CPSU, Community & Public Sector Union v Stellar Call Centres Pty Ltd [1999] FCA 1224

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW – Application of awards and certified agreements – Transmission provisions of Act – Outsourcing of employer’s activities – Respondent operating a customer call back centre pursuant to contract with Telstra – Centre identical to those operated by Telstra – Whether respondent bound by Telstra awards and certified agreements – Test for determining whether respondent is “successor, assignee or transmittee” of part of Telstra’s business – Whether it is necessary that the transmitted part of the business be a free standing commercially viable business.

North Western Health Care Network v Health Services Union of Australia [1999] FCA applied

Workplace Relations Act 1996, ss149(1)(d), 170MB(1), 285C, 285E and 356

CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION, CLAIRE MOORE, DAVID LETIZIA and STEPHEN JONES v STELLAR CALL CENTRES PTY LIMITED

N241 of 1999

COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING & ALLIED SERVICES UNION OF AUSTRALIA

v STELLAR CALL CENTRES PTY LIMITED

N676 of 1999

WILCOX J

SYDNEY

3 SEPTEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N241 of 1999

BETWEEN:

CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION

First Applicant

CLAIRE MOORE

Second Applicant

DAVID LETIZIA

Third Applicant

and

STEPHEN JONES

Fourth Applicant

AND:

STELLAR CALL CENTRES PTY LIMITED

Respondent

JUDGE:	WILCOX J
DATE:	3 SEPTEMBER 1999
PLACE:	SYDNEY

THE COURT ORDERS THAT:

1. It be declared that, in relation to employees of the respondent, Stellar Call Centres Pty Limited, engaged on work required to be done by the respondent in the performance of any contract substantially to the effect of the draft contract which is exhibit SM15 herein:

(a) the following awards apply:

(i) Telstra/CPSU Consolidated Award 1996 [Print N7759]; and

(ii) Telstra Corporation General Conditions of Service Award 1996 [Print Q2734]; and

(b) the following certified agreements apply:

(i) Telstra Corporation 1995-97 Enterprise Agreement;

(ii) Australian and Overseas Telecommunications Corporation Redundancy Agreement 1993; and

(ii) Telstra Customer Service Representative Competancy Board Training and Pay Structure Agreement 1996.

2. The respondent by itself its servants or agents, refrain from contravening s285E of the Workplace Relations Act 1996 by refusing or unduly delaying entry to the premises of the respondent at Robina Centre by officers and employees of the Community and Public Sector Union entitled to enter those premises under s285C of the said Act.

3. Within 28 days the respondent pay a penalty of $2,000.

4. Under s356 of the Act, one half the amount of the penalty be paid to the Community and Public Sector Union.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N676 of 1999

BETWEEN:

COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING & ALLIED SERVICES UNION OF AUSTRALIA

Applicant

AND:

STELLAR CALL CENTRES

Respondent

JUDGE:	WILCOX J
DATE:	3 SEPTEMBER 1999
PLACE:	SYDNEY

THE COURT ORDERS THAT:

(a) the following awards apply:

(i) Telstra/Corporation General Conditions of Employment Award 1998 [Print Q9145]; and

(ii) AOTC/APTU Award 1993; and

(i) Telstra Corporation 1995-97 Enterprise Agreement;

(ii) Australian and Overseas Telecommunications Corporation Redundancy Agreement 1993; and

(iii) Telstra Customer Service Representative Competancy Board Training and Pay Structure Agreement 1996.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N241 of 1999

BETWEEN:	CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION First Applicant CLAIRE MOORE Second Applicant DAVID LETIZIA Third Applicant And STEPHEN JONES Fourth Applicant
AND:	STELLAR CALL CENTRES PTY LIMITED Respondent
	N676 of 1999
BETWEEN:	COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING & ALLIED SERVICES UNION OF AUSTRALIA Applicant
AND:	STELLAR CALL CENTRES Respondent
JUDGE:	WILCOX J
DATE:	3 SEPTEMBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 WILCOX J: Two applications, heard together, raise a single question that is important to the parties and may have ramifications for others as well: whether awards and certified agreements binding Telstra Corporation Limited (“Telstra”) in respect of its employees who take customer calls at Telstra-operated call centres apply to the respondent, a company contracted to operate a call centre at which its employees also take Telstra customer calls. The answer to the question depends upon whether it may properly be said that the company that contracted to operate the “outsourced” call centre is a “successor, assignee or transmittee” of part of Telstra’s business within the meaning of s149(1)(d) and/or s170MB(1) of the Workplace Relations Act 1996.

The facts

2 The respondent, Stellar Call Centres Pty Limited (“Stellar”), was incorporated on 13 May 1998 as a joint venture between Telstra and Excell Asia Pacific Pty Ltd (“Excell”), a subsidiary of Excell Global Services LLC, (“Excell Global”), a company based in the United States of America. Excell Global is experienced in the provision of telemarketing and customer services.

