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Outsourcing concerns

A RECENT court case in Victoria could have serious repercussions for WA local governments seeking to outsource.

The Federal Court found a Victorian council had unfairly dismissed employees when it attempted to outsource its health care division.

It found the council’s employees were entitled to terms and conditions specified in a Federal Award, supplemented by a certified agreement under the Commonwealth Workplace Relations Act.

The successful tenderer was not a party to that award.

When the transferring council employees were offered renewed employment with that company, they realised their terms and conditions for doing similar work would be less favourable.

The court decided the employees had been dismissed because they were entitled to the provisions of an industrial agreement.

The Commonwealth Workplace Relations Act 1996 says when a business is transmitted or assigned to a new owner, the terms of the award, certified agreement or Australian Workplace Agreement the former employer was a party to are binding on the new owner.

Employees take across their entitlements and their continuity of service.

Before that the future of the employees working in outsourced areas was uncertain.

If employees were lucky they were taken on by the new employer on new conditions of his choosing or they might get some notice pay or a redundancy package.

Minter Ellison employment law consultant Andrew Burnett said the Victorian case affected WA local governments because almost all were respondents to the Federal Local Government Officers (WA) Award.

The Award covers all employees below managerial level.

Mr Burnett said a local government wanting to outsource one of its divisions would have to have the staff in that division taken on by the contractor taking on that business or pay those staff redundancy packages.

“The arrangement is not too attractive for a contractor because he has to pay those staff at the same rate they were receiving from the local government,” Mr Burnett said.

However, for the transmission of business principles to apply, the local government has to be outsourcing a core section of its business, he said

It could be considered a council would be outsourcing a core activity if it was to seek a tender for its parks and gardens division.

Combined Small Business Associations of WA president Oliver Moon said such considerations were already taken into account with WA Government tenders.

“The successful tenderer had to employ the staff their contract was replacing. The hours and remuneration had to be the same,” Mr Moon said.

The Australian Local Government Association’s John Pritchard said the case was likely to have ramifications for all local governments.

He said the association’s lawyers had not had a chance to consider the full implications of the case.

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