Submission from Carlton & United to Senate Standing Committee on Education and Employment Inquiry into Corporate Avoidance of the Fair Work Act 2009

1. Executive Summary Carlton & United Breweries (CUB) is pleased to provide this submission to the Senate Standing Committee on Education and Employment Inquiry into Corporate Avoidance of the Fair Work Act 2009 (FWA).

CUB’s submission addresses the Inquiry’s terms of reference by providing information about the following: (a) CUB’s long history of operations in ; (b) CUB’s workforce, and how it engages reputable third party contractors to provide services to it; (c) CUB’s approach to meeting its obligations under the FWA and the National Employment Standards (NES);

(d) the state of the brewing industry in Australia; (e) the Abbotsford dispute, which CUB remains committed to resolving. The FWA is the cornerstone of workplace relations in Australia. The system of NES, modern awards and minimum wages provide a system that ensures that employees have base level terms and conditions across Australia. CUB is committed to ensuring that it meets the objectives and the spirit of the FWA and the NES.

It is these base level terms and conditions that many employers, such as CUB, expand upon to offer market leading terms and conditions, to invest in the professional development of employees and to maintain a highly engaged workforce. For instance, over many years, CUB has worked cooperatively with relevant unions to agree to enterprise agreements for all operational staff at CUB’s breweries that offer terms and conditions that exceed the NES and the applicable modern awards.

CUB, like many recognized employers in Australia, engages reputable third party contractors to provide services to its breweries and operations in various circumstances. When CUB engages a third party contractor, it expects that the third party contractor meets its obligations under the FWA, NES, and any applicable enterprise agreements and modern awards. CUB’s standard services agreement also requires its third party contractors to comply with these obligations.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

We are disappointed that an industrial dispute has arisen over the change in third party contractors earlier this year at the Abbotsford Brewery.

We remain committed to working with the unions and the Fair Work Commission to ensure the dispute is resolved as quickly as possible. 2. About Carlton & United Breweries

CUB’s history dates back to 1832 when the commenced brewing in , . Brewing has continued without interruption at Cascade since this time, making it the oldest manufacturing site to continue operating across any industry in Australia. CUB as a company was born in 1907 from the merger of six breweries, including McCracken’s (1851), Victoria (1854), Carlton (1864) and Foster’s (1888), and continues to be the proud manufacturer of some of Australia’s most famous , including VB, , Crown and Cascade. CUB’s proud history of creating work and being part of the community remains alive today. In addition to CUB’s own workforce, hundreds of thousands of Australians are employed in the industry and contribute to its business – from the barley farmers, malting operations and hops growers, to the truck drivers, hospitality/tourism workers, and liquor store retail staff. The Australian Liquor Stores Association (ALSA) estimates that the retail alcohol industry directly employs more than 47,500 people across Australia. CUB has a long and effective history of working collaboratively with the trade union movement. One of CUB’s founding brewers, Robert McCracken, was the first brewer in Melbourne to introduce the 8 hour working day in 1879. CUB is also proud that during the Great Depression in the 1930’s none of its employees lost their job, after CUB management and the Liquor Trades Union agreed to a small wage decrease to ensure everyone remained employed during this difficult period of Australia’s history. CUB is also a proud supporter of many community, cultural and sporting organisations across Australia. From CUB’s sponsorship of elite sports such as the Australian Football League and the through to CUB’s support of grass roots sporting clubs. CUB is a founding member and the largest funder of DrinkWise, Australia’s leading organisation on driving cultural change around responsible drinking. CUB has been proud to support DrinkWise’s many successful campaigns including ‘Kids absorb your drinking’, ‘How to drink properly’ and the ‘You won’t miss a moment’ campaign, in conjunction with our major sporting partners. CUB takes its commitment to responsible consumption of alcohol seriously through the way it produces, markets and sells its products. CUB is a signatory to the Alcohol Beverages Advertising Code and the CEO Global Alcohol Commitments through the International Association for Responsible Drinking.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

CUB also believes that safety in the workplace is of critical importance. CUB is committed to the continual improvement of its policies and practices to provide a safe working environment, and invests heavily in initiatives to improve safety outcomes for all of its employees, and any contractors that work on its premises. CUB has adopted a systemic approach to identifying hazards in the workplace, implementing risk controls to reduce the danger of any hazards identified, and ensuring proper processes and practices are in place to manage risks on an ongoing basis. This has resulted in a steady, traceable improvement in overall safety performance with recordable injuries, lost time injuries and workers compensation claims at a historic low for the business (spanning 150 years of operations). This also places CUB amongst the lowest in lost time injury frequency rate for the Australian beverages industry.