3 Telstra and Excell each own half the shares in Stellar and appoint half its directors. The chairmanship of the company rotates between their nominees. Each owner has rights in relation to the appointment of senior executives. A seconded Telstra employee, Stephen John Morphett, currently serves as the first Chief Executive Officer of Stellar. He deposed that Stellar’s object “is to provide call centre services and solutions primarily targeting the financial, travel, government, telecommunications, technical support and utilities industries in Australia and such other countries in the Asia Pacific region as the joint venture partners may agree upon.”

4 Mr Morphett went on to describe Stellar’s business as being “to assist organisations to improve their interface with their customers through call centre solutions”. He said the company “provides a range of services, including call centre outsourcing, staffing and management, consulting and training”. He made the point that there are a number of other call centre providers who provide call centre services to clients. He said the “purpose of establishing Stellar was to compete with these call centre providers for Telstra and non-Telstra work”. He went on:

“Telstra has the most intensive call centre business in Australia, in the sense that it employs the most people in call centres. It is therefore to be expected that a component of Stellar’s business will involve outsourced Telstra work, in the same way that other call centre providers such as Teletech performs outsourced Telstra work. However, securing non-Telstra business in the telecommunications industry and in other industries is a specific objective, and this is evident from Stellar’s business plans.”

Mr Morphett exhibited to his affidavit the Stellar 1999/00-2001/02 business plan.

5 Both in his affidavit and oral evidence Mr Morphett gave examples of non-Telstra contracts, primarily for short-term telemarketing services. So far, Stellar’s most significant contract is the contract that gives rise to these proceedings. It is a contract with Telstra for the provision of a call back centre at Robina on the Queensland Gold Coast.

6 Telstra maintains, nationwide, a dedicated telephone number, 132200, to deal with customer inquiries regarding billings and the availability and connection of services and new products; apparently everything but service difficulties. Until the end of 1998 all calls to this number were taken by Telstra employees located at Telstra-operated centres. According to one exhibit, in 1998 Telstra was employing some 12,000 people at 100 such centres.

7 In October 1998 Telstra published a document that it styled “Telemarketing Service Supplier – Campaign Brief Regional Overflow”. In the course of the hearing of this case, Mr J N West QC, who appeared with Mr G J Hatcher for Stellar, described this document as an “Invitation to Tender”. I think that is a fair description. The document explained in some detail Telstra’s difficulty in coping with 132200 calls at busy times. The document set out these “Campaign Objectives”:

“Initially to provide accurate and timely assistance to Customers with consumer sales enquiries during periods of high call traffic flow. This is to be undertaken within Telstra’s policy and Guidelines for handling Consumer calls whilst providing excellent Customer Service.

The long term intention of the campaign is to utilise the site to benchmark ‘operational practice’. A twelve month contract may be established with possibly a twelve month renewal. Reviews of the campaign every three months will be expected to assess and improve operations and productivity.”

Standards were set out. The document identified the relevant “Target Area” by saying “Customers will originate from all over Australia - National”. The section of the document headed “Systems Requirements” listed six Telstra systems to which the service supplier would need access. Information was given about those systems.

8 Stellar was one of two companies that submitted a proposal in response to Telstra’s Campaign Brief. Its document identified the following “key elements” of its proposal:

“1. Deliver a full outsourcing solution for regional overflow of 132200 call traffic for the period 14 December 1998 to 14 February 1998 [sic: 1999];

2. Provide a price per contact quotation, based on Average Handling Time and Call Volume;

3. Present, for Telstra consideration, some logistical considerations, which Stellar believes may provide further benefit to the outsourced operation.”

The document also said:

“We have been led to expect that Telstra intends to award a twelve month contract (renewable) and that the proposed new centre would be used for benchmarking purposes beyond February 1998. [sic: 1999]”

9 The document then detailed “the key benefits associated with using Stellar for the Telstra campaign”. These included the location of the call centre “in regional Australia rather than capital cities”, thus achieving cost savings in relation to both salaries and rent. The claimed benefits also included “Transmission of Business”, in respect of which the document said:

“Stellar has available to it senior personnel who have successful overseas experience in handling the industrial relations, legal and people issues surrounding the ‘Transmission of Business’ that may occur when outsourcing components of an organisation’s business.”

In a later part of the document, dealing with pricing, Stellar said:

“Stellar would support the Telstra call centre operation on an outsourced basis, at the targeted performance levels, handling times and call volumes in year one for $[omitted] per inbound call.”

However, the stated price was subject to adjustment, in either direction, by reference to two variables: Average Handling Time (“AHT”) and Call Volume.

10 A section of the Stellar document was devoted to the supply of information about the company and its key staff. This section stated the “Stellar Vision” as being: “To be recognised, throughout our chosen market segments, as the best value partner for call centre outsourcing.”

11 In mid-November 1998 Mr Morphett was informed by Telstra’s Managing Director of Consumer and Commercial Sales, Andrew Day, that Stellar was the successful tenderer. It appears Stellar immediately commenced to recruit and train staff, using for that purpose premises at Bundall, on the Gold Coast, that had previously been used by Telstra for training purposes. On 14 December 1998 Stellar commenced taking customer calls, still at Bundall; but from 21 December this was done in new Stellar-owned premises at Robina that provide 150 work spaces for personnel taking customer calls.

