – Original employer remaining liable for payment of severance. DECISION The Australian Liquor, Hospitality and Miscellaneous Workers Union, Queensland Branch, Union of Employees (the Union) seeks an order for the payment of wages on behalf of Julio Jimenez who is alleged to have been employed by Bayton Property Services Pty Ltd (Bayton). The sum of $3,565.92 being severance pay is sought. The respondent does not challenge the quantum of the sum claimed. The payment is sought under the provisions of the Australian Building Services Association – Queensland Division – Certified Agreement 1999 (CA) which applies the provisions of the Commission’s Policy on Termination, Change and Redundancy of Employees (1987) 30 QGIG 1119 (TCR Policy). The evidence establishes that Mr Jimenez was employed as a cleaner on 6 November 1995. He alleges that he worked for Bayton at various sites, lately until 1 May 2001 (sic) at the Lutwyche Shopping Centre when a new contractor who took over from Bayton did not continue the employment. Bayton allege that under the terms of a franchise agreement with D.F. and L.P. Cheetham (Cheetham), Mr Jimenez’ employment was transferred to that partnership from 4 April, 2001 and that from that date, Cheetham assumed all responsibilities for the employment of staff. The “new contractor” that Mr Jimenez is referring to is an entity other than Cheetham because on 31 May, 2001 the Shopping Centre was sold and the cleaning contract went elsewhere. It was on 31 May that Mr Jimenez’ employment ceased. While it is not conceded by the applicant and while Mr Jimenez had an imperfect understanding of the arrangement, it is clear and I find on the balance of probabilities that Mr Jimenez’ employer changed from 4 April, from Bayton to Cheetham with Mr Jimenez’ knowledge and consent (albeit implied). This change is particularly corroborated by the pay slips he received. When his employer changed, so did his pay slip. I accept the evidence of Bayton that from 4 April, pursuant to a franchise agreement between Bayton and Cheetham, Cheetham assumed the duties at the Shopping Centre and accepted responsibility for the employment of the staff including Mr Jimenez. Evidence before the Commission is that Bayton did not know, at the time of the transfer, that the employment with Cheetham would only be of a short duration. No evidence was provided to the Commission of the number employed by Cheetham. The only evidence produced that Cheetham assumed the full responsibilities for the payment of all employee benefits was an Email of uncertain effect, indicating that staff would need to be paid for public holidays. The deficiency though is of little moment. The Union submits that Bayton is responsible for severance pay because of the provisions of the CA and that what happened after Mr Jimenez ceased to be employed by Bayton is irrelevant. Clause 2.2 of the CA provides:– “2.2 Introduction of Changes, Termination of Employment in Cases of Redundancy Except as provided for in clause 2.1 hereof, Employers and employees to whom this Agreement applies shall observe the terms and conditions of the Statement of Policy of Termination of Employment, Introduction of Changes and Redundancy contained in the decision of the Full Bench of the Commission dated 16 June 1987, and published in the Queensland Government Industrial Gazette Vol. 125, folios 1119-1121, as amended by 125 QGIG 1377 and 126 QGIG 188: Provided that .... Provided further that the provisions of the Policy will not be applied in circumstances where: (a) A contract changes hand between contractors and the contractor who is successful agrees to engage existing employees at that particular site; and (b) The Union is advised within fourteen days of the change of contract.”. It has been admitted by the parties that the Union was not advised within 14 days of the change of contract. The result is that the TCR provisions apply. Bayton submits that the responsibility for the payment lies with Cheetham, there having been a transfer of business under the provisions of s. 69 of the Industrial Relations Act 1999. That submission mistakes the effect of s. 69. The meaning of that section was explained by President Hall in Harrison v -- 1 of 4 -- 308 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 12 April, 2002 Electcom Limited (2000) 163 QGIG 347. In that case, the submission was that that Part of the Act was not about treating as continuous for all purposes an employment which in fact and in law was broken. The submission was that the employment was treated as continuous only for the purposes of calculating length of service. His Honour accepted those submissions and held that the remedy for unlawful dismissal was available against the former employer. Thus when Mr Jimenez’ employment was “transferred” to Cheetham, there was a dismissal and a re-employment. That there is no termination in these circumstances was also rejected by Mackenzie J in Clarke v Hancock (1993) 36 AILR 8; (1993) 143 QGIG 589. The question then to be answered is whether there has been a transmission of business. Paragraph 3 of Clause C of the TCR Policy provides:– “3(a) Where a business is, whether before or after the date of this Award/Agreement, transmitted from an Employer (in this clause called the ‘transmittor’) to another Employer (in this clause called the ‘transmittee’), and an employee who at the time of such transmission was an employee of the transmittor the business, becomes an employee of the transmittee: (i) The continuity of the employment of the employee shall be deemed not to have been broken by reason of such transmission; and (ii) The period of employment which the employee has had with the transmittor or any prior transmittor shall be deemed to be service of the employee with the transmittee. (b) In this subclause, ‘business’ includes trade, process, business or occupation and includes part of any such business and ‘transmission’ includes transfer, conveyance, assignment or succession whether by agreement or by operation of law and ‘transmitted’ has a corresponding meaning.”