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Fair Work Act 2009                                       1057811






s.157 - FWC may vary etc. modern awards if necessary to achieve modern awards objective


Application by Australian Industry Group, The


Fast Food Industry Award 2010




2.02 PM, FRIDAY, 15 MAY 2020


JUSTICE ROSS:  Good afternoon.  It's Justice Ross.  I've got Deputy President Masson and Commissioner Lee with me.  Could I have the appearances, please.  Firstly, from Ai Group.


MR B FERGUSON:  If the Commission pleases, Ferguson, initial B, and Ms Bhatt, initial R.




MR W FRIEND:  Friend, initial W, your Honour.  Ms S Burnley is here, Mr D Macken is here and Mr G van Rensburg is here.


JUSTICE ROSS:  Thank you.  For RAFFWU?


MS S KELLY:  Ms Kelly, of counsel.  With me I have Mr J. Cullinan.


JUSTICE ROSS:  Thanks, Ms Kelly.  For the Minister?


MR D WILLIAMS:  Your Honour, Williams, initial D, from Minter Ellison.  Ms J Kuzma, initial J, is also on the line.


JUSTICE ROSS:  Thank you, Mr Williams.  My chambers has been advised that Ai Group has an application for a short adjournment to make.  Mr Ferguson, what do you want to say about that?


MR FERGUSON:  Yes, your Honour.  Just shortly before the proceedings commenced we became aware of a submission from the SDA withdrawing their consent to one element of the claim; the claim in relation to shutdown.  Obviously these proceedings have been a product of negotiations and been advanced on the basis that there was a consent position, but given the late notice of that we haven't had the benefit of a proper discussion with that union about the reasoning for that.


We would like to take the opportunity to have a brief discussion with them to see whether there could be a way forward.  We think, putting it bluntly, they may be jumping at shadows and we would like to just ventilate those issues properly.  We were going to seek the indulgence of the Full Bench for, say, a half‑hour adjournment just to allow those discussions to take place and see whether we can proceed by consent.  We don't want to throw away the whole afternoon, your Honour.  There are obviously two other urgent claims to deal with also.


JUSTICE ROSS:  Yes.  Does anyone object to an adjournment if we say until 2.40?


MS KELLY:  No objection from RAFFWU.


JUSTICE ROSS:  Thanks, Ms Kelly.


MR FRIEND:  No objection from the SDA.


JUSTICE ROSS:  All right.


MR WILLIAMS:  Or from the Minister.


JUSTICE ROSS:  Thank you.  Whilst you're discussing things I've been looking at the draft determination.  I've assumed from the various sort of flurry of correspondence this morning that - leave aside the close‑down issue - Ai Group is adopting the SDA's proposed determination.


MR FERGUSON:  Yes, your Honour.


JUSTICE ROSS:  One issue that occurs to me, when I compare that with the one that this bench recently approved in the Vehicle Manufacturing, Repair, Services and Retail Award there doesn't seem to be anything in the proposal before us that links the access to the flexibility to the need to respond to a consequence of the pandemic.  For example - and I'm not - - -


MR FERGUSON:  There is, your Honour.


JUSTICE ROSS:  I'm not advancing this.  Where is that?


MR FERGUSON:  I think the different approaching in drafting is the various - sorry, there is in relation to part‑time, but in relation to the other two elements of the claim the different approach is that some of the safeguards have been weaved into the specific clauses rather than sitting at the top - - -


JUSTICE ROSS:  Where is the one in relation to part‑time?


MR FERGUSON:  I'm just bringing it up now.  Sorry, no, there is not in relation to part‑time.  Your Honour is right, the part‑time course was not an element of the other determination or the other variation.


JUSTICE ROSS:  No, but I suppose my question still stands.  What relates the access to flexibility in relation to the proposed clause H.8 - - -


MR FERGUSON:  No, I take your point.


JUSTICE ROSS:  I mean, anything to do with the COVID‑19 pandemic.


MR FERGUSON:  I take your point.


JUSTICE ROSS:  Look, you might usefully discuss that with the SDA and in view of that we'll adjourn until 2.45.  We will contact each of the parties at that point.  All right?


MR FERGUSON:  Thank you.


JUSTICE ROSS:  Thanks very much.

SHORT ADJOURNMENT                                                                    [2.07 PM]

RESUMED                                                                                               [2.52 PM]


JUSTICE ROSS:  I understand there's a - in addition to the appearances announced on the last occasion, there's an appearance for the ACTU.


MS S ISMAIL:  Thank you, your Honour.  It's Ismail, initial S, for the ACTU.


JUSTICE ROSS:  All right.  Thank you.  Is there anything you want to indicate before I go through the running list and how we propose to deal with it, Mr Ferguson?


MR FERGUSON:  Yes.  I might, your Honour, just make clear what we propose be dealt with today.  the way it has unfolded, we would press all three elements of the claim, if you will, still adopting the proposal advanced by the SDA yesterday but for one issue, in that the period of notice that must be given when an employee is being directed to take annual leave would be 48 hours rather than one week.  We've set that out in correspondence.  That's for a close-down.




MR FERGUSON:  But we are pressing all three claims.  But as I understand it, the SDA and ACTU are no longer consenting to the close-down provision that they proposed.


JUSTICE ROSS:  All right.  And where did you get to in relation to the matter I raised?


MR FERGUSON:  We had some discussions in relation to that.  I think time overtook us a little bit, but I think - and my friends will correct me if I'm over-putting it here - from our part we would be amenable to amending the part-time claim to insert a form of words that in effect said that that element of the schedule could only be utilised where it was being used by an employer for reasons associated with (indistinct) to the COVID-19 pandemic or government initiatives to slow the transmission of COVID‑19.  The precise form of words (indistinct) think about it in a little more detail.  That would be the intent, from our perspective.  I think that was agreeable, but things were rushed, your Honour.


JUSTICE ROSS:  Do you need more time?


MR FERGUSON:  Certainly the SDA and the ACTU may be able to confirm on their feet whether they would support that intent.


JUSTICE ROSS:  All right.  We will see when we come to them.  At the moment we have before us submissions from Ai Group of 1 May, 12 May, and 15 May; of the NRA dated 4 May; of the SDA dated 5 and 15 May, and a further short submission in response to Ai Group's submission of 15 May; the Minister of 12 May; and RAFFWU of 5 and 14 May.  Have I missed any submission?  No?  All right.