12 Stellar commenced to provide call centre services pursuant to a memorandum of understanding with Telstra. Negotiations for a detailed agreement, covering a multitude of matters, were commenced in late 1998 and a draft document was created. The draft went through a number of mutations and only reached what was understood to be its final form during the hearing of these proceedings in July 1999. When the hearing concluded, it had not yet been executed.

13 A draft agreement was admitted into evidence in this case. I was informed by counsel for Stellar that some variations to this draft had subsequently been agreed. Those variations affect the amount of Stellar’s remuneration, but not the principle upon which that will be calculated. That principle is the one mentioned in Stellar’s proposal document: an amount per inward call that is adjusted upwards or downwards in accordance with a table setting out the AHT, stated in seconds, and volume of calls received at the call centre. Counsel indicated the other amendments to this draft do not affect any of the provisions referred to in the course of the hearing, some of which I will mention.

14 The agreement is to operate for 36 months from the “Start Date”, identified as 14 December 1998, but subject to Telstra’s right to extend for a further 12 months by giving notice to that effect to Stellar at least three months before the end of the term. Under the heading “Duties”, the draft provides:

“2.1 You must provide the Services specified in Schedule 1 according to the terms of this agreement.

2.2 We must, during the Term:

(a) pay you in accordance with Schedule 2; and

(b) provide you with such training, manuals and other information (including forecasts and performance reports) as we determine are necessary to assist you to perform your obligations under this agreement; and

15 Schedule 1 refers separately to “Call Centre Services” and “Benchmarking Services”. In relation to the first subject, it reads:

“2.1 You must operate a call centre (‘Your Call Centre’) at Level 5, Library Complex, Robina Town Centre, Robina, Queensland, at all times from 7.30am until 6.00pm every day from Monday until Friday (inclusive) each week during the Term. Your Call Centre must provide to us and our customers all of the call management services of a Telstra Sales Centre (‘Call Centre Services’).

2.2 You must operate Your Call Centre in accordance with our policies and procedures as advised in writing from time to time.

2.3 You must ensure that Your Call Centre appears from a Customer’s perspective, to have the ‘look and feel’ of a Telstra Sales Centre. Your Call Centre must function in effect as a ‘seamless’ part of our Sales Centre services.

2.4 The call groups operating within Your Call Centre must be aligned with our operational service strategy, according to our instructions from time to time.

2.5 We will:

(a) endeavour to provide you, at the beginning of each month, with an indication of the number of calls which we expect to be able to forward to you during that month; and

(b) advise you of the number of calls which we expect to forward to you to handle, on each particular Working Day of each particular week (‘Estimated Daily Call Volume’) during each preceding week.

For example, we will advise you of the Estimated Daily Call Volumes for each day from Monday 12 January until Friday 16 January 2000, during the week commencing Monday 5 January 2000.

2.6 Your Call Centre must handle a minimum of 5% less than the Estimated Daily Call Volume every Working Day (‘Required Daily Call Volume’). Failure to meet the Required Daily Call Volume on any particular day will constitute a material breach of this agreement.

2.7 For the purposes of this paragraph 2, to ‘handle’ a call means to receive a call, deal with the customer’s query or matter, end the call, and input the data resulting from that call.”

16 The material regarding Benchmarking Services is as follows:

“3.1 You acknowledge that:

(a) you will use your best endeavours and access to international resources, best practice processes and skills to provide an efficient and effective service for us at all times; and

(b) in assessing your performance under this agreement, we are entitled to rely on an expectation that you will apply those best practice processes.

3.2 You must work with us in benchmarking and in performing studies to determine and develop more efficient practices and processes which provide best practice for our call centre operations (this work to be known as ‘Benchmarking Services’).

3.3 You must, at all times when we ask:

(a) give us full access to:

(i) Your Call Centre site and staff; and

(ii) your data concerning the operation of Your Call Centre; and

(iii) your work instructions and other documents concerning the operation of Your Call Centre; and”

(b) allow us (unless you are prevented from doing so by any pre-existing legal obligation to a third party) to make copies of your documents concerning the operation of Your Call Centre; and

concerning the Benchmarking Services, benchmarking or best practice issues.

3.4 In exercising our rights under the preceding paragraph, we must use our best efforts not to impede your ability to carry on your business activities substantially as normal.

3.5 You must:

(a) give us monthly reports, to be delivered to us by the 7^th Working Day of each month; and

(b) attend and report at each of our monthly operations team meetings,

concerning initiatives being undertaken for improved methods in any aspects of the Services.”