. When the TCR Policy was adopted by this Commission, the Full Bench adopted the reasons for the decision of the Federal Tribunal in the TCR Case. Those reasons at (1984) 8 I.R. 34 at 75 include:– “However, we would make it clear that we do not envisage severance payments being made in cases of succession, assignment or transmission of a business.”. The effect of the TCR Policy is that if there has been a transmission of business, Bayton is relieved of payment of severance pay. The commencing point in determining whether there has been a transmission of business appears to be Crosilla v Challenge Property Services (1982) 2 I.R. 448, a decision of the Industrial Court of South Australia on legislation with somewhat similar provisions. There it was held that the letting of a contract to clean premises and the transfer of an employee to the contractor did not constitute a transmission of part of the business. Crosilla was a “long service leave” case where an employee claimed to be entitled to long service leave because of the continuity of service provision in the relevant legislation. The employee worked as a cleaner for the proprietors of a motel (Town House). The cleaning duties were transmitted to the respondent Challenge when that company entered into a contract with Town House for the cleaning of the motel. The employee’s employment was also transferred to Challenge. The employee performed the same work as that which she had performed under her contract with Town House. The question was whether there was a transmission of part of the business of Town House to Challenge. Russell J at p. 456 said:– “That which must be demonstrated to have been transmitted is the business, or part of the business of the transmittor. The business of Town House is that of a fully licensed motel operator. It receives guests or patrons, who resort there, and, for reward, provides them with accommodation, meals and refreshments. The business of the respondent (Challenge), on the other hand, is that of a cleaning contractor. It provides its customers with a cleaning service in their buildings, or in other premises, for reward. Both before and after the cleaning contract was entered into, both Town House and the respondent continued to run their own businesses. The only difference, in the case of Town House, was that instead of running its business as a motel proprietor by employing servants to perform the necessary cleaning work, it reorganised the method of running its business by engaging an independent contractor to perform the cleaning work: in the case of the respondent, it was still running its business as a cleaning contractor. ..... It seems to me to be crystal clear that the whole of Town House’s business has remained intact at all material times. .....In order to constitute a transmission of business, or part of the business, it must be shown that the business itself, or a severable part of the business itself, has been transferred to the transmittee. It is not sufficient merely to show that, as a result of the contract entered into with a contractor, the contractor has been given a license to enter the principal’s premises to perform certain functions, which are ancillary to the running of the business, by the principal.”. The next case is that of North Western Health Care Network v Health Services Union of Australia (1999) 92 FCR 477 where the appellant had assumed the management of the provision of certain adult mental health services previously provided by the State of Victoria. The question was whether outsourcing or mainstreaming of health services had the effect that the body assuming the obligation to deliver the services was bound by the awards to which the State was bound. The facts revealed that the same patients had become the responsibility of the Networks; the medical records and stock were transferred; leased assets were assigned; and staff were transferred. While the State retained control over funding and audit, that was but the consequence of it having transferred the responsibility for the provision of the relevant mental health services so that it was now required to pay for the delivery of such services. In holding that there had been a transmission, R.D. Nicholson J at 495 said:– “What was involved was a transmission of the core of the relevant services not, as in Crosilla ..... a peripheral activity.”