CUB recently joined AB InBev, which is a global brewer headquartered in Leuven, Belgium. The transaction came about on 11 October 2016 as a result of AB InBev merging with SABMiller, the former parent company of CUB.

AB InBev’s global brands include Corona, Budweiser and Stella Artois. Brewing beer in more than 50 countries worldwide, AB InBev employs approximately 200,000 individuals, and takes great pride in the development of its employees. AB InBev has a strong and effective history worldwide of working closely with organised labour, and has prioritised developing a cooperative and productive relationship with trade unions in Australia. CUB and AB InBev are committed to growing and investing in the Australian business, and continuing to support their employees and the broader community. 3. CUB’s direct workforce

CUB prides itself on having a diverse and engaged workforce. CUB directly employs approximately 1,500 people across Australia. Given that CUB’s people are the core of its business, CUB seeks to be an ‘employer of choice’ by providing pay and employment conditions that exceed the NES and modern awards and by continually investing in learning and development. CUB directly employs approximately 420 operational employees in its three breweries, located at Abbotsford, Victoria; Yatala, Queensland; and Cascade, Tasmania. All full-time operational staff are covered by site specific enterprise agreements. In addition to its operational workforce, CUB directly employs approximately 1,120 employees in various roles nationally. These employees are salary-based and are located in CUB’s head office in Melbourne, Victoria; offices at its breweries; and CUB’s sales offices in locations throughout Australia.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

4. Wages and conditions of CUB employees

All of CUB’s operational workforce are covered by enterprise agreements negotiated with the relevant unions and approved by the Fair Work Commission. CUB is party to five enterprise agreements that cover the operations in Victoria, Tasmania and Queensland.1 These enterprise agreements provide employees with employment terms and conditions that exceed their minimum entitlements under the NES and modern awards. For instance:

 Rates of pay: Rates of pay exceed the rates of pay under the relevant modern award;

 Maximum weekly hours: The majority of CUB’s operational employees are engaged upon a 35 hour week, although the maximum weekly hours set under the NES are 38 hours per week;

 Flexible working arrangements: CUB has a Flexible Work Practices policy, which supports healthy lifestyles and family friendly work practices, by providing options for employees to achieve greater work-life flexibility. These options include job sharing, telecommuting (working from home), part-time employment and flexible working hours. CUB also offers a program which provides assistance for employees in managing the process of returning to the workplace after a period of parental leave. CUB also provides support for employees in managing caring responsibilities with the Eldercare assistance program;

 Parental leave: CUB provides eight weeks paid maternity leave to employees in addition to the Government paid parental leave, where the NES provides for unpaid parental leave;

 Personal leave and compassionate leave: For employees working at the Abbotsford Brewery, sick leave provisions of 12 months paid leave is provided in the event of a personal illness and/or injury. Employees covered by the Cascade Beverages enterprise agreement receive payment for any unused accrued personal leave upon resignation. Employees working at the Yatala Brewery are provided up to 6 months paid personal leave if they are seriously ill or injured;

1 CUB Pty Ltd Abbotsford Brewery Enterprise Agreement 2015 – 2018; Cascade Beverages and United Voice Enterprise Agreement 2016; Cascade Brewery Maintenance Enterprise Agreement 2016; Cascade Brewery Operations Enterprise Agreement 2013; Queensland Breweries Enterprise Agreement 2013.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

 Notice of termination and redundancy pay: For all operational staff, redundancy pay entitlements exceed the requirements provided under the NES. For example, monthly salaried employees are entitled to receive in cases of redundancy nine weeks pay and an additional three weeks’ pay per year of service (capped at 52 weeks). Employees covered by CUB’s enterprise agreements receive more redundancy terms than industry standards. For instance, CUB employees working at the Abbotsford Brewery are entitled to receive a payment of 5 weeks plus 4 weeks’ pay for each complete year of continuous service (to a maximum payment of 109 weeks) and employees working at the Yatala Brewery are entitled to receive a payment of 8 weeks plus 4 weeks’ pay for each completed year of service (to a maximum payment of 104 weeks).