17 Schedule 1 goes on to detail Stellar’s duties. Those provisions require Stellar to “provide a level of service equal to or superior to that provided by our Sales Centres”, to comply with Telstra’s Code of Conduct and Privacy Protection Policies, to attend meetings and training sessions as required, to keep records and provide reports, and to use any facilities or equipment provided by Telstra “only for the purpose of providing the Services”. Stellar is required to ensure that the infrastructure at its call centre used for Telstra services “is physically and electronically isolated from any infrastructure used for the purposes of providing services to anyone other than us”. Telstra is to have full and free access to Stellar’s call centres at any time. Stellar is to comply with Telstra’s systems requirements as set out in Schedule 4 to the agreement. Stellar (and, presumably, each of its employees) is to identify itself “only in the manner specified by us from time to time” and to “adjust the hours and days of your Working Days in accordance with our instructions from time to time”. Stellar is to maintain a workforce from the Start Date to 30 June 1999 of “150 Full Time Equivalent Consultants”. After 1 July 1999, the number drops to 130, but subject to Telstra’s directions from time to time.

18 Schedule 4 provides for Stellar to have access to those Telstra systems that are necessary for it to perform its services. The Schedule also refers to Telstra hardware that has been supplied to Stellar. Rules are stated in relation to both Stellar’s use of its right of access and the hardware.

19 It seems the Stellar call centre has operated in the way envisaged by the documents to which I have referred. Mr Morphett explained in his affidavit:

“Modern call centre technology means that the precise location of the performance of the work is often irrelevant, as it is in the performance of the Overflow Contract, which operates in the following way. Telephone calls are networked nationally, so that each call finds the next available operator, wherever that operator is located. In other words the whole national network operates as a virtual single centre.”

20 As I understand the position, the Stellar centre at Robina operates as part of that “virtual single centre”. Robina only handles overflow calls in respect of phone connection and product inquiries but, with that limitation, it is a matter of chance whether a particular customer who dials 132200 is answered by a Stellar employee at Robina or by a Telstra employee at any one of its call centres. The intent of Telstra and Stellar is that the customer is to be unaffected by the circumstance that he or she is dealt with by a Stellar employee rather than a Telstra employee. The customer is not to be apprised of that fact and the same services and information are to be available to him or her. In the words of cl 2.1 of Schedule 1 of the agreement, the Robina call centre functions “in effect as a ‘seamless’ part of (Telstra’s) Sales Centre services.”

21 John Zisis, the Corporate Operations Manager of Stellar, deposed that Stellar owns most of the equipment used at Robina. Telstra owns the computing equipment necessary for Stellar’s computing system to connect with Telstra, but this is operated and maintained by Telstra’s own employees. Mr Zisis said:

“Telstra gives Stellar a daily schedule which specifies, in half hour blocks, the number of customer service agents who must be logged on to the Telstra system at any given time. This is referred to as the number of ‘requireds’. Stellar must meet the level of requireds, however, the way Stellar organises its operation to adhere to the level of requireds is for Stellar to determine. For example, the number of customer service managers Stellar uses to supervise the work of the customer service agents is wholly within Stellar’s discretion. Further, there is no requirement that Stellar adopt the Telstra model of managing customer service agents.”

22 Mr Morphett deposed that there was never, and is not, any agreement that Stellar would offer employment to current or former employees of Telstra at Bundall. Nor did Stellar give preference to those people. According to Rosemary Crothers, Stellar’s Human Resources Manager, 181 agents and 11 managers were recruited for Robina. Selection for both positions was on the basis of face to face interviews with testing for relevant skills and aptitudes. Ms Crothers deposed:

“In recruiting employees for positions at Stellar’s Robina call centre, I focussed on the key skills and competencies indicated for each job as set out in the interview guide that was used …

The key competencies that were used were based on Customer Service experience, rather than particular experience in call centres. As a result, the employees at Robina come from a wide variety of backgrounds. There were also a number of employees who were unemployed at the time they applied to Stellar.”

23 Ms Crothers analysed the employment history of the 192 recruits. She said:

“(b) Of the 181 agents employed at Robina, 8 came directly from employment by Telstra, 99 came from other employers and 74 were previously unemployed.

(c) of the 11 managers employed by Stellar at Robina, only 1 person had worked with Telstra at some time prior to commencing with Stellar.”

24 On 12 March 1999 David Letizia, an industrial organiser employed by the Queensland branch of CPSU, The Community and Public Sector Union (“CPSU”) wrote to Mr Zisis indicating his intention to enter Stellar’s Robina premises pursuant to s285C of the Workplace Relations Act. That section provides:

“(1) A person who holds a permit in force under this Division may enter premises at which:

(a) work is being carried out to which an award applies that is binding on the organisation of which the person holding the permit is an officer or employee; and

(b) employees who are members, or eligible to become members, of that organisation work;

for the purposes of holding discussions with any of those employees who wish to participate in those discussions.

(2) The person may only enter the premises during working hours and may only hold the discussions during the employees’ meal-time or other breaks.”

25 Mr Zisis responded by challenging Mr Letizia’s right to enter the premises. On 16 March Mr Letizia, and another organiser Claire Moore, went to Robina and sought entry. Mr Zisis refused entry. There was a conversation, the details of which are in dispute; but they are immaterial. It is sufficient to say Mr Zisis made clear to Mr Letizia and Ms Moore that he did not think the Telstra awards and certified agreements bound Stellar, or that CPSU had coverage of any of its employees.