. In PP Consultants Pty Ltd v Finance Section Union (2000) 75 ALJR 191, the appellant, which conducted a pharmacy business, entered into an agreement with a bank to conduct a branch agency and employed two former employees of the bank to work in the agency. The question was whether, for the purposes of s. 149(1)(d) of the Workplace Relations Act 1996 (Cth), the appellant was the successor, assignee or transmittee of the business or part of the business of the bank. The High Court held that the question whether one person had taken over or succeeded to the business or part of the business of another was a mixed question of fact and law. While stating that there was no general test to ascertain whether for the purposes of the section, one employer has succeeded to -- 2 of 4 -- 12 April, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 309 the business or part of the business of another, it was possible to indicate the manner in which the question should generally be approached, at least in non-government employer activities. At p. 195, the majority said:– “As a general rule, the question whether a non-government employer who has taken over the commercial activities of another non-government employer has succeeded to the business or part of the business of that other employer will require the identification or characterisation of the business or the relevant part of the business of the first employer as a first step. The second step is the identification of the character of the transferred business activities in the hands of the new employer. The final step is to compare the two. If, in substance, they bear the same character, then it will usually be the case the new employer has succeeded to the business or part of the business of the previous employer.”. Callinan J in referring to Crosilla and others, said that decisions of other factual situations were of little assistance and distinguished the decision in North Western Health Care Network because it was concerned with the transfer of governmental activities and the courts in that case were not required to identify or analyse the nature and components of a business in the orthodox sense of the word and in the context of a conventional business environment. In respect to the facts of the case before him, his Honour accepted submissions that the business formerly carried on was an unqualified business of full- scale banking. It was carried on by the bank itself. The bank disposed of no part of its business to anyone. The appellant carried on its own, an agency business, and a business therefore of a quite different kind from that formerly carried on by the bank. His Honour said at p. 200:– “The matter may also be tested, in my opinion, by asking this question: what ‘business’, to which the appellant is said by the respondent to have succeeded, could the appellant sell or otherwise pass on to someone else? The answer is, ‘no business’, for ....the agreement makes plain that the agreement is a strictly personal one.”. It was held that no part of the bank’s business had been acquired by the appellant, whether as successor, assignee or transmittee. The final case to which I refer is that of Stellar Call Centres Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2001) 103 IR 220 which again dealt with the provisions of s. 149(1)(d) of the Federal Workplace Relations Act 1996. Stellar was incorporated as a joint venture between Telstra and another company. Telstra maintained a dedicated telephone number to deal with certain enquiries. Due to the extent of calls to that number, Telstra could not cope and Stellar was a successful tenderer to provide an overflow service. The Federal Court of Australia at 228, referred to the joint judgment of the High Court in PP Consultants and said:– “.... it is no longer sufficient to ask whether the putative transmittor, the first employer, has ‘disposed of an important aspect of operating’ its business. Rather, one must characterise the business or the relevant part of the business of the first employer, and see whether, so characterised, it substantially corresponds with the character attributable to ‘ the transferred business activities in the hands of the new employer’. ... As we understand it, even if there be complete identity between the duties and working conditions of the relevant employees of both employers, that will not attract the application of s. 149(1) unless the business in which those duties are performed for the new employer is in substance identical in character with the business, or a distinct part of the business, of the presumptive transmittor.”. Once again it was held that there had been no transmission. So what is the business to which Cheetham succeeded? The evidence is scant but, attached to the affidavit of Mr Teague of Bayton was a copy of the franchise agreement between Bayton and Cheetham. The oral evidence of Mr Teague was otherwise unhelpful, probably because of his appointment as General Manager and transfer to Queensland in September 2001 at a time after the happening of these events. No other oral or written evidence of the operation of Bayton or Cheetham was provided. The franchise agreement, so far as appears relevant, provides:– “1. Bayton operates and oversees the Bayton System, which includes proprietary rights in trade marks, logos, business names, service marks, service names and other industrial property including those that Bayton may from time to time designate. 2. The Bayton system is a comprehensive system, the foundation of which is the adherence by franchisees to standards and policies of Bayton. Compliance by franchisees with the foregoing standards and policies provides the basis for the valuable goodwill of the Bayton System. The establishment and maintenance of a sound working relationship between Franchisor and Franchisee, accountability for performance of the obligations contained in this Agreement, constitutes the essence of the Franchise provided for herein. 