1
Fair Work Act 2009
s.604 - Appeal of decisions
Communications, Electrical, Electronic, Energy, Information, Postal,
Plumbing and Allied Services Union of Australia
Australian Manufacturing Workers' Union
v
Main People Pty Ltd
(C2015/3716)
VICE PRESIDENT HATCHER
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER ROBERTS SYDNEY, 13 AUGUST 2015
Appeal against decision [2015] FWCA 1119 and [2015] FWC 2560 of Deputy President
Asbury at Brisbane on 14 April 2015 in matter number AG2014/6270.
Introduction
[1] The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing
and Allied Services Union of Australia and the Australian Manufacturing Workers’ Union
(unions) have filed a notice of appeal under s.604 of the Fair Work Act 2009 (FW Act) in
which they seek permission to appeal and appeal a decision of Deputy President Asbury
issued on 14 April 20151 (Decision). In the Decision the Deputy President approved an
enterprise agreement, the Main People Pty Ltd Enterprise Agreement 2014 (Agreement) on
the basis of an undertaking provided by the employer covered by the Agreement, Main People
Pty Ltd (Main People). The unions challenge the approval of the Agreement on two broad
bases: first, that the Agreement did not satisfy the approval requirement in s.186(3) that the
group of employees covered by it be fairly chosen, and second, that the undertaking that was
made to ensure that the Agreement passed the better off overall test requirement did not meet
the requirements of s.190(2) and (3) of the FW Act.
Background
[2] The history of this matter requires some explanation. The Agreement was made on 29
May 2014. An application for approval of the Agreement was lodged in the Commission on
the same day. The statutory declaration accompanying that application disclosed that as of
that date, Main People only employed three persons on a casual basis who were covered by
the Agreement. Two of these were trades assistants and one was a boilermaker. They were
1 [2015] FWC 2560
[2015] FWCFB 4467
DECISION
E AUSTRALIA FairWork Commission
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employed at Karratha in Western Australia. As at the date of the Decision, none of these three
remained employed by Main People.
[3] Notwithstanding this, clause 3 of the Agreement provided that it applied to “all
Employees of the Company engaged in one of the classifications, in all the States and
Territories of Australia, as contained in clause 10 of this Agreement …”. The classifications,
grouped in four pay levels, included the following:
trade qualified electrical fitter/mechanics;
trade qualified boilermakers;
trade qualified fitters;
trade qualified painters;
open ticketed crane drivers (100 tonnes and over);
advanced/intermediate riggers;
advanced/intermediate scaffolders;
mobile crane drivers;
welders;
painters/blasters (not qualified);
dogman;
scaffolders;
riggers;
operators;
trades assistants;
peggy/cleaners; and
storepersons.
[4] In a short decision issued on 14 July 20142 (Initial Decision), Deputy President
McCarthy approved the Agreement on the basis that it satisfied the approval requirements in
ss.186, 187 and 188 of the FW Act.
[5] The unions appealed the Initial Decision on the basis that Deputy President McCarthy
had erred in being satisfied that the group of employees covered by the Agreement was fairly
chosen, as required by s.186(3), and that the Agreement passed the better off overall test as
required by s.186(2)(d). The appeal was lodged outside the 21-day period prescribed by rule
56(2)(a) of the Fair Work Commission Rules 2013, and accordingly an extension of time was
required under rule 56(2)(c). There was also a challenge to the standing of the unions to bring
the appeal on the basis that they were not persons aggrieved for the purpose of s.604(1) of the
FW Act.
[6] This appeal was determined in a decision issued by a Full Bench (Hamberger SDP,
Asbury DP and Roe C) on 25 November 20143 (Appeal Decision). The requisite extension of
time was granted by the Full Bench. In relation to the issue of standing, the Full Bench
determined as follows:
“[5] Under s. 604 of the FW Act only ‘a person who is aggrieved by a decision’ may
appeal the decision.