We've also received witness statements of Mr Cameron Newlands, that has been filed by Ai Group; and Mr Josh Cullinan, that has filed be RAFFWU.  Neither witnesses is required for cross‑examination.  Ai Group has filed a document submitting that certain aspects of Mr Cullinan's statement should be attributed little if any weight.


I take it, Mr Ferguson, though, that's not an objection to the statement, it's simply setting out your submission as to how we should treat the evidence.  Is that right?


MR FERGUSON:  yes, your Honour, that's exactly right, to expedite matters.


JUSTICE ROSS:  All right.  And RAFFWU's submission also deals with Mr Newland's statement.  If there's no objection, I would propose to mark Mr Newland's statement as exhibit AiG1, and Mr Cullinan's statement as RAFFWU1.




JUSTICE ROSS:  Can I perhaps begin with the SDA, only for this reason, that you filed a draft determination this morning.  It has got in red "without prejudice" at the top.  I want to understand.  You deal with, in your submission of this morning - this morning or last night - with the broad nature of the changes that you're proposing to the initial application that are reflected in the draft determination attached to your submission.


I would be assisted if you can take me through that draft determination and identify what's different between it and the one Ai Group filed with its initial application.  Mr Friend?


MR FRIEND:  Yes, I can do that directly, your Honour.  I take you first to point H or clause H.7, "Any requirement issued by an employer (indistinct) not apply (indistinct) unreasonable."  That's an addition.  A further addition is H.8.3, dealing with genuine agreement.




MR FRIEND:  8.3 H.  8.3.


JUSTICE ROSS:  Eight.  Bear with me for a moment.  Yes.


MR FRIEND:  And also H.8.4, which deals with the consent to arbitration of disputes.


JUSTICE ROSS:  Okay.  Right.


MR FRIEND:  The next change is under annual leave, H.9.  Perhaps if I can do this in a slightly - I beg your pardon.  H.9.1 now reads - there's an addition of "and H.9.7" after "H.9.3" in the first line.  So it's subject to clause H.9.3 and H.9.7, "And despite" - and so on.  Then H.9.3 is changed:


An employer may only make a request under clause H.9.1 where it is reasonable in all of the circumstances."


JUSTICE ROSS:  And that's - I see, that's because the terms of H.7 deal with the requirements issued, and this is a request.


MR FRIEND:  Yes.  And H.9.4:


An employee is not required to take leave under H.9 unless the employee is invited to in writing.


That's the consent to arbitration issue again.




MR FRIEND:  And other than that, what has happened this morning is removal of consent to the third issue, which is the close-down one.


JUSTICE ROSS:  All right.  Can I take you to H.9.7.  So that's not a new provision, it's just that you've amended 9.1 to indicate that you have to satisfy 9.7 before you can make a request.


MR FRIEND:  Yes, that's - I've only had this since late last night, your Honour, so I think that's right.  Just let me check.




MR FRIEND:  Yes, that was in the earlier one.  But the clarification is simply to make clear that that's covered.  I might say on the other issue that you raised earlier, something along the lines of H.9.7 in regard to the flexible part-time employment would seem to cover that issue as well.


JUSTICE ROSS:  All right.  Thank you, Mr Friend.  We will come back to you.


MR FRIEND:  Thank you, your Honour.


JUSTICE ROSS:  We might go to the applicant for the moment.  Mr Ferguson, what do you wish to say?


MR FERGUSON:  Firstly, your Honour, do you want me to take you to the further amendment H.10, which is the close-down clause?


JUSTICE ROSS:  I understand the point of difference between yourselves - well, as I understand it, the SDA no longer supports H.10, and your position is you support the without prejudice document filed by the SDA, save in relation to - just take me to the ‑ 10.1(a).


MR FERGUSON:  Yes.  We've retained our earlier approach of 48 hours.


JUSTICE ROSS:  Yes, I see, but that's really the - that's the difference.


MR FERGUSON:  And the only addition is H.10.4(a) was an amendment that the unions had made to include an additional safeguard, that the employer has consulted with the employee about the requirement to take the leave.  We've adopted that as well.


JUSTICE ROSS:  All right.  Thank you.  Primarily you set out your argument in your written material.  What we would be most interested in is your response to RAFFWU's submission.


MR FERGUSON:  yes, your Honour.  And I will go to that, then.  We are content largely to rely on our written material.  I suppose in terms of the key arguments in that submission, the first is an argument, the general thrust seems to be that we failed to establish that employers in this sector won't be viable absent these sorts of variations.


The crux of our position in response to that really is that we don't need to establish - the Commission doesn't need to be satisfied that employers wouldn't be viable but for these variations in order to be satisfied that the changes are necessary to meet the modern awards objective.  We say that especially in the context of the COVID crisis and the pressures that it is putting on the sector.


In advancing that submission we are quite up front about the fact that as we say the evidence makes clear, there are employer in this sector that are facing an extremely difficult (indistinct) example of McDonald's, which is the largest employer in the sector, shows that although there's a bit of a patchwork of experiences, some are facing very significant downturns in revenue, and they're also having to grapple with very stark changes in patterns of customer demand.


We say that that context makes it necessary to vary the award in the manner we've proposed.  But we do make clear that really at the heart of our intent in seeking these changes is providing employers with some sort of mechanisms that will assist them to maintain employment or to maximise the employment opportunities as far as possible.  We do say that is in everyone's interests.  And in the current context it is necessary to satisfy the modern award, but we don't say that the Commission take the view - it would need to be established that people are not viable in order to get to that threshold.  The evidence makes clear that a very significant number of restaurants are closed and of course it's very difficult to argue that those businesses are profitable or that they won't be viable if that continues for an extended period of time.


The next argument that I probably want to address is their response to the view that there is - or our argument that there is a gap in the legislation.


JUSTICE ROSS:  A regulatory gap, I think.


MR FERGUSON:  A regulatory gap.


JUSTICE ROSS:  It's a submission advanced by yourselves and the Minister.


