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Perspective

Too clever by half employer loses it all in front of FWC

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In the recent case of Sphere Healthcare Pty Limited T/A Sphere Healthcare Pty Ltd [2021] FWC 2507 (5 May 2021), an employer has had its application to terminate its enterprise agreement struck down after the FWC found it should have given 140 recently redundant employees an opportunity to vote.

Sphere had applied to the FWC to terminate its existing enterprise agreement after a series of unfortunate events. After restructuring its business at the onset of the COVID-19 pandemic (15 employees made redundant), disaster struck Sphere when its factory burned down in a catastrophic fire.

Seeing no alternative, a decision was made to make the remaining entirety of the workforce (some 140 employees) redundant, and the redundancies were implemented over 2 months finishing in September 2020.

Before finalising the redundancies, Sphere re-engaged 5 former employees on fixed term contracts to perform decommissioning work in the burnt down factory. In October 2020, Sphere approached the 5 employees and put them on notice it was seeking to terminate the enterprise agreement.

Sphere complied with its obligations under the Act, notifying the employees of the time and date for the vote and providing the employees with information about the impact the termination would have on them. In doing so, it promised the 5 employees it would continue to provide them with any of the EA terms more beneficial than the Award if they voted to terminate.

The 5 employees voted unanimously to approve, and Sphere applied to the FWC, but the Union disputed the application, arguing there was a chance Sphere could recommence operations at the site.

In resisting this argument, Sphere noted it had no plans to recommence operations at this stage but conceded to the FWC it would re-engage the recently redundant employees if it were to recommence operations.

This concession proved fatal to the application. In dismissing the application, Deputy President Cross determined, as a result of the concession, the 140 redundant employees were “usually employed” by Sphere (despite not currently being employed by Sphere) and, therefore, national system employees of Sphere who had a right to vote on the termination of the enterprise agreement. By not informing them of the vote, Sphere had failed to meet its obligations under the Act and the application was dismissed.

Lessons for employers

  • Employers need to be careful to not be too cute when seeking to terminate enterprise agreements – proximity of vote to significant redundancies was real undoing of application here
  • Need to factor in risks of complexity when determining commercial justification of terminating an enterprise agreement early – here, the enterprise agreement was due to reach its nominal expiry date in April 2021 and significant time, effort and cost could have been saved by Sphere being more patient

Written by Mathew Reiman

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