Given the fundamental role that enterprise agreements play in governing the relationship between employers and employees, CUB engages in extensive bargaining processes with employees and unions in order to reach agreement on wages and conditions. CUB believes that the FWA establishes a fair and reasonable process for the implementation of enterprise agreements, and strictly follows this process when establishing any enterprise agreement that governs its employees.

Whenever CUB seeks to bargain for a new enterprise agreement, CUB’s guiding principle is to ensure an extensive consultation process occurs with all employees covered by the relevant agreement, including extensive consultation with its employees’ union representatives. 5. The state of the brewing industry in Australia

In 2014, the Australian Bureau of Statistics reported that beer consumption in Australia had reached a 66-year low. In recent times, there has also been increased competitiveness in the brewing industry, with an increasing number of microbreweries operating in Australia. For instance, in 2006, there were 96 microbreweries, and by 2015, there were estimated to be more than 150.2 While brewing in Australia was once limited to a few beer brands, consumers now have over 400 beer brands to choose from in a market that includes both local and imported beers.

As a result of these changes in the brewing industry, CUB’s local breweries have had to evolve in order to maintain CUB’s position as an iconic and leading brewer in Australia. Given CUB’s deep commitment to brewing beer in Queensland, Victoria and Tasmania, CUB is focused on ensuring that its breweries remain competitive and viable in the future as CUB moves into its second century of operation.

2 Craft Beer Industry Association (CBIA, Australia) and internal AB InBev estimates.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

6. CUB’s use of third party contractors

Like many businesses, in various circumstances, CUB explores contracting options as part of its business. For example, CUB uses contracting options where the activity is not part of CUB’s core business, or where the model will provide improved competitiveness. CUB engages a number of reputable third party contractors for a variety of services. Many of these companies provide personnel that perform services at CUB sites, such as logistics, cleaning, catering, and security services, and collectively employ approximately 400 people to perform those services at CUB sites. In addition, other third party contractors provide offsite support functions to CUB and other businesses, in relation to shared IT and finance services and facilities management services. Some parts of CUB’s operations, such as logistics and advertising, have been contracted to reputable third party contractors for many decades. CUB does not use third party contractors to avoid employment or industrial obligations. CUB expects all of its third party contractors to comply with their legal obligations in respect of workplace relations. This includes their obligations to comply with the NES, any relevant enterprise agreements and modern awards, notwithstanding the type of service or where the service is provided. In CUB’s standard services agreement, CUB imposes contractual obligations on its third party contractors to ensure that these obligations are met.

7. Abbotsford Brewery dispute An industrial dispute arose at CUB’s Abbotsford Brewery in 2016 following CUB’s decision to change the provider of maintenance services at the Abbotsford Brewery. During the second- half of 2016, CUB has proactively sought to resolve the dispute by attending several conferences between the relevant parties at the Fair Work Commission. CUB remains hopeful that a resolution to this dispute will be reached at the Fair Work Commission.

7.1 The challenges facing the Abbotsford Brewery

The Abbotsford Brewery was established in 1904 and is located in the inner city of Melbourne, approximately 2 kilometres from the Melbourne central business district. At the brewery, CUB brews and packages over 20 different beer and cider brands for distribution throughout Australia including some of the best know beers in Australia including , Carlton Draught and .

CUB has made the Abbotsford Brewery the heart of its southern brewing operations, centralising all of its Victorian brewing operations at this site and continuing to invest in this centrally located site. At the Abbotsford Brewery, CUB directly employs approximately 220 employees in its brewing and packaging areas, and approximately 80 employees in support functions.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

Although CUB continues to invest in the Abbotsford Brewery, the infrastructure at the site is more than a hundred years old, and its competitiveness is slipping behind Australian and global standards. In order for Abbotsford Brewery to be competitive with other local, interstate, and international breweries and ensure its ongoing viability, it continues to be essential that changes are made to improve the competitiveness of the brewery, and ensure the site is flexible enough to cater to the tastes and demand from CUB’s customers.

7.2 Outsourcing maintenance services at the Abbotsford Brewery since 2009

At CUB’s Abbotsford Brewery, maintenance work has been outsourced to third party contractors since 2009, when CUB entered into a contract with ABB Management to undertake the maintenance work for the brewery. ABB Management was later acquired by Quant Australia Pty Ltd (Quant), which continued to provide those services until June 2016.