2 [2014] FWCA 4694
3 [2014] FWCFB 8429
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[6] The respondent submitted that neither of the appellants are a ‘person who can show
a grievance which will be suffered as a result of the decision complained of beyond
that which he or she has as an ordinary member of the public’. Neither union was a
bargaining representative for the Agreement, nor was there any evidence that any
employee of the respondent at the time of the vote to approve the Agreement was a
member of either union. Further there was no evidence that any subsequent employees
of the respondent had asked the appellants to represent their interests in relation to the
Agreement.
[7] The appellants have the right to represent employees under the terms of the
Agreement. Moreover, given the nature of the respondent’s business, and the industry
within which it operates, we are satisfied that it is likely that some members of the
appellants will be employed by the respondent in the future, in classifications covered
by the Agreement. In the circumstances of this case we consider that this gives the
appellants an interest in the decision to approve the Agreement beyond that of an
ordinary member of the public. Accordingly, we are satisfied that the appellants have
standing to appeal the decision to approve the Agreement.”
[7] In relation to the unions’ challenge in respect of the fairly chosen requirement, the Full
Bench summarised their submissions as follows:
“[14] The appellants submitted that the selection of the group of employees covered by
the Agreement was unfair because it ‘undermined collective bargaining in a manner
which was not compatible with Part 2-4 of the Act and was contrary to the purpose
and policy of the Act.’ Only three employees had engaged in bargaining for the
Agreement. However the Agreement had application to a group of employees far wider
than the group of three employees. The Agreement covered 17 separate classifications
and operated in all States and Territories. The unions alleged that respondent knew at
the time of making the Agreement that it intended to undertake operations in areas
outside of Karratha. It must have been known to the respondent that it would need
more employees than the three casuals it employed at the time of making the
Agreement.
[15] The appellants submitted that the Deputy President could not, in these
circumstances, have objectively been satisfied that the group of employees, which
included full-time, part-time and casual employees in 16 different classification
streams throughout the whole of Australia, had been fairly chosen.”
[8] The Full Bench rejected this submission and determined as follows:
“[18] It is in the nature of the scheme established by the FW Act that (a majority of) the
employees employed at the time an enterprise agreement is made can agree to terms
and conditions of employment that will then bind future employees employed under
the terms of that agreement. Nor is there anything in the FW Act to prevent employees
voting to approve an agreement that will affect employees in classifications or
geographic locations other than their own (unless a relevant scope order has been
made).
[19] There is nothing unusual or necessarily untoward in a relatively new business
making an enterprise agreement early in its life with a small number of employees,
[2015] FWCFB 4467
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with an expectation that the business will grow and eventually employ a much larger
number of employees, who would then be covered by the agreement. The evidence
suggests that the respondent is a ‘start up’ venture.
[20] It is clear from the respondent’s statutory declaration in support of the application
for approval of the Agreement that the Agreement covered all the respondent’s ‘blue-
collar’ work force as opposed to its ‘white-collar’ employees performing management,
supervisory and office-based roles). That represents a clear organisational distinction;
nor is there any reason to suggest that such coverage involved any other form of
unfairness.
[21] The scope of the Agreement is not arbitrary or discriminatory. We also note that
there was no evidence of anything artificial or improper about the way the Agreement
was made.
[22] We do not consider that the Deputy President’s decision was in error in relation to
the ‘fairly chosen’ issue.”
[9] In relation to the question as to whether the Agreement satisfied the better off overall
test, the Full Bench said:
“[28] When considering the text of the Agreement itself, it is clear that it potentially
covers a wide range of work across a range of different industries. There could be a
number of different Modern Awards that could be relevant to the application of the
BOOT. This does not appear to have been something that the Deputy President took
into account when considering whether to approve the Agreement. On the face of the
record he only took into account whether the Agreement passed the BOOT against the
Metals Award. On the material before the Deputy President there was insufficient
material to reach the conclusion that the Metals Award was the appropriate
benchmark. We are also concerned that there was insufficient material before the
Deputy President to be satisfied the Agreement passed the BOOT, even when
considered against the Metals Award. The employer in the F17 Statutory Declaration
stated that there were no conditions which were less beneficial to employees than the
Metals Award. Although the respondent submitted that a number of allowances did
not apply to the current scope of work, the Agreement does not prevent a broader
scope of work being performed in the future. An examination of the Agreement
reveals a number of other matters which are less beneficial than the Metals Award. It
is only necessary to consider two of those matters to conclude that the BOOT is
unlikely to be met. Those matters are the failure to specify the maximum roster cycle
over which hours are to be averaged, and the scope to employ tradespersons at a
classification above the C10 level who would be entitled to a higher award rate.
