Legal

Call Waiting

By Jim Nolan - Denman Chambers

The Federal Court has put a dampener on outsourcing within a corporate structure.

CEPU v Stellar Call Centres

The issue of award terms and conditions being applied to outsourced activities has arisen yet again with an important decision of the Federal Court by Justice Wilcox in CPSU and Ors and CEPU v Stellar Call Centres Pty. Limited. [Stellar] [Federal Court of Australia N676 of 1999 3 September 1999] This issue has been the subject of important recent litigation as a result of government decisions to "outsource" or contract out a variety of functions. [See earlier article [reference]

This decision dealt with the issue of the transmission of respondency of a number of awards and agreements binding upon Telstra to Stellar to which Telstra had outsourced certain of its activities. The decision of the Court was that Stellar was in fact a transmittee of the respondency of the relevant awards. It was declared by the Court that in relation to employees of Stellar who are engaged on work required to be done by it in the performance of any contract with Telstra that it was obliged to apply the Telstra awards and agreements.

The interesting issue involved in this decision was the nature of the work which had been outsourced to Stellar and the manner in which it was to be performed. Justice Wilcox noted that the applications raised an issue that was not just important to the parties involved but might have ramifications for others as well. That was whether the awards and certified agreements which bound Telstra in respect of Telstra's employees who take customer calls at the Telstra operated call centres, also applied to Stellar where it had been contracted to operate a call centre at which its employees also took Telstra customer calls.

The answer to the question, as the Judge pointed out, depended upon whether it could properly be said that the company that contracted to operate the outsourced call centres was a successor, assignee or transmitee of that part of Telstra's business within the meaning of s.149(1)(d) and/or s.170MB(1) of the Workplace Relations Act 1996. S.149(1)(d) relates to the transmission of awards and s.170MB(1) to the transmission of certified agreements.

Stellar was incorporated in May 1998 as a joint venture between Telstra and an American company Excell Asia/Pacific Pty. Limited. A seconded Telstra employee served as its chief executive officer. Stellar was involved in call centre operations, not just for Telstra, but for other organisations and in addition to this, provided a range of services including call centre outsourcing, staffing and management and consulting and training for a range of corporations.

Telstra operated a nationwide customer inquiries number, 132200, to deal with all customer inquiries regarding billing and the availability of connection and services and new products. It was a single point of entry for all Telstra services except for service difficulties and faults. Until the end of 1998 all calls to this number were taken and dealt with by Telstra employees located at Telstra operated centres. In 1998 Telstra employed some 12,000 people at 100 such centres. In late 1998 Telstra decided to branch out and become a tele-marketing services supplier and for that purpose established the joint venture operation.

Stellar was set up to allow it to compete with other call centre providers, not just for Telstra but also for non-Telstra work. The non-Telstra contracts were primarily ones for short term tele-marketing services. The most significant contract which Stellar held was that for the provision of a call-back centre under a contract with Telstra.

Telstra wanted to have another organisation deal with the 1300 calls particularly at busy times. The arrangement with Stellar was that Stellar would provide services to Telstra including full outsourcing for what was described as the �regional overflow� of 132200 call traffic.

In December 1998 Stellar commenced taking Telstra customer calls and then later that month new premises, owned by Stellar, opened at Robina near the Gold Coast at which premises there were 150 work spaces for personnel taking customer calls.

The services to be provided included the operation of the call centre at Robina in accordance with Telstra's policies and procedures. This included a requirement that the Stellar Call Centre appears, from the customers' perspective, to have the "look and feel" of a Telstra sales centre. The call centre was intended to function as a "seamless" part of the network of Telstra sales service centres. The infrastructure at the call centre in connection with the provision of the Telstra services was required to be physically and electronically isolated from any infrastructure used for the purposes of providing services to anyone else.

Stellar described its operations as part of a �virtual single call centre� because the whole of the National Telstra network was designed to operate as "virtual single centre". Calls would be routed to the next available operator regardless of his/her physical location. So, consistent with that scheme, a Telstra customer who made an inquiry using the 132200 number would not be aware whether his/her inquiry was handled by a Telstra employee of an employee of Stellar located at Robina.

There was no agreement that Stellar would offer employment to current or former employees of Telstra. Some 181 employees and 11 managers were recruited to work at Robina. Of this number, only 8 of the employees came directly from the employment of Telstra and only 1 of the managers had previously worked for Telstra at sometime prior to commencing with Stellar.

Against this background, the critical question then was - was it possible to say that Stellar's activities had really amounted to taking over a part of the business of Telstra? Justice Wilcox found for the unions and in that connection, applied the decision of the Full Court of the Federal Court of Australia in the North Western Health Care Network Case [3rd July 1999, unreported 1999 FCA 897]. He applied the test approved in that Full Court decision, namely, was there a substantial identity of the work performed as between the new employer and the old employer? Justice Wilcox found that there was. He said that once attention is paid to the matter of substantial identity of the work as distinct from the nature of any technical or legal transaction between the old and new employer its apparent that an outsourcing arrangement may fall within the transmission provisions of the Act.

Contrary to what was suggested that nothing was in fact transferred by Telstra to Stellar, Justice Wilcox said that while there was no assignment of assets, Stellar was appointed by Telstra as its agent to provide part of the service that Telstra offers to its customers. Stellar performs work that otherwise would be done by Telstra itself. His Honour pointed out that contact with customers is a critical part of Telstra's business. 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 that part of the burden transferred to it, Stellar is the "successor" of Telstra.

His Honour also emphasised that it was not necessary for the relevant sections of the Act to operate in respect of a part of a business only where that part of the business was itself a viable, stand alone business. He said that this suggestion placed an unwarranted limitation on the words of the Act.

In an interesting observation his Honour went on to say that there was, in any event, something artificial about the concept of a free standing commercially viable part of a business. He said everything depends on the way the business structures its accounts. Perhaps this is an observation drawn from His Honour�s experience as the presiding judge in the MUA/Patricks full court decision!

In any event, there was little doubt that in a real sense, the Robina Call Centre is a commercially viable free standing business.

His Honour also dealt with the issue of the other non Telstra - business undertaken by Stellar. He said that much emphasis was placed in the case on the proposal that Stellar aspired to get other contracts apart from those with Telstra. At the time of the hearing it had succeeded in this to a minor degree. These non-Telstra contracts related to tele-marketing activities. That is to say employees making outward calls rather than receiving inward calls. His Honour pointed out that in the earlier decision of the High Court in the ATOF Case (1990) 171 CLR 216 the High Court stated that other activities are not relevant to the issue provided that there is a substantial identity of the services between the old employer and the new employer. It is immaterial that the new employer also engages in other activity or even mainly engages in other activity.

In the light of his findings on transmission, Justice Wilcox made a declaration and injunction supporting the CPSU's rights of entry to Stellar�s premises.

To the extent that the Stellar Case assists in determining circumstances in which transmission operates I think it may be concluded that Stellar now makes an emphatic statement that where there is a substantial identity of the functions transferred the award respondency will follow. That will mean, it seems to me, that where there is a discrete and substantial function transferred and undertaken by the new employer, transmission will occur. Whilst the test applied was the test applied by the Full Court in the earlier Northwestern Area Health Service Case, this decision underscores the fact that the test applies even where no staff are transferred as a result of the outsourcing arrangements.

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»	Guest Report
»	Sport
»	Trades Hall
»	Piers Watch

»	League's Working Class Takeover
»	Proverb for the Cyber Age
»	Postcard from the Emu
»	Mind Your Language
»	The Other Young Speaker
»	Timor: A Call to Action
»	A Letter to Downer

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