CUB decided to outsource the maintenance work in 2009. This function was not regarded as a core part of CUB’s business as it was conducted separately to the work that was performed by CUB’s operational employees. By engaging a specialist provider to supply maintenance services, CUB was able to benefit from the expertise that ABB was able to provide in a competitive contract maintenance market.

When CUB outsourced these services in 2009, all maintenance staff that were made redundant received redundancy payments, with most being paid six figure amounts. Approximately 50% of the redundant CUB maintenance trade workers were then immediately employed by the new contractor in ongoing positions, with recognition of their service with CUB. Those that were not employed by ABB in 2009 were offered training services funded by CUB to assist them with seeking future employment outside the brewing industry.

7.3 The decision to change third party providers in 2016

By 2015, Quant’s business operations in Australia had significantly contracted, with the provision of maintenance services to CUB at the Abbotsford Brewery being its only business operations in Australia. Given that the commercial arrangements between Quant and CUB were due to expire on 31 July 2016, CUB commenced a review into whether it would extend the commercial arrangements with Quant.

On around 19 January 2016, CUB notified Quant that CUB would not extend its commercial arrangements with Quant beyond its expiry on 31 July 2016. On the same day, all CUB and Quant employees working at the Abbotsford Brewery were notified that CUB had decided not to extend its agreement with Quant beyond 31 July 2016, and the agreement would terminate at the end of its term. The agreement with Quant was terminated by mutual agreement on 10 June 2016.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

CUB commenced a tender process to select the most appropriate service provider to provide maintenance services at the Abbotsford Brewery, in line with its normal competitive procurement processes.

Following the completion of that tender process, CUB selected Programmed as the service provider to provide the maintenance services at the Abbotsford Brewery. Programmed is a leading provider of staffing, maintenance and facility management services. Programmed was established in 1951 and has since grown to over 100 branches based in key metropolitan and regional areas across Australia and New Zealand. Programmed has over 20,000 employees, and over 10,000 customer relationships across a range of government and private sector industries, including resources, infrastructure, education, manufacturing, logistics, commerce/retail and tourism markets.

All Quant employees were on notice since January 2016 that their employer would not be providing maintenance services at the Abbotsford Brewery in the latter part of 2016. As Quant did not have any remaining operations in Australia and was not able to redeploy its workforce, CUB also understands that all Quant employees were paid applicable redundancy pay.

All Quant employees were given the opportunity to meet with Programmed representatives to interview for positions with Programmed. A small number of employees who were previously employed by Quant accepted positions with Programmed, and Programmed also recruited a number of other employees from the market. CUB understands that most former Quant employees did not seek positions with Programmed. Many former Quant employees have pursued and obtained employment opportunities elsewhere.

Following this, in June 2016, the CEPU (ETU), AMWU and a number of other trade unions established an industrial protest outside the Abbotsford Brewery, and commenced a community campaign seeking support from the public for a boycott of CUB brands. Some former Quant employees have remained at this protest since that time.

Since 5 October 2016, Chelgrave has provided maintenance services at the Abbotsford Brewery. Chelgrave’s employees are employed under enterprise agreements that cover both the CEPU and AMWU. CUB continues to proactively seek to resolve the dispute with the assistance of the Fair Work Commission. CUB remains hopeful that a resolution to this dispute will be reached at the Fair Work Commission.

8. Conclusion

The FWA plays a critical role in ensuring all employees in the national workplace relations system receive fair pay and conditions.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106

CUB, like many employers in Australia, engages reputable third party contractors to provide services to its breweries and to support its operations in certain circumstances. When CUB engages a third party contractor to provide services to it, it expects that the third party contractor meets its obligations under the FWA, NES, and any applicable enterprise agreements and modern awards. CUB’s standard services agreement also requires its third party contractors to comply with these obligations. CUB is committed to upholding its obligations under the FWA, and meeting or exceeding all requirements set out in the NES, applicable enterprise agreements and modern awards in relation to its employees. CUB acknowledges the importance of constructive working relationships with unions and has a proud history of working with its employees and the unions that represent them in a strong and productive relationship. This is reflected in the terms and conditions in its enterprise agreements that exceed the NES and the applicable modern awards, which were genuinely and fairly implemented in consultation with its operational employees.

We look forward to assisting the Inquiry in support of the terms of reference.

77 Southbank Boulevard, Southbank VIC 3006 Australia Telephone +61 3 8626 2000 Facsimile +61 3 8626 2002 www.cub.com.au CUB Pty Ltd ABN 76 004 056 106