[29] The failure of the Deputy President to take account of these material
considerations amounted to an appealable error.”
[10] On this basis the Full Bench granted permission to appeal and upheld the appeal, and
concluded as follows:
“[31] Given the error identified in relation to the application of the BOOT, we grant
permission to appeal, allow the appeal and set aside the decision to approve the
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Agreement. It is possible that our concerns in relation to whether the Agreement passes
the BOOT could be overcome by the provision of suitable undertakings. In Re BUPA
Care Services4 it was held that where the Commission has a concern that an agreement
does not meet the requirements set out in s.186 and s.187 of the Act (including that the
agreement does not pass the BOOT) s.190 requires that the Commission give the
employer an opportunity to provide a written undertaking aimed at meeting those
concerns. In accordance with the approach adopted by that Full Bench we will refer the
application for approval of the Agreement to DP Asbury.”
The proceedings before the Deputy President
[11] The approval application for the Agreement having been remitted to the Deputy
President, Main People proposed an undertaking on 4 December 2014 which, it submitted,
would permit the better off overall test to be satisfied and the Agreement to be approved. In a
written submission filed on 17 December 2014, the unions sought to be heard in respect of the
proposed undertaking, and also re-agitated the “fairly chosen” issue to the following extent:
“30. The CEPU and the AMWU repeat and rely upon their submission from the
Appeal in respect of whether the group of employees to be covered by the Purported
Agreement was fairly chosen.
31. We note that at paragraphs 10-22 of the Appeal Decision the Full Bench dealt
with this argument and dismissed the appeal ground. It is the CEPU and the AMWU’s
position that the Full Bench was wrong to decide the matter in that way and the
decision should not be followed.”
[12] There was then a hearing before the Deputy President on 18 December 2014. At this
hearing the unions were permitted to appear and make submissions (without objection from
Main People), and to be represented by counsel in doing so. The submissions were almost
entirely concerned with the better off overall test and the proposed undertaking. The unions
briefly raised the fairly chosen issue, but did no more than formally put the submission which
it had earlier advanced in writing (quoted above). In the course of the hearing and having
regard to matters that had been raised, Main People indicated that it would provide the Deputy
President with a revised undertaking. The revised undertaking was supplied later that day.
[13] Having received this revised undertaking, the Deputy President issued directions for
the filing of further written submissions by the parties about this. Both the unions and Main
People filed submissions in accordance with these directions. There were subsequent
exchanges of correspondence between the Chambers of the Deputy President and Main
People which led to the form of the undertaking evolving. The final version of the
undertaking was as follows:
“1. This Agreement only applies to work to which the Manufacturing and
Associated Industries and Occupations Award 2010 (Metals Award) would
have applied except for the operation of this Agreement.
4 [2010] FWAFB 2762
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2. All Employees will be paid more under this Agreement than they would
have been paid under the Metals Award if it applied to the work carried out
by them from time to time.
3. This undertaking will be applied based on the classifications to which the
Employees would have been entitled if the Metals Award had applied.