MR FERGUSON:  Yes.  I think part of what is put against us is that there has been a policy decision about where JobKeeper should apply and where it should not, and an assumption that employers who don't meet those various thresholds should be able to withstand the economic effects of COVID.  The first point we would make there is that what determines a policy approach in a legislative space is not the same as the considerations that must guide the Commission.  The Commission should be guided by the modern awards objective and what is necessary in that context.


For all the reasons we've set out in our submission, we say the variations aren't necessary and in fact fairness dictates that employers who slip through the gap - and by that I mean aren't eligible for JobKeeper - should have some access to some of the flexibilities that we have proposed as a means of addressing the circumstances presented by COVID and in particular, as we've said, as a means of trying to maintain employment as far as possible.


JUSTICE ROSS:  It may be a debate about semantics to some extent.




JUSTICE ROSS:  But, speaking for myself, I found the RAFFWU's submission about the characterisation of it being a regulatory gap as persuasive insofar as it went.  I don't think it is accurate to describe it as a regulatory gap.  I accept you can describe it in the way you have just described it.  It has been a regulatory choice for, no doubt, various reasons including the cost to the budget of extending it.




JUSTICE ROSS:  But however one characterises it, your submission is that there are employers in this sector - and you've advanced evidence of McDonald's that employs almost half of the employees in the sector.  You say that they don't qualify, don't meet the threshold reductions in revenue specified in the JobKeeper scheme, but, nevertheless, they have suffered a significant downturn and these changes that you're proposing are necessary.  Is that the essence of how it's put?


MR FERGUSON:  Yes, your Honour, that is.  The other point I would make on that is just adopting the threshold of how much economic harm that business has endured, if you will, that isn't a sufficient basis for deciding whether or not these sorts of flexibilities should be afforded because, as the evidence makes clear, you know, the structure of the business might mean that there is a patchwork of experiences at different restaurants.


The evidence makes clear that in this sector COVID and government initiatives to stop the transmission are having an inconsistent impact in that some stores, based on their locations and their store type, have been absolutely devastated.  The evidence is that a very significant number have closed.  Where that applies it's really no comfort to the employer or the employees the overall revenue that the business might be receiving, because they don't necessarily at that point have the tools to deal with the fact that they don't necessarily have work for their current workforce.


The heart of what we have been trying to do here is open up some mechanisms that will allow employers to deal with that reality - that hopefully temporary reality, but very real reality - that as McDonald's has made clear, they have got more permanent staff than they need in some instances.  Even with the best of efforts they are out of options, if you will, on the evidence, and they need three mechanisms that we have proposed in order to try and avoid having to take the more drastic step of making people redundant.


I think it would be naive to assume that any businesses will just indefinitely carry people, if you will, where there is no useful work for them to do.  What this does is allow some alternative mechanism, which is a step short of the implementation of redundancies.  We say the McDonald's evidence makes it very clear that that is the way these sorts of mechanisms will be used.


We have, in effect, adopted some of the flexibilities in JobKeeper which are useful under the legislation for dealing with these circumstances, but we've obviously tried to put in the award because the legislative regime won't provide the solution.  That's the approach, your Honour.




MR FERGUSON:  In relation to the part‑time employment and the criticisms that are labelled at that, part of what is put against us is that consent is not - well, I'm paraphrasing, but the consent won't be genuine or there will be some sort of misuse of the provision in the sense that you will have people who will be pressured into it - - -


JUSTICE ROSS:  I think it's put that consent is illusory in the context of this sector - is the way RAFFWU has advanced it in their submission.


MR FERGUSON:  Yes.  While we don't accept that the evidence establishes that and we have advanced those submissions about the deficiency in the evidence, and why little weight can be put on RAFFWU's material, what has now happened with the amended variation is we have bolstered the requirement that there be genuine agreement in relation to this and also introduced a capacity for the Commission to arbitrate the issue of whether or not there has been a genuine agreement if there is any dispute in relation to that.


Of course if there is not a genuine agreement, then the clause we say wouldn't apply in any event, but certainly in our view we don't take the view that the parties in this sector are unable to freely agree to these sorts of issues.  We have put safeguards around it that we think are sufficient safeguards.  Certainly the industrial parties, the registered organisations who are familiar with it, are satisfied that those safeguards - - -


JUSTICE ROSS:  I'm sorry, Mr Ferguson, that last bit I couldn't hear what you said.  Can you just repeat that.  You started out by saying there were safeguards around this, but I lost the rest of it.


MR FERGUSON:  There are safeguards that, you know, the major registered industrial associations with familiarity of this sector have worked through carefully and are satisfied are appropriate in the context of this industry.  We say they are sufficient and that there is no reason for the Commission to adopt the view that parties in this sector can't agree to these sorts of arrangements.


The point we made - and we made it last time, and we've made it in our written submission - is that there are various safeguards, including additional safeguards, to what was in the proposal that was of a similar nature that was previously advanced in separate proceedings.  Your Honour took me to that on the last occasion.  We say there are sufficient safeguards to ensure it won't be abused.


The only other point I wanted to address really is the shutdown point in the context of consent for that no longer being maintained.  Obviously the evidence reveals the very real situation of a very significant number of McDonald's stores being closed down.  While some stores have started to open, 40 remain closed at the moment.  Of course there is no reason to assume that they will all open quickly.


We have the reality of multiple stores at airports closed.  I think on the evidence some 400 employees working - well, not working, but employed in connection with those stores.  We say it is essential that this sort of flexibility is now put into the award to give organisations like McDonald's an ability to take a step short of making those sort of employees redundant.  The evidence is quite clear that that is the way McDonald's have used the shutdown provision if it was - the close‑down provision if it was inserted into the award.  I refer you specifically to paragraphs 70 and 71 of Mr Newlands' statement in support of that.


We don't think there is any reason to take the view that this crisis has passed for this sector.  It's a fluid situation, of course, and there has been some opening of restrictions.  We all hope that things improve, but the reality is we still say it's necessary to deal with this issue and to deal with it in a way that is similar to how it has been dealt with in other awards.


JUSTICE ROSS:  Going to that point about - and I'm not suggesting by this observation that the crisis has passed.  The ABS has been releasing data that is referred to in your submission and the Minister's about using, I think, ATO record data about the impact in particular sectors.  When you look at that data, what it suggests is that since early to mid‑April you certainly had a - prior to that you had sharp fall in wages and employees employed in the sector.  From that period though it appears that it has stabilised on those two indicators from that data.