The proceedings

26 On 29 March 1999 CPSU, Ms Moore, Mr Letizia and Stephen Jones, CPSU’s National Telecommunications Secretary (“the CPSU applicants”), commenced a proceeding in this Court by filing an Application seeking declaratory and injunctive relief and the imposition of a penalty. The form of the orders sought by the applicants was subsequently amended on two occasions, most recently to read as follows:

“1. A declaration that, in relation to employees of the Respondent engaged on work required to be done by the Respondent in the performance of a contract or contracts between Telstra Corporation Ltd (‘Telstra’) and the Respondent by which the Respondent is to operate a Call Centre at Robina which provides call management services of a Telstra Call Centre, the following awards apply:

(i) Telstra/CPSU Consolidated Award 1996 [Print N7759]

(ii) Telstra Corporation General Conditions of Service Award 1996 [Print Q2734]

2. A declaration that, in relation to employees of the Respondent engaged on work required to be done by the Respondent in the performance of a contract or contracts between Telstra Corporation Ltd (“Telstra”) and the Respondent by which the Respondent is to operate a Call Centre at Robina which provides call management services of a Telstra Call Centre, the following certified agreements apply:

(i) Telstra Corporation 1995 – 97 Enterprise Agreement

(ii) Australian and Overseas Telecommunications Corporation Redundancy Agreement 1993

(iii) Telstra Customer Service representative Competency Based Training and Pay Structure Agreement 1996.

And orders that:

3. The Respondent by itself, its servants or agents, refrain from contravening or cease contravening Section 285E of the Workplace Relations Act 1996 (‘the Act’) by refusing or unduly delaying entry to the premises at the Robina Centre by officers of and employees of the Community and Public Sector Union (‘CPSU’) entitled to enter those premises under section 285C of the Act.

4. A penalty be imposed on the Respondent.

5. Under Section 356 of the Act the penalty be paid to the First Applicant.”

27 It is agreed between the applicants and Stellar that the awards and agreements referred to in these draft orders currently bind Telstra in respect of the persons it employs at its customer call centres. It is also agreed that, as at 16 March 1999, at least one of the persons employed by Stellar at Robina was a member of CPSU, but without prejudice to a contention by Stellar that persons employed by it fall outside the eligibility criteria in CPSU’s rules.

28 Shortly before the projected hearing day another union, Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (“CEPU”), gave notice to the parties of its intention to apply for leave to intervene. When the matter was called, Mr R Reitano of counsel sought leave. He stated his client wished, not only to support the contention of CPSU that the operations conducted by Stellar fell within s149(1)(d) and s170MB(1) of the Workplace Relations Act, but to obtain an order as to its own rights. I said I thought it inappropriate to grant orders in favour of an intervener, but I would be disposed to allow CEPU to file a separate Application and, subject to the views of the other parties, hear it simultaneously with the CPSU Application. Mr Reitano agreed to take that course and, there being no objection, his Application was heard along with that of CPSU.

29 The CEPU Application seeks the following relief:

“1. A declaration that in relation to employees of Stellar Call Centres Pty Ltd engaged on work required to be done by Stellar Call Centres Pty Ltd in the performance of a contract or contracts between Telstra and Stellar Call Centres Pty Ltd by which Stellar Call Centres Pty Ltd is to operate a call centre at Robina which provides call management services of a call centre, the following awards of the Australian Industrial Relations Commission (“Commission”) are binding upon Stellar Call Centres Pty Ltd:

(i) Telstra Corporation General Conditions of Service Award 1996 [Print Q2734](now known as the Telstra Corporation General Conditions of Employment Award 1998 – Print Q9145)

(ii) AOTC/APTU Award 1993.

2. A declaration that in relation to employees of Stellar Call Centres Pty Ltd engaged on work required to be done by Stellar Call Centres Pty Ltd in the performance of a contract or contracts between Telstra and Stellar Call Centres Pty Ltd by which Stellar Call Centres Pty Ltd is to operate a call centre at Robina which provides call management service of a call centre, the following Certified Agreements of the Commission are binding upon Stellar Call Centres Pty Ltd:

(i) Telstra Corporation 1995-97 Enterprise Agreement

(ii) Australian and Overseas Telecommunications Corporation Redundancy Agreement 1993

(iii) Telstra Customer Service Representative Competency Based Training and Pay Structure Agreement 1996.”

30 Once again, it is agreed that the awards and agreements mentioned in the draft orders bind Telstra in respect of its call centre employees.