4. If an Employee has the relevant skills and qualifications and is required to
perform work for Main People within the scope of a classification higher
than C10 in the Metals Award as per Schedule B of the Metals Award (if it
applied to his or her employment), Main People will ensure that the
Employee will be paid at a rate that maintains the wage relativities as
reflected in Schedule B of the Metals Award on the basis that the appropriate
Award relativity will be calculated by reference to the Level 1 base rate of
pay in the Agreement as follows:
Metals Award Classification % of Level 1 base rate of pay under
Agreement
C10 100
C9 105
C8 110
C7 115
C6 125
C5 130
C4 135
C3 145
C2(a) 150
C2(b) 160
C1 180/210
5. Main People will only apply the roster cycles set out in clause 13(i) to 13(x) of
the Agreement.
6. An Employee may request a reconciliation once a year or on termination to
establish whether there is an amount which is required by this undertaking to be
paid to them.”
[14] On 7 April 2015 the Deputy President advised the parties that she had formed the
preliminary view that this version of Main People’s proposed undertaking had been revised to
a point where she was prepared to accept it, and allowed the unions an opportunity to file
further submissions concerning it. Such submissions were filed by the unions on 8 April 2015.
The Decision, as earlier stated, was issued on 14 April 2015.
The Decision
[15] In the Decision the Deputy President identified the issues for determination, and in
doing so stated that she did not intend to revisit the fairly chosen issue on the basis that it had
been determined by the Full Bench in the Appeal Decision, and regarded the matter which
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had been remitted to her as being whether Main People could provide an undertaking to
address concerns about whether the Agreement passed the better off overall test.5
[16] After re-stating the concerns in relation to the better off overall test identified in the
Appeal Decision and setting out the final version of the undertaking proffered by Main
People, the Deputy President said:
“[19] When an undertaking is offered by an employer the Commission may accept such
undertaking where it is satisfied that the effect of the undertaking is not likely to cause
financial detriment to employees. In this case I am satisfied that the effect of the
undertaking is not likely to cause financial detriment to any employee covered by the
agreement. The undertaking does not operate so as to reduce a beneficial entitlement
under the Agreement when compared to the Award.
[20] As to any substantial change in the Agreement I do not agree with the
submissions on behalf of the Unions that a substantial change results from the effect of
the undertaking. In relation to item 1 of the undertaking, the employer has at all times
asserted that the work that will be performed under the Agreement and the employees
who will be performing that work are covered by the Metals Award and are not
covered by any other Award. The proposed undertaking in relation to the coverage of
the Agreement clarifies this point.
[21] Item 2 read in conjunction with item 6 entitles employees to be paid more under
the Agreement than they would have been entitled to be paid if the Metals Award
applied and to request a reconciliation once a year or on termination of employment to
ensure that this is the case. Items 3 and 4 of the undertaking operate so that an
employee who would be entitled to be classified at a level above C10 if the Metals
Award applied to his or her employment, will be paid a wage rate that is equivalent to
the percentage Metals Award relativity for the appropriate classification level, applied
to the C10 rate in the Agreement.
[22] I am satisfied that the C10 rate in the Agreement, paid as it is for each hour which
will be worked, is sufficient to compensate employees for allowances and penalty
rates they would be entitled to under the Award. The undertaking to apply Award
relativities to the C10 rate in the Agreement will maintain the necessary margin to
ensure that the Agreement passes the BOOT in respect of any person who may be
employed who would be entitled to be classified above C10 under the Award. The
Applicant has also addressed the other significant matter raised by the Full Bench by
stipulating the cycles over which ordinary hours can be rostered. This will ensure that
the calculation of amounts for the purposes of items 2 and 6 of the undertaking can be
properly carried out.
[23] Similar undertakings to those proffered by the employer in this case have been
accepted in any number of agreements approved by the Commission. I accept the
undertakings provided by the employer and I am satisfied that they meet the concerns
in relation to whether the Agreement passes the BOOT. I am also satisfied that the
undertakings do not cause financial detriment to any employee and that they do not
result in substantial changes to the Agreement.”
5 Decision at [11]-[12]
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[17] The Deputy President recorded that copies of the undertaking had been sent to the
bargaining representatives (that, is the three persons employed by Main People) at their last
known addresses, but no response had been received. The Deputy President then stated that
the Agreement was required to be approved on the basis that the statutory requirements for
approval had been met.