MR FERGUSON:  Yes.  That may be the case and it may well be that things do actually improve.  I think the evidence we are dealing with though is - take the McDonald's situation; they are still carrying more permanent staff than they actually require.  They have been using various techniques or mechanisms to try and avoid that, including voluntarily asking people to take leave and so forth, but the reality is they have still got significant numbers of stores closed.  Look at the specific example of the airports; they're shut.


What they're saying is absent these sorts of changes, unless there is a return to the typical trading conditions, they are going to need to terminate people; but if these variations including the close‑down were inserted, they could try to alleviate to avoid that more drastic step.  It may be that things in broad levels have stabilised, but I think what the evidence shows is that different restaurants are in different situations and I think it's hard to be certain that, you know, the worst is behind us.  Of course these things change.


The other point I would also make is we only are proposing these provisions be inserted for a fairly short period of time - - -


JUSTICE ROSS:  Can I just go to that.  Is three months from the date of effect of the variation?


MR FERGUSON:  Yes.  There are some limits on how it will operate - just bear with me for one second, your Honour.




MR FERGUSON:  The close‑down, if I could take you to H.10.5 -


only permits an employer to require an employee to take unpaid leave if it is in connection with a close‑down that commenced prior to -


and we would insert a date four weeks from the date of variation -


and the unpaid leave does not extend beyond eight weeks from the date of operation.


In essence, there is a very constrained time frame in relation to the close‑down.  While the schedule operates for three months - and I'll speak to why that is the case - the actual right to implement a close‑down is very limited and there is a limit on how long someone can be on unpaid leave as a consequence of this.  We're not leaving someone indefinitely in limbo and hopefully within four weeks the need for close‑downs will have passed, but obviously it was always contemplated that an application might be made to extend the schedule if it became necessary.  You know, I appreciate consent has evaporated now, but all parties were at the time trying to look at mechanisms that ensure only what was necessary was included.


The same in relation to leave.  The ability to make a request to put someone on leave would only apply where the leave starts within four weeks from the date of the amendment commencing operation; but the actual leave might end after that date.  In both cases the new rights to request or require people go on some sort of leave only operates in the very immediate future, if you will.  It's not something that would extend into the unknown.  Now, we might need to come back and seek a variation to that, but we have been conscious of only trying to do what is necessary.


I will make what is perhaps a very obvious point, but it is ordinarily not in an employer's interest to be closing their business in this sector.  It's a drastic step, one that commercial reasons might dictate, but it's not something that they would be taking lightly or with a view to do doing some sort of punitive reason.  Where you are closed down, obviously the spectre of needing to implement redundancies or to terminate employees looms large, which I suppose then takes me - sorry, your Honour, are there any questions in relation to that?


JUSTICE ROSS:  To the extent that there are stores or restaurants in airports, for example, that are no longer trading - - -




JUSTICE ROSS:  - - - presumably in relation to the full‑time people employed there they have already been made redundant.


MR FERGUSON:  No, your Honour.


JUSTICE ROSS:  Are they still being paid?


MR FERGUSON:  I think a myriad of different options are being taken on the evidence, in that they have tried to move them to other stores where possible, they have called for employees to take annual leave; for volunteers.  The approach this company has taken - I think it's set out in the evidence, but in any event it is that they have tried to call for volunteers generally in relation to annual leave so to create opportunities for people to keep working at other stores where people were amenable to that.


They have not yet implemented redundancies.  They are at great pains to avoid that if possible.  Some employees may have taken, by agreement, unpaid leave and so forth, but I think largely they are finding homes - or have been finding homes for people temporarily.


JUSTICE ROSS:  All right.


MR FERGUSON:  Their evidence is that that has been possible today partly because people have been volunteering to take annual leave in relation to school holidays, but it has been harder to get volunteers as we have moved past that point.  The other work we see the close‑down does is it provides a simple and easy to use mechanism that negates the need for employers to potentially grapple with some of the complexities around 524 stand‑downs under the Act.


Without trying to be definitive of how that section of the Act works, it seems in the current climate that difficult questions can arise sometimes about whether there has been a shortage of work and whether it's for reasons that are beyond the employer's control, particularly in circumstances where there may have been, if you will, some devastating decline in patronage but not necessarily a complete cessation.  Obviously there is scope for different arguments to be advance around that.


What we're trying to do and we say the Commission should do is provide a clear mechanism that people can use in those sorts of situations where, because of the pandemic - and we're seeking something which is akin to what has gone into other awards, multiple other awards, where it's also, albeit just by the consent of the parties, clear that there is a very difficult environment.  So that is the other point where we're saying there is real work to do here notwithstanding the Act, given the possible limitations around it and the extent to which it might not be fit for dealing with the circumstances of the pandemic entirely.


Those were the submissions I was going to advance, unless there were any other specific issues.  We have ventilated in our material - this is in our material in a fair bit of detail and of course I think the evidence now adduced in response to the specific questions hopefully assists the Commission, as well, to get a clear picture of what is happening in the sector and how employers will use this.


JUSTICE ROSS:  I only had one question.  In your submission you say that the variation of the award in the manner you propose may encourage enterprise bargaining.  What is the basis of that proposition?


MR FERGUSON:  Only that there are of course employers in this sector that utilise enterprise agreements.  To the extent that you vary the award to reflect an appropriate arrangement in the context of current circumstances, employers may be willing to seek to vary their agreements to reflect those circumstances if it's equally necessary for them.


In that sense it makes it easier at a practical level for the parties to engage in bargaining around mechanisms to deal with COVID.  And of course it changes the benchmark for the BOOT, which is always relevant in a sector where there may not be rates that are significantly higher than the award.  But we don't wish to put that too highly, other than to say that conceptually it may assist.


We don't have any evidence that this is necessarily going to result in a break out in enterprise bargaining, but it just seems to us that it would be a factor that would weigh to some degree in favour of the variation.


JUSTICE ROSS:  Just in relation to the bargaining question generally, if we decline to make the agreement, wouldn't that encourage McDonald's to enter into collective bargaining?