3. Bayton Provides the Franchisee the license for professional cleaning and maintenance business, which provide cleaning, maintenance and janitorial services to commercial cleaning customers, and licensees are provided with all components of the Bayton System for the use in their Bayton business. The Franchisee wishes to be granted by the Franchisor the right to adopt and use the Bayton System as a Bayton franchisee in the operation of a commercial janitorial cleaning service business.”. Other relevant clauses appear to be:– “2.2.1 The Franchisor will provide to the Franchisee the clients, located in the Area, amounting to the gross volume per month of the ‘Initial Business’ as specified in Schedule 1. 2.2.2 The Franchisor will replace customers which are part of the ‘Initial Business’ with other customers of the same gross monthly value, if the services of the Franchisee were not terminated due to defaults on the part of the Franchisee....”. An initial kit was provided to the franchisee and the document, in clause 7.2 goes on to provide that the franchisor may discontinue the franchisee’s service upon the happening of certain defined events, including failure to perform its obligations, failure to provide service, remaining uncontactable in certain circumstances and failure to rectify concerns. Cheetham’s business appears to be that of a husband and wife partnership performing only cleaning duties. That fact is inferred from the only evidence produced, being the Tax Invoices annexed to Mr Teague’s affidavit. The statement in clause 3 of the franchise agreement that the business operated by Cheetham was “a commercial janitorial cleaning service business” in also instructive. Compare Cheetham’s business with that of Bayton’s. Bayton operates the Bayton system including proprietary rights in trade marks, logos, business names, service marks, service names and other industrial property and sells franchises. Bayton might also provide cleaning services at various locations but the Bayton business is much wider than the provision of janitorial cleaning services. What must be shown is that the business or part of it was transmitted. What was transmitted to Cheethams was not a core part of Bayton’s business. It was a peripheral part of the business, something like that which occurred in Crosilla. The business conducted by Bayton and the business transmitted to -- 3 of 4 -- 310 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 12 April, 2002 Cheetham were not substantially the same. The business conducted by Cheetham including the franchise itself, could be sold or transferred to others but not the “contract to provide services to Lutwyche Shopping Centre” which always remained with Bayton. That contract was “given” to Cheetham to fulfil Bayton’s obligation under the franchise. It was a mere license to provide cleaning services at the Lutwyche Shopping Centre and nothing more. The contract to provide those cleaning services remained with Bayton as evidenced by the termination letter dated 27 April from Lutwyche City Shopping Centre giving Bayton one months notice of termination concluding 31 May. That contract to provide cleaning services could not be sold or transferred by Cheetham. Like PP Consultants, it could be said that Baytons disposed of no part of its business. Both Bayton and Cheetham continued to run their own businesses. I am not satisfied that the character of the business undertaken by Cheetham substantially corresponds with the character of the business operated by Bayton. That Mr Jimenez may have been performing exactly the same tasks appears to be irrelevant – Stellar Call Centres. On the whole of the evidence I am not satisfied that there has been a transmission of business as provided for in the TCR Policy of the Commission. In fact, I am satisfied that there was no transmission of business. The dismissal caused by the change of employer constituted a classic redundancy because the former employer, Bayton, no longer wished the job being done by Mr Jimenez to be done by anyone. Because there was no transmission of business in accordance with the transmission provisions of the TCR Policy, Bayton remains liable for the severance pay set out in paragraph 6 of clause C. Lest it be thought that employees may be able to “double dip” and receive severance pay from the former employer and wages from the new employer in these circumstances, the TCR Policy in paragraph 9 of clause C provides relief to an employer, upon application, where the employer obtains acceptable alternative employment for an employee. No application has been made under that provision and it is extremely doubtful that there could be a finding that Bayton found acceptable alternative employment for Mr Jimenez. With the benefit of hindsight, the alternative employment was not acceptable due to its short duration. I order that Bayton Property Services Pty Ltd pay the applicant Union the sum of $3,565.92 on behalf of Mr Jimenez. B.J. BLADES, Commissioner. Released: 28 March 2002 Appearances:– Mr J. Martin for the Australian Liquor, Hospitality and Miscellaneous Workers Union, Queensland Branch, Union of Employees. Mr C. Pollard, of Jones Ross, for Bayton Property Services Pty Ltd. -- 4 of 4 --