Submissions
[18] The unions submitted firstly that the Deputy President erred in being satisfied under
s.186(3) of the FW Act that the group of employees covered by the Agreement was fairly
chosen. The selection of the group was unfair because it undermined collective bargaining in
a manner which was not compatible with Part 2-4 of the FW Act and was contrary to the
purpose and policy of the FW Act. To the extent that this proposition was inconsistent with
the judgment of the Federal Court Full Court in Construction, Forestry, Mining and Energy
Union v John Holland Pty Ltd6, it was respectfully submitted that this decision was wrong and
should not be followed. In circumstances where the Agreement was negotiated and made with
three casual employees in one remote location in Western Australia who fell within only two
classifications, there could not be satisfaction, the unions submitted, that the selection of a
group of employees encompassing 17 classifications across all States and Territories in
Australia was fair. They also submitted that in CFMEU v John Holland, it had been
acknowledged that in assessing whether the fairly chosen requirement was satisfied, it was
necessary to have regard to the business rationale for the scope of the proposed agreement and
to deal with any possibility of unfair exploitation. In circumstances where the Agreement had
been found in the Appeal Decision not to satisfy the better off overall test, the unions
submitted that it should be concluded that the Agreement had been made by way of a
manipulated process, lacked moral authenticity and was exploitative.
[19] The second submission made by the unions was that the Deputy President erred in
approving the Agreement on the basis of Main People’s undertaking because the undertaking
did not satisfy the requirements of s.190(2) and (3) of the FW Act. In particular the unions
submitted:
(1) Paragraph 2 of the undertaking was in the nature of an assertion about the
effect of the Agreement, and did not confer any entitlement upon employees.
The Commission therefore could not have been satisfied under s.190(2) that it
met the concern in relation to the better off overall test.
(2) Alternatively, if paragraph 2 is to be read with paragraph 6 as conferring an
entitlement, it is an entitlement that causes financial detriment to employees
covered by the Agreement because it only requires payment annually or upon
termination, as compared to s.323 of the FW Act which requires wages to be
paid at least monthly. The Commission could not therefore have been satisfied
under s.190(3)(a) that accepting the undertaking was not likely to cause
financial detriment to any employee covered by the Agreement.
(3) Paragraph 1 of the undertaking, which reduced the coverage of the Agreement,
paragraph 4, which introduced an entirely new classification structure and
6 [2015] FCAFC 16
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relativities into the Agreement, and paragraph 5, which introduced a
reconciliation process and associated new payment arrangements, were
significant and substantial changes. The Commission could not have been
satisfied under s.190(3)(b) that the undertaking was not likely to result in
substantial changes to the Agreement.
(4) In circumstances where the undertaking was incapable of acceptance, the
Deputy President erred in being satisfied that the better off overall test
requirement in s.186(2)(d) had been complied with.
[20] The unions submitted that permission to appeal should be granted because the appeal
raised questions as to the Commission’s jurisdiction and important issues of principle relevant
to future applications for approval of enterprise agreements, and because the Decision was
attended by serious error.
[21] Main People submitted that the unions’ challenge to the Decision in respect of the
“fairly chosen” requirement in s.186(3) was incompetent because that issue had been
determined in the Appeal Decision and was not an issue remitted for determination to the
Deputy President. In the alternative, Main People submitted that the unions’ appeal in this
respect was directly inconsistent with CFMEU v John Holland. In relation to the unions’
attack on the undertakings, Main People submitted:
(1) Paragraphs 2 and 6 of the undertaking, when read together, clearly conferred an
entitlement upon employees covered by the Agreement and an obligation on
Main People. If Main People does not meet its obligation to pay employees
more than what they would have received under the Manufacturing and
Associated Industries and Occupations Award 2010 (Metals Award)7, it is
liable for a contravention of s.50 of the FW Act.