MR FERGUSON:  I don't think we could be satisfied (indistinct) on the evidence that that necessarily would, because the point of the BOOT would still be there as a potential barrier if they tried to ‑ ‑ ‑


JUSTICE ROSS:  Yes, but you can run a case under 189.


MR FERGUSON:  Is that the exceptional circumstances?




MR FERGUSON:  You could run that case and employers could run that gauntlet, as to whether or not that would get up, and make their own decisions about that.  It's an option, but my expectation is that employers would be more likely to propose a course of action where they didn't have to deal with that issue.  There may also be some uncertainty as to whether that option would be available in the context of a variation.  But I just need to give some thought to that.


JUSTICE ROSS:  No, I think there is a real question about whether 189 applies to a variation.  But in the case of McDonald's it wouldn't be a variation.


MR FERGUSON:  No, it wouldn't, your Honour, not in the specific case of McDonald's.  In others, it might.  I just don't know whether this would be sufficient to motivate them to engage in bargaining.  The other reality of bargaining is notwithstanding whether amendments are made to the Act to make it easier, bargaining can take a long time to deal with in terms of getting an agreement up and approved, whereas a variation to the award will deliver an urgent resolution to the problem, if you will.


We're dealing with an urgent crisis now.  Stores are closed now.  I think it's, you know, unlikely that the best course of action would be to try and engage in bargaining, given that that could take some time.  And of course it would need to be approved, and there are all sorts of uncertainty as to how that would happen.  But I accept a point that it wasn't made in the award, it might motivate some employer to be more inclined to bargain.  I can't argue against that logical proposition.


JUSTICE ROSS:  All right.  Thank you, Mr Ferguson.


MR FERGUSON:  I'm not sure ‑ ‑ ‑


JUSTICE ROSS:  Is there anything the SDA, then the ACTU, and then the Minister wish to add to their written material?  Then we will hear from RAFFWU and those supporting, in whole or part, the application, can respond to anything Ms Kelly adds by way of oral argument to the written material.  Mr Friend, was there anything you wanted to say?


MR FRIEND:  Very little, your Honour.  You can see through the course of the SDA's submissions how this matter has evolved.  Initially the first submissions opposed the proposed variation without additional safeguards being included, and those additional safeguards have been included in relation to two of the matters now.  And then just this morning in relation to the close-down, we find that there's an intent perhaps to use the close-downs for a purpose that had never been contemplated in the course of negotiations.


And so as we said in our submission this morning, we no longer support the close-down part of the proposed variation.  The difficulty here is always to find a way of including sufficient protections for the employees while acknowledging that there is a very difficult situation that needs to be dealt with on the ground.  The SDA's decision is that the two changes which it supports are now, with the addition of the matter identified by your Honour earlier today, in a form which does provide sufficient protections, and are justified in all the circumstances.  That's all we need to say at this stage.


JUSTICE ROSS:  Thank you.  Ms Ismail, anything you wanted to add?


MS ISMAIL:  No, nothing to add, your Honour.


JUSTICE ROSS:  Thank you.  Mr Williams?


MR WILLIAMS:  Thank you, your Honour.  Firstly we accept your Honour's observations in relation to the use of the term "regulatory gap".  That's perhaps not the most felicitous term.  The JobKeeper scheme operates in accordance with its terms, and there are some employers who qualify and some who don't.  "Regulatory gap" is perhaps more often used where there's an inadvertent lacuna in legislation, and we don't suggest that's the case.


However, the Minister's position, and his support for this application, proceeds on the basis that JobKeeper is one initiative, and others may also be required; and on the basis that the Minister is satisfied that the issue of job losses, which is the Minister's primary concern, can occur in different sectors of the economy, including those within the JobKeeper scheme and those who are not.


And therefore consistent with the Minister's concern to maintain employment, this application, as has previous applications, does have the Minister's support.  And of course the issue of the dichotomy between those within the JobKeeper scheme and those without was not a feature of some of the earlier applications which occurred before JobKeeper, and it doesn't seem to be a relevant consideration to the disposition of this proceeding, given that as I said, the economic impact occurs across the economy, and the application is properly made to protect jobs in areas of the economy which don't have the support of JobKeeper.


Having said that, the Minister supports the application because it appears, as did previous applications, to be reasonably directed towards the maintenance of employment and social inclusion, and the strength of the economy.  And therefore it appears on its face to be justifiable under the modern awards objective.


But in terms of how that objective is achieved, the Minister's position is that should remain primarily a matter between the industrial parties, who know best what is available and appropriate in their industries; and of course the Full Bench as the expert tribunal.  And although the Minister has of course observed there has been some ebb and flow in relation to the extent to which this application is supported, and one of the parties today opposes it in its totality, the Minister is content to support the application.


That support is not predicated on any particular outcome.  That ought to be left to the parties and to the Full Bench.  And the Minister doesn't want to be heard in relation to the matters which remain in contention between the parties.  Thank you, your Honour.


JUSTICE ROSS:  Thank you, Mr Williams.  Can I raise one issue.  You indicated that - and I understand what you say about getting too immersed in the detail between the parties, but one of the issues that I had raised earlier with Ai Group directly and the SDA indirectly was the connection between a COVID-19-related issue and the flexible part-time employment proposed term.  You've indicated the Minister's view that the changes are reasonably directed to the maintenance of employment.


But in relation to the current draft regarding flexible part-time employment, there's no such condition attached to that, such as that you can - or that the clause only operates in circumstances where its utilisation is directed at the maintenance of employment, or something of that nature.  And I was wondering what you would say to that.


MR WILLIAMS:  Your Honour, I don't have an instruction - substantive submission in relation to that point.  Perhaps I can make one observation only.




MR WILLIAMS:  And that is that in comity with earlier decisions, for example the hospitality award, which I - from recollection was the first one - I don't recall that there was an explicit requirement for a link between a COVID-related issue and the flexibilities which were available.  And the other point that I would make is that the part-time arrangements available under this application must in all circumstances, as I read it, be by consent.  And once again that was not necessarily a feature of some of the previous orders.


Apart from that, your Honour, I don't have an instruction to engage with the debate between the parties.


JUSTICE ROSS:  All right.  That's fine.  Thank you.  Ms Kelly.