The statutory provisions

31 The applicants base their contention that the Telstra awards bind Stellar on s149(1)(d) of the Workplace Relations Act 1996. Section 149 appears in Part VI of the Act, dealing with awards of the Australian Industrial Relations Commission. Subsection (1) provides:

“149(1) Subject to any order of the Commission, an award determining an industrial dispute is binding on:

(a) all parties to the industrial dispute who appeared or were represented before the Commission

(b) all parties to the industrial dispute who were summoned or notified (either personally or as prescribed) to appear as parties to the industrial dispute (whether or not they appeared);

(c) all parties who, having been notified (either personally or as prescribed) of the industrial dispute and of the fact that they were alleged to be parties to the industrial dispute, did not, within the time prescribed, satisfy the Commission that they were not parties to the industrial dispute;

(d) any successor, assignee or transmittee (whether immediate or not) to or of the business or part of the business of an employer who was a party to the industrial dispute, including a corporation that has acquired or taken over the business or part of the business of the employer;

(e) all organisations and persons on whom the award is binding as a common rule; and

(f) all members of organisations bound by the award.” [Emphasis added.]

32 In relation to the certified agreements, the applicants rely on s170MB of the Workplace Relations Act. That section reads:

“170MB

(1) If:

(a) an employer is bound by a certified agreement; and

(b) at a later time:

(i) if the application for certification of the agreement stated that it was made under Division 2 – a new employer that is a constitutional corporation or the Commonwealth; or

(ii) if the application stated that it was made under Division 3 – a new employer;

becomes the successor, transmittee or assignee (whether immediate or not) of the whole or a part of the business concerned, then, from the later time:

(c) the new employer is bound by the certified agreement, to the extent that it relates to the whole or the part of the business; and

(d) the previous employer ceases to be bound by the certified agreement, to the extent that it relates to the whole or the part of the business; and

(e) a reference in this Part to the employer includes a reference to the new employer, and ceases to refer to the previous employer, to the extent that the context relates to the whole or the part of the business.

(2) Subsection (1) does not affect the rights and obligations of the previous employer that arose before the later time.”

33 It will be noted both s149(1)(d) and s170MB(1) employ the formula “successor, assignee or transmittee” and both refer to the business or a part of the business. It is not suggested by any party to the present case that there is any practical difference between the wording of the two provisions. The parties agree that the present claims must succeed in respect of both the awards and certified agreements or fail in respect of both.

Contentions of counsel for the applicants

34 Counsel for the CSPU applicants argue that Stellar is a “successor, assignee or transmittee” of part of Telstra’s business. They identify that part as “part of the operation of customer call centres”. Counsel submit the paragraphs in s149(1) of the Act are remedial legislation and ought to be construed liberally. In support of that submission they cite a line of cases commencing with the decision of the High Court of Australia in George Hudson Limited v The Australian Timber Workers’ Union (1923) 32 CLR 413 and concluding with the recent decision of a Full Court of this Court in North Western Health Care Network v Health Services Union of Australia [1999] FCA 897. Counsel say:

“The provision is remedial in two material ways. It protects employees whose award conditions may be undermined by a transmission of business to an employer not bound. And it protects the public generally from the inimical consequences of industrial disputation that might be caused by such a transmission.”

The latter proposition harks back to statements in George Hudson by Isaacs J at 435-436, by Higgins J at 452 and by Starke J at 453-454.

35 In North Western Health Care Network R D Nicholson J took up this idea. At para 28 he said:

“The purpose of s 149 as appears from its terms is to extend the binding nature of awards beyond the parties who appeared or were represented before the Commission in relation to the industrial dispute. The policy objective of this provision is to make the power to settle industrial disputes effective by extending the instrument of settlement to ‘the ever changing body of persons within the area of such disturbances’: … It does not therefore seem to be to the point that ‘outsourcing’ or ‘mainstreaming’ may not have been in contemplation at the time the section was enacted.”

36 In the same case at para 97, Madgwick J said:

“Finally, I would say that, although it has been convenient to segregate arguments and questions about ‘business’, the successor terminology and (to a lesser but still appreciable extent) what is necessary to constitute an overriding order of the Commission, they are in truth but aspects of a single, overriding conception. That is that settlements by award-making, aimed at quelling present industrial disputes and the prevention of future disputes, should be kept effective, pending conscious variation or replacement of the award, regardless of mere changes in arrangements as to which legal entity might be the employer of an unchanged industrial class of employees, regardless of such matters as whether the original employer had other classes of employees as well and may have remained their employer, and regardless of whether the legal ownership of all of the plant and equipment used by the employees for their work and the other resources of the employer utilised in the undertaking should have likewise changed.”

37 In relation to the term “business or part of the business”, counsel for the CPSU applicants cite the comment of R D Nicholson J in North Western Health Care Network (para 41) that these words take their colour “from the activity in which the employer was involved and in relation to which the industrial dispute arose”. R D Nicholson J thought this approach was supported by the High Court decision in Re Australian Industrial Relations Commission; ex parte Australian Transport Officers Federation (1990) 171 CLR 216 (“ATOF”). In that case the High Court had to construe a union eligibility rule that referred to persons employed by (amongst others) the Commissioner for Motor Transport or “a successor or assignee or transmittee of the business of any of the foregoing”. The Court held that, in determining whether the Roads and Traffic Authority was a successor, assignee or transmittee of the business of the Commissioner, it was appropriate to determine whether there was a “substantial identity” between “the nature of the business as it was formerly carried on and the nature of the business now carried on by the new entity with a view to ascertaining an identity between the two”.

