Upcoming Mallesons seminarsIn a recent decision, the Full Court of the Federal Court of Australia (“the Full Federal Court”) overturned the earlier decision of Justice Wilcox in CPSU v Stellar Call Centres Pty Ltd (“Stellar”), which found that the establishment of a joint venture between Telstra and Excell Asia Pacific Pty Ltd amounted to a transmission of business for the purposes of the Workplace Relations Act 1996 (“the Act”).
Since the first decision in Stellar, the High Court of Australia considered the application of the transmission of business provisions of the Act in PP Consultants Pty Ltd v Finance Sector Union of Australia (“PP Consultants”).
The decision of the Full Federal Court in Stellar followed and applied the decision of the High Court in PP Consultants. In its decision, the High Court concluded that there was no transmission of business for the purposes of s.149(1) of the Act, so that PP Consultants was not bound by the Banking Industry - St George Bank Employees - Award 1995 in respect of employment by it of persons engaged in the provision of bank agency services to the St George Bank. In describing the approach to be taken to the application of s.149 of the Act, the High Court made the important point that it is not necessarily the case that “business” means or includes activities undertaken in the course of a business, although it did not seek to define the meaning of “business” or “part of the business” in positive terms.
The joint judgment of 4 (of 5) members of the Court went on to say: “The question whether one person has taken over or succeeded to the business or part of the business of another is a mixed question of fact and law. For this reason and, also, because “business” is a chameleon-like word, it is not possible to formulate any general test to ascertain whether, for the purposes of s.149(d) of the Act, one employer has succeeded to the business or part of the business of another.”
The process to determine if transmission has occurred Nonetheless, the joint judgment indicated that, in transactions between non-government employers in respect of commercial activities, the question of transmission: “... 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 that the new employer has succeeded to the business or part of the business of the previous employer.”
How was this test applied in PP Consultants?
In the particular factual context, the High Court held that although PP Consultants had taken over at least a large part of the activities in which St George Bank had previously engaged at its Byron Bay branch, PP Consultants had not thereby engaged, for itself, in the business of banking. Although PP Consultants was involved in banking activities, in conducting the branch agency it was not carrying on banking business. It was determined by the Court that it was carrying on the business of a bank agent. In addition,
St George had not disposed of any part of its business; rather, all that had happened was that it had changed the method by which it carried on its banking business in Byron Bay. The consequence was that no part of St George’s business had been acquired by PP Consultants. How was this test applied in Stellar? In Stellar, the Full Court of the Federal Court categorised the business of Telstra and Stellar, respectively, as follows: “Telstra is a corporation which conducts businesses in the telecommunications industry...that business can appropriately be characterised as providing telecommunication services to its customers”... “Stellar’s business is the provision of telephone answering services.”
Accordingly, the Court held that it could not be said that the business of Stellar was in substance identical in character to the business of Telstra. In relation to whether it could be said that Stellar had taken over part of Telstra’s business, the Court considered whether it could be said that the answering of telephone calls was a distinct part of Telstra’s business.
The Court held that the answering of telephone calls was an activity which facilitated the conduct of Telstra’s business but was not a distinct part of its business (which was the provision of telecommunication services). Therefore, it could not be said that the business or part of the business of Telstra had been transmitted to Stellar. In this regard the Court said: “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 section 149(1) unless that 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.”
Implications for Employers
This decision indicates a much more robust approach by the Federal Court to the issue of transmission of business and provides an example of the way in which the “three step” test of transmission set out by the High Court in PP Consultants is to be applied. This will assist employers greatly when considering whether a particular transaction gives rise to an issue in relation to transmission of business. However, neither the High Court nor the Full Federal Court has given any guidance as to how to determine what constitutes a “business” or a “part” of a business, or the test to be applied to determine whether an activity is a distinct part of an employer’s business or is merely an activity which facilitates the conduct of that business. No doubt, these matters will be the subject of further consideration by the Court.
For further information please contact
Janine Young
Solicitor
T +61 3 9643 4313
janine.young@mallesons.com