MS KELLY:  Thank you, your Honour.  I might deal with this by responding to the submissions made by Mr Ferguson, and otherwise relying on the written outline that has been filed.


JUSTICE ROSS:  Certainly.


MS KELLY:  The first proposition put by Mr Ferguson was to disavow the proposition that my client has put, which is that one of the reasons that the Full Bench ought not to be satisfied to the requisite level that this change is necessary is because there has been a failure to establish the viability.


My client doesn't say that viability is the test.  The test is set out in the statute and is clear.  But this is directed to the question of fairness, and that is of course the touchstone under the modern awards objective, fairness and relevance.  The submission put is that in reaching a conclusion as to whether it is satisfied that the proposed variations are necessary, fairness has to be front of mind.


If these proposed variations are not directed towards ensuring the viability of businesses, then they are directed towards ensuring the maintenance of profits.  And looked at that way, they are proposed variations that require part-time and casual workers to potentially suffer a reduction in their terms and conditions of employment in order to maintain the profit of employers rather than to maintain employment or to maintain viability.


The reason that that point is put so strongly is reflective of what Mr Ferguson said about, in his words, the extremely difficult trading environment that businesses are facing.  He spoke (1) revenue and (2) of patterns of customer demand, and those two factors were, in his submission, what renders it necessary to make these amendments in order to maintain employment.


The difficulty with that submission is one that it was made strongly in the written submissions, and that is the lack of evidence linking the proposed variation to the revenue decline and the patterns of customer demand that are said to result in a change necessary to maintain employment.  There are two key points to be made there.


The first is in terms of the part-time clause, it is directed to part-time employees.  Those employees make up well less than 20 per cent of the workforce, performing well less than 20 per cent of all hours of work.  Employers in this industry therefore have access to a casual workforce of at least 80 per cent of their employees who provide full flexibility in terms of their existing award conditions.


What is not made clear, either on the evidence or on the submissions, why a small number of part-time employees ought to have the significant detriments that are attached to a casualisation of their working conditions in circumstances where employers in this industry already have access to a flexible workforce comprising roughly 80 per cent of the casual employees they currently employ.  That's point 1.


Point 2, when we start of the proposition about the split between part-time and casual employees in this industry, we then look at:  well, what was the evidence of the revenue decline and the patterns of customer demand that might allow the Full Bench to conclude that it is fair and relevant for the 15.5 per cent of part-time workers in this industry to bear the burden of reduced terms and conditions for these employers; what evidence was called that would permit that conclusion to be reached?  This point was made in the written submissions.


The only evidence called was evidence in relation to McDonald's.  But that material was not disaggregated in a way that permits the Commission to draw any conclusions at all about the revenue or the patterns of customer demand of the employers who would be eligible to access the proposed variation.  And that is because there has been a complete failure to break down the evidence of between McDonald's itself, a large and profitable organisation; and its franchise operators; between those of its franchise operators who are eligible for JobKeeper and those who are not eligible for JobKeeper.


And so the generalised data that has been presented to the Commission does not, in our submission, permit the Commission to conclude that it is fair to ask 15.5 per cent of a workforce to bear the burden of casualised terms and conditions of employment and a reduction in income where there is absolutely no evidence that asking them to do so is connected to genuinely maintaining the viability of a business, or assisting a business to maintain employment.


And the point that I need to emphasise there is there has been no explanation at all of why this burden should fall on the 15.5 per cent in circumstances where there is a workforce consisting of 80 per cent of employees who are fully flexible by reason of their casual status.


The second point also connected to the submissions of Mr Ferguson about the failure to establish viability is that this application must be seen in its proper context, and that context includes the earlier decision of this Full Bench in relation to whether or not to permit a variation of a very similar kind within the recent past.  That earlier decision found that clause of this kind would not meet the modern awards objective.


Of course my client accepts that there has been a change in circumstances, but in circumstances where there has been a very recent decision of the Full Bench that says clauses of this kind do not meet the modern awards objective, that underscores the need for there to be not generalised evidence of difficulties being faced in the industry, but specific evidence that links this particular change to the fairness - - -


JUSTICE ROSS:  I'm sorry, Ms Kelly, you just dropped out there for a moment.  I heard you accept there has been a change in circumstances, but you submitted that the recent decision underscored the need for - and I lost you momentarily after that.


MS KELLY:  Thereafter the point was the recent decision, given it found that clauses of this kind do not meet the modern awards objective, underscores the need for there to be a clear link between the evidence of the difficulties being faced in the industry and the clause.  That, in my client's submission, is what is absolutely lacking in this case.


There has not been in the written submissions of the AiG, nor in the oral address of Mr Ferguson, any cogent explanation for why these difficulties being faced require a small percentage of the employees to bear the burden of reduced terms and conditions of employment and reduced wages.  And that, in my submission, means that the Commission ultimately will not be able to reach the necessary standard satisfaction that the changes proposed are necessary.


Mr Ferguson then touched on the question of stores that have been closed, and he made a submission that if the present situation continues, then it is the case or might well be the case that those stores are not in fact viable.  Two things need to be said, or perhaps three things need to be said about that.


The first is that what is clear from the evidence is that only 40 now remain closed, and the trend is towards reopening those stores.  There is no evidence before the Commission that further stores are to be closed or are likely to be closed.  The present evidence only allows the Commission to conclude that the trend is towards reopening stores.


The second point that needs to be made is it is known that there are 40 stores that remain closed.  If these stores and the franchise operators - or potentially McDonald's itself taking them as the relevant example - are known, then it was a very simple thing for McDonald's or for the AiG or for somebody else supporting these changes to put on evidence about the situation at one or more of those stores and the situation for one or more of the franchise operators who operate those stores.


That might have disclosed any number of things.  It might have disclosed that the franchise operators in these particular situations are eligible for JobKeeper and so are not the cohort to whom these proposed variations are directed or it might have shown that they are ineligible for JobKeeper, but, by reason of the fact that they own one or more franchises, their overall viability and profit remains high.  That is the vice in the way in which the evidence has been put before the Commission.  There is no means of distilling the particular effect of the current situation on the cohort that it is said need these changes in order to prevent job losses.