38 Counsel for the CPSU applicants also cite R D Nicholson J in respect of the question whether it is necessary to show a legal form of succession. At para 29, his Honour pointed out that, “[s]trictly speaking there cannot be a succession, assignment or transmission” of a business or part of a business. He said:

“For something to occur to that effect it is necessary that it occur in relation to the component parts of the business such as the leasehold or other realty interests; the plant and equipment; or the goodwill. In my view this points to the language in the paragraph being used broadly, not strictly:”

39 R D Nicholson J took that view to its logical conclusion in para 64:

“Once it is accepted that the reference to ‘the business’ in s149(1)(d) has the wide reference which the primary judge found, it is not necessary to search for some legal form of succession, assignment, transfer, corporate acquisition or takeover. What is necessary is to determine as a question of fact whether ‘the business’ understood in the wide sense so found has been transmitted to other hands. That does not require a search for some legal mechanism as a nexus between the pre and post transmission stage.”

40 Consistently with this approach, R D Nicholson J said in para 41:

“There is no reason why ‘outsourcing’ or ‘mainstreaming’ from government to private enterprise should attract a different application of the section itself.”

41 Turning to the facts of the case, counsel for the CPSU applicants submit that the “substantial identity” test is clearly satisfied; Stellar’s call centre employees are doing exactly the same work as that which was performed at Telstra call centres before the “outsourcing” agreement, and is still performed by Telstra employees at all the call centres conducted by Telstra.

42 Counsel for CEPU adopts the submissions made on behalf of the CPSU applicants.

Contentions of counsel for the respondents

43 Counsel for Stellar argue the effect of their opponents’ submissions is to read out of s149(1)(d) the words “has acquired or taken over the business or part of the business of the employer”. They say the evident purpose of the provision was to provide for continuity of employment conditions notwithstanding discontinuity in the employment itself. In the present case, counsel contend there has been no relevant acquisition, either of a business or of employees; no assets have been transferred.

44 Counsel for Stellar also argue that, for either s149(1)(d) or s170MB(1) to apply, there must be a transfer from one employer to another of a business or a part of a business that is itself a commercially viable entity. In support of that proposition, they cite three cases: The Queen v Cohen; ex parte Motor Accidents Insurance Board (1979) 141 CLR 577, ATOF and R E Hayman v Neill [1960] AR 363.

45 Cohen was an eligibility case in which it was necessary for the High Court to consider the meaning of the phrase “the business of insurance”. In the passage cited by counsel, at 588-589, Mason J said he did not think “the word ‘business’ in the present case merely contemplates commercial enterprises which are in competition and which are conducted for profit. Rather, it denotes the idea that some person, body or organization is engaged in the activity or undertaking of insurance”. The reference to ATOF was to that part of the judgment (at 229-230) in which the Court held that the appropriate course was to compare the activities of the old employer and the new employer in order to determine whether there was a substantial identity between them. Hayman was a decision of the Full Bench of the New South Wales Industrial Commission relating to employees’ long service leave entitlements. At 370 the Commission expressed the view “that to be a part of a business the part must itself constitute a business”.

46 Counsel for Stellar accept that it is not necessary for a person relying on s149(1)(d) or s170MB(1) to point to a legal transaction; but they say there must be a divestment of assets, to the extent that the old employer no longer carries on the relevant activities. In the present case, counsel say, nothing has been transferred; Stellar has not acquired for itself anything previously owned by Telstra; it simply provides a service to Telstra to enable Telstra to conduct its “core business”.

Conclusion

47 The submissions of the applicants must be accepted. I agree with counsel for the CPSU applicants that this case is governed by North Western Health Union. The Full Court there considered a case in which some government activities had been “outsourced” to another body, which carried out the day to day activities subject to government supervision. Some assets were transferred from the State to the network but the Full Court decision does not depend on that circumstance; the critical point was that there was a substantial identity of work between that performed by employees of the new employer and that previously performed on behalf of the old employer. That is this case. Once attention is paid to the matter of substantial identity of work, as distinct from the nature of any legal transaction between the old employer and the new employer, it is apparent that an “outsourcing” arrangement may fall within s149(1)(d) or s170MB(1).

48 I do not think it is correct to say nothing was transferred by Telstra to Stellar. There was no assignment of assets, but Telstra appointed Stellar as its agent to provide part of the service Telstra offers its customers. Stellar now performs work that otherwise would be done by Telstra itself. Contact with customers is a critical part of Telstra’s business. No doubt it is burdensome and costly to provide that contact, but it is critical to do so. Without good marketing and attention to customer queries, the business would quickly founder. The effect of the arrangement between Telstra and Stellar is that Stellar has taken on part of the burden of customer contact. In relation to the part of the burden transferred to it, Stellar is the “successor” of Telstra.