Presumably if the Ai Group and its supporters formed the view that this variation was necessary, they did that having identified the class of franchise operator or employer who would seek to access the clause, assessing the circumstances of that group of employers and determining that the relevant necessity test was met.  If they did that task, then they ought to have been able to present the evidence of the circumstance of those employers to the Commission.


That is particularly important in circumstances where the Commission doesn't have power to make the change simply because it might assist the achievement of the modern awards objective; it must be necessary.  In the absence of the targeted evidence of the kind that I have just described, it is my client's submission that the relevant state of satisfaction simply can't be reached.


Hearing what your Honour had to say about the regulatory gap, there is not much I need to add to that save to comment on the language used by Mr Ferguson where he talked about employers who were slipping through the gap and should, therefore, have access to similar flexibilities.  The phrase "slipping through the gap" is no better, in my submission, than "regulatory gap".  There is no gap for the reasons outlined in the written submissions my client has filed.


There is a deliberate policy choice by the Commonwealth.  It does not meet the statutory test to simply say a policy choice by the Commonwealth results in a circumstance where one group of employees who meet the requisite threshold decline have access to a set of flexibilities, a group who don't meet that test do not have access to those flexibilities and therefore it is necessary to level the playing field, as it were.  The two things are, in my submission, wholly independent of each other.  It all comes back to whether or not the change is necessary in order to meet the modern awards objective.


In order to undertake that task, it's necessary to do, in my submission, a number of things.  It is to ask who is affected, how they are affected, the extent to which they are affected and then to balance those considerations against the effects on workers of the proposed variation.  It is precisely that task which we say the Commission cannot undertake by reason of the paucity of evidence that has been filed.  As I have just said, it is the case that the AiG has failed to call evidence of one single employer's data specific to that employer, not in the aggregated way that McDonald's has presented its data, who would in fact be eligible to utilise these provisions.


Allied to that point, Mr Ferguson made the point that employers cannot indefinitely carry employees for whom there is no useful work.  Bringing that back to the clause itself, the part‑time clause, we come back to a point I have made a number of times now which is we are dealing with 15.5 per cent of employers such as McDonald's.  The evidence of Mr Cullinan identifies that part‑time employees tend to be part of the core or sometimes called skeleton staffing of these stores and they tend to be rostered at the times when it is known that employers are likely to be busy, such as mornings.


That pattern of rostering is entirely consistent with the nature of part‑time work.  It has a degree of consistency and it has a degree of regularity.  It, therefore, in times of downturn is also the case, in my submission, that part‑time employees working those patterns of employment are likely to be one of a group least affected by downturn.  That is the purpose of employing casuals, to provide you with a flexible means of increasing and decreasing your workforce outside of busy hours or in periods that might become variable.


It is illogical to suggest that it is the part‑timers who are the employees who are most likely to be not needed or who an employer might indefinitely carry when there was no useful work for them to do.  The point really, in my client's submission, is that there are cheaper employees who could do that work, casual employees, but it wouldn't meet the test of fairness if that was the purpose for which the proposed variation was to be made.


Mr Ferguson then turned to deal with the question of consent.  My client maintains the submission it made that the consent provided for in the clause really is illusory.  We have to recall that 50 per cent of the employees in this industry are children and they are in the middle of what are at a national level quite extraordinary circumstances.  It doesn't require evidence for the Full Bench to conclude that it is likely that children faced with a request from their employer in the current prevailing environment are likely to feel some sense of pressure to change their working arrangements.


It is also likely, consistent with the findings of the Full Bench in the earlier matter to which I have referred, that all employees - including the 50 per cent who are children - are likely to feel pressure to provide wide availabilities in order to try and secure for themselves some of the reduced hours of work that are available.  Looked at in that context it doesn't require evidence to conclude that the consent really is illusory and it is likely to be the case that these employees are suffering significant levels of pressure to agree to the changes.


The protections that are in there in that context, in my client's submission, only add to the illusory nature of the consent.  An arbitration before the Fair Work Commission is a significant process that a young worker, unsupported, is highly unlikely to have the necessary skills to engage in or the necessary support structure to assist them to engage in it.  It's a potentially time‑consuming process.  It is a potentially stressful process and in circumstances where there is already a significantly elevated degree of stress among the community generally, it isn't, in my client's submission, a mechanism that is likely to mean that the consent is real.


Mr Ferguson then circled back to the question of closed stores in reference to a particular shutdown provision.  Forty stores remain closed.  There is no evidence of how many of those stores were closed in the last four weeks and would therefore have access to the clause as currently drafted.  There is certainly no evidence before the Commission about how long it might be before those stores are opening.  What we do know is that the evidence shows that there are steps being taken to reopen many of the stores that have closed.  That is the trend; the trend towards reopening stores, not closing stores.


In my client's submission, we have set out in our written submissions why my client says the question of stand‑down is adequately dealt with through the statutory mechanism, but it's important to observe that H.10 has the capacity to exacerbate the issues that my client has identified in relation to the part-time clause, because if you are an employee has been required to take unpaid leave, and that period of unpaid leave might extend for 12 weeks, you are an employee who is more likely to consent to altering your part-time employment arrangements in a manner consistent with the proposed part-time variation, and that further underscores that the notion of consent is illusionary.


It's also the case that casual employees who are not receiving hours because for example there is a close-out of their relevant store, are more likely to feel pressured to accept a minimum hours part-time contract which will have, as we've set out in the written submissions, all of the detriments and uncertainties of casual employment, but without any of the benefits of part-time employment, if that is the means by which the employee is likely to be able to secure hours of work.


And so it's important, in my client's submission, to observe that these clauses, read together, exacerbate the potential vulnerabilities of employees that we have identified.


I wanted to touch briefly, your Honour, on some of the other evidence that is before the Commission.  It is not only the evidence of McDonald's.  It has been set out in the submissions filed on behalf of my client that other major employers in the industry are pointing to in some cases record sales; in some cases to sales that, taken at a national level and accepting that there is some variability stop one store, that have returned to, and in some cases exceeded pre-COVID-19 levels.


And that is all consistent with the submission that if there was ever a time for these changes, and my clients that there was no such time, that the time has passed and the industry in the recovery position.  And absent the evidence that I've talked about that draws a clear link between the way in which these clauses would be used and the viability of employers, it would be unfair, and therefore contrary to the modern awards objective to ask the burden to fall on low-paid part-time employees.


I wanted to touch then on what Mr Ferguson had to say about the prospect that these amendments would aid enterprise bargaining, potentially promoting bargaining.  As I understood the submission, it was to the effect that in the middle of a pandemic where, on Mr Ferguson's client's case, employers are suffering severe downturns and need to cut costs in order to secure their existing employees, they would enter into enterprise bargaining because the effect of this clause would have been to reduce the BOOT.


That seem to be the submission, that employers would be more likely to bargain because the BOOT had been lowered.  In terms of employers who already have existing agreements, I understood the submission be that they might reopen the agreement; and as far as I can tell, the only purpose of doing so would be to attempt to lower further, in an ongoing way, the conditions of employees.  If that was the proposition that was put, then it is further evidence that these proposed variations will not further the modern awards objective.


That's all I think I need to say, your Honour, save to emphasise that my client does rely on the totality of the material that has been provided in the written submissions.


JUSTICE ROSS:  Thank you, Ms Kelly.  Anything in reply, Mr Ferguson?


MR FERGUSON:  Just three issues, your Honour.  The first is one of the latest submissions advanced by Ms Kelly, it relates to the operation of the close up down provision.  I just want to be very clear as to how that operates.  The fact that close-downs are already occurring wouldn't be a bar to an employer utilising this provision if it was inserted to the award.


The way the clause is structured is that employees can be requested to take annual leave, or ultimately potentially unpaid leave as part of a close-down.  It doesn't require that the close-down would have to commence after variation to the award.  And that's clear, we say, from the wording of H.10.1, and also the wording in H.10.5.


The next point relates to the submissions by Ms Kelly in relation to part-time employment.  And as I understood them, they were to the effect that it's unclear why this proportion, albeit a smaller proportion of the workforce and perhaps engage in other categories of employment, should bear the brunt of this variation; that there is nothing in the evidence or submissions that connects the circumstances of the industry, or there's nothing in the evidence justifies this form of variation.  Those two points seem to be principally put against us.


I just make this observation, that the evidence of Mr Newlands goes to some detail to explain why the circumstances of the industry make the current part-time employment provisions not fit for purpose, and how the proposed variation could be utilised to deal with the current circumstances.


And if I can describe it in this way:  the current provisions in the award require a high degree of specificity that surrounds the particular hours that a part-time employee must work.  It goes to specific starting and finishing time.  The evidence of Mr Newlands is that there has been a radical change in the level of customer demand.


As you work through the statement you will see the times that were busy before:  mornings, weekend, late nights on the Thursday are now quiet periods; times that were quiet are now busy.  And the problem is that people have entered into part-time arrangements that are now totally unaligned to what are hopefully the temporary circumstances that employers in this sector now face.


Which I think even accepting what was put by learned friend, that there was a pattern of part-time people being utilised at the busy periods at the time, where there was a stable demand for their labour.  The problem now is that there isn't demand for the labour because there have been such dramatic shifts, and that's partly why we say - and the evidence shows - a need some greater flexibility around this on a temporary basis is justified.


Things have changed, things are continuing to change, and I think it is reasonably foreseeable to say that things might evolve.  Indeed the parties are saying that things are improving.  We're not sure that it is clear that there is necessarily an imminent return to typical patterns, but we accept that things are fluid, and that's why we're putting in place an arrangement that will allow a degree of flexibility for a short period of time so that people could still be engaged on permanent employment, indeed guaranteed certain hours, but still used flexibly; hopefully offered more work as things to improve.  And certainly the evidence says that this would assist in encouraging people to offer people more work.


You only have to think about the circumstances of a large employer like McDonald's that, you know, will, as time progresses, be faced in all likelihood with the need to put on staff as people leave for whatever reason.  It's impossible to think how the current provisions could result in an employer sensibly making a decision to guarantee fixed hours to a part-time employee when things are in such a state of flux.


This just provides a mechanism for allowing an appropriate form of part-time employment for a short period of time.  And we say it is justified on the evidence when you look at it in totality, and on the views of Mr Newmans.


I think the third point I just wanted to respond to was the general criticisms about the lack of evidence in support of the claim.  I think what must be borne in mind is we've brought evidence from a senior manager of the largest employer in this sector, an employer who employs almost half of the employees in the sector; and we've brought evidence from a person was able to give the best evidence about the situation as a whole, he is able to speak to the circumstances of McOpCo organisations and franchisees.


That, in our respectful submission, gave the Commission a very useful and helpful picture of what the sector is facing.  We are obviously bringing this matter on as a matter of urgency, and there are limits in that context to how many franchisees would - "We could have bought one, we could have bought two", and they would have said, "We should have bought five."  We have tried to provide as much evidence as we can in that context.


The other point I will make is it is always difficult in these sorts of industry matters to bring evidence from employer witnesses in relation to these sorts of issues.  The Commission would know for itself that there has been a raft of media in relation to this - in our view a lot of it inaccurate - where employees come under scrutiny and criticism, perhaps unfairly.  It is always difficult in these sorts of controversial cases for employer witnesses to come forward.  Of course we have now seen today RAFFWU and other unions organising conveys in protest, attacking McDonald's stores.


In that sort of climate it is understandable that we have had a difficult time having more employers come forward, notwithstanding their support for the claim.  In any event, we say the evidence that has been advanced is more than sufficient to justify the variation, especially when complemented by what has been a very significant level of support for the variations from all the major registered industrial associations and the Minister; notwithstanding the evaporation of some of that support for one specific claim and for certain specific reasons as identified in the submissions.  Those the submissions unless there are any further questions.


JUSTICE ROSS:  No.  Is there anything that the SDA wishes to say?


MR FRIEND:  No, your Honour.


JUSTICE ROSS:  Thank you, Mr Friend.  Ms Ismail, anything from you?


MS ISMAIL:  No, thank you, your Honour.


JUSTICE ROSS:  Thank you.  Mr Williams?


MR WILLIAMS:  No reply from the Minister, thank you, your Honour.


JUSTICE ROSS:  All right.  If there is nothing further, we propose to adjourn and reserve our decision.  Can I thank each of you for your written and oral submissions.  We will adjourn.

ADJOURNED INDEFINITELY                                                           [4.07 PM]