49 I do not agree that, for s149(1)(d) or s170MB(1) to operate in respect of part of a business, the transmitted part must itself be a viable business. Not only is this an unwarranted limitation on the generality of the word “part”, it would tend to make that word otiose. A free standing, commercially viable part of a business is itself a “business”, in the ordinary sense of that term, notwithstanding that it may be conducted in association with another business or other businesses. Neither of the High Court decisions cited by counsel is relevant to this point. The statement in Hayman is to the point but is unsupported by reasoning. Whatever its accuracy in relation to the New South Wales statute then under consideration, it ought not be accepted as apposite to either s149(1)(d) or s170MB(1) of the Workplace Relations Act.

50 Although it is unnecessary to do so, having regard to my view, I make the observation that, in any event, there is something artificial about the concept of a free standing, commercially viable part of a business; everything depends on the way the business structures its accounts. Presumably Telstra does not operate a profit and loss account in respect of each of its call centres; there would seem to be no point in a Telstra call centre invoicing Telstra for its services. But plainly this is possible, as the arrangement with Stellar demonstrates. In a real sense, the Robina call centre is a commercially viable, free standing business.

51 I do not agree with counsel for Stellar that the applicants’ argument involves a reading out of words contained in s149(1)(d). The words “has acquired or taken over the business or part of the business of the employer” are words limiting “corporation”. The reference to the corporation is by way of extension of the more general description “successor, assignee or transmittee … of the business or part of the business”. That description does not contain the words the subject of counsel’s submission.

52 During the course of the hearing, much emphasis was placed upon the fact that Stellar aspired to obtain contracts with clients other than Telstra. To a minor extent, it has already succeeded in doing so. These contracts have been for telemarketing (making outward calls), as distinct from operating a call centre (receiving inward calls). Also, Stellar’s contract with Telstra requires it to dedicate both employees and equipment exclusively to performance of the Telstra contract. Nonetheless, Stellar’s activities extend beyond the Telstra contract. ATOF establishes this does not matter. Provided there is a substantial identity of services, as between the old employer and the new employee, it is immaterial that the new employer also engages in other activities; even mainly engages in other activities.

Disposition

53 Counsel for Stellar contend that any relief granted to the applicant should be in terms more limited than that sought in CSPU’s Further Amended Application and CEPU’s Application. They say it is inappropriate to make declarations that refer to work required to be undertaken by Stellar “in the performance of a contract or contracts between Telstra and Stellar”; it is possible that later contracts will depart in material respects from the draft contract that is in evidence. Counsel submit the preferable course is to confine any declarations to a contract substantially to the effect of the draft contract admitted into evidence as exhibit SM15.

54 I think that point is well taken. I propose to make declarations in the form sought by each of the applicants but with that variation in each case.

55 Although the matter of access to the Robina call centre was the catalyst for these proceedings, little time was spent on that matter at the hearing. The terms of s285C of the Workplace Relations Act are set out in para 24 above. It is conceded that at least one of the persons employed by Stellar at the Robina call centre on 16 March 1999 was a member of CPSU. That is enough to satisfy para (b) of s285C(1). The contest between the parties has centred about para (a). However, it follows from my determination that s149(1)(d) applies to this case that para (a) is also satisfied. Consequently, it is appropriate to make the injunction sought by the CPSU applicants.

56 Counsel for the CPSU applicants press for the imposition of a penalty and submit it should be paid to CPSU.

57 Upon proof of a breach of the Act, it is ordinarily appropriate to impose a penalty, even if only a nominal one, in order to mark the Courts disapproval of the breach. I see no reason to take a different view about this case. When it decided to refuse entry to its Robina premises on 16 March 1999, Stellar did not have the benefit of the Full Court decision in North Western Health Network; but that decision only upheld that of Marshall J at first instance. Marshall J’s decision was announced on 22 October 1997: see Health Services Union of Australia v North Eastern Health Care Network and Western Health Care Network (1997) 79 FCR 43. Marshall J also based his reasons on ATOF. I think Stellar should have realised on 16 March 1999 that it was, at least, strongly arguable that its refusal to admit Mr Letizia and Ms Moore to its premises was a contravention of s285C of the Workplace Relations Act, exposing it to a possible penalty under s285E.

58 Section 285E provides a maximum penalty of $10,000 for a corporation contravening s285C. In the present case the appropriate penalty is at the lower end of the range. I propose to impose a penalty of $2,000 and to order that one half of that amount be paid to CPSU.

I certify that the preceding fifty eight (58)

numbered paragraphs are a true copy

of the Reasons for Judgment herein

of the Honourable Justice Wilcox.

Associate:

Dated: 3 September 1999

N241 of 1999

Counsel for the Applicant: M Bromberg and D Langmead

Solicitor for the Applicant: CPSU (The Community and Public Sector Union)

Counsel for the Respondent: J N West QC and G J Hatcher

Solicitor for the Respondent: Blake Dawson & Waldron

N676 of 1999

Counsel for the Applicant: R Reitano

Solicitor for the Applicant: R L Whyburn & Associates

Counsel for the Respondent: J N West QC and G J Hatcher

Solicitor for the Respondent: Blake Dawson & Waldron

Hearing Dates: 12 and 13 July 1999

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