(2) The undertaking provides a financial benefit, not a detriment, to employees
covered by the Agreement. Paragraph 6 is not to be read as meaning that any
top up payment required by paragraph 2 is only to be made annually, since the
payment of wages provisions in clause 9 of the Agreement requires weekly
payment of wages.
(3) The undertaking does not result in significant changes to the Agreement. In
respect of the coverage issues, the parties did not intend that the Agreement
cover work other than that falling within the coverage of the Metals Award, as
demonstrated by the references to the Metals Award in the application. An
undertaking which clarifies the intended operation of the Agreement is not one
which significantly changes it.
[22] It was submitted that the Decision was not attended by appealable error, and that
permission to appeal should be refused.
Statutory framework
7 MA000010
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[23] Section 186(1) of the FW Act establishes a “basic rule” that where an application for
approval of an enterprise agreement is made under s.185 (which prescribes the time in which
such an application must be made and its content), the Commission must approve the
agreement if the requirements in ss.186 and 187 are met. Sections 186 and 187 set out a range
of approval requirements. Section 186(2) sets out approval requirements in relation to the
safety net, and relevantly provides as follows:
186 When the FWC must approve an enterprise agreement—general
requirements
…
(2) The FWC must be satisfied that:
. . .
(d) the agreement passes the better off overall test.
[24] Section 193 prescribes what is necessary to pass the better off overall test. It relevantly
provides:
193 Passing the better off overall test
When a non-greenfields agreement passes the better off overall test
(1) An enterprise agreement that is not a greenfields agreement passes the better off
overall test under this section if the FWC is satisfied, as at the test time, that each
award covered employee, and each prospective award covered employee, for the
agreement would be better off overall if the agreement applied to the employee than if
the relevant modern award applied to the employee.
. . .
Award covered employee
(4) An award covered employee for an enterprise agreement is an employee who:
(a) is covered by the agreement; and
(b) at the test time, is covered by a modern award (the relevant modern award)
that:
(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to
perform under the agreement; and
(iii) covers his or her employer.
Prospective award covered employee
(5) A prospective award covered employee for an enterprise agreement is a person
who, if he or she were an employee at the test time of an employer covered by the
agreement:
(a) would be covered by the agreement; and
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(b) would be covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) would cover the person in relation to the work that he or she would
perform under the agreement; and
(iii) covers the employer.
Test time
(6) The test time is the time the application for approval of the agreement by the FWC
was made under section 185.
FWC may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better
off overall test, if a class of employees to which a particular employee belongs would
be better off if the agreement applied to that class than if the relevant modern award
applied to that class, the FWC is entitled to assume, in the absence of evidence to the
contrary, that the employee would be better off overall if the agreement applied to the
employee.
[25] The “fairly chosen” approval requirement is contained in s.186(3) and (3A), which
provides:
Requirement that the group of employees covered by the agreement is fairly chosen
(3) The FWC must be satisfied that the group of employees covered by the agreement
was fairly chosen.
(3A) If the agreement does not cover all of the employees of the employer or
employers covered by the agreement, the FWC must, in deciding whether the group of
employees covered was fairly chosen, take into account whether the group is
geographically, operationally or organisationally distinct.
[26] It is not necessarily the case that, where an agreement does not satisfy all of the
approval requirements in ss.186 and 187, the application for approval of the agreement must
be dismissed. Section 190 allows for an agreement to be approved with undertakings. It
provides:
190 FWC may approve an enterprise agreement with undertakings
Application of this section
(1) This section applies if:
(a) an application for the approval of an enterprise agreement has been made
under section 185; and
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(b) the FWC has a concern that the agreement does not meet the requirements
set out in sections 186 and 187.
Approval of agreement with undertakings
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied
that an undertaking accepted by the FWC under subsection (3) of this section meets
the concern.
Undertakings
(3) The FWC may only accept a written undertaking from one or more employers
covered by the agreement if the FWC is satisfied that the effect of accepting the
undertaking is not likely to:
(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.
FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has
sought the views of each person who the FWC knows is a bargaining representative
for the agreement.
Signature requirements
(5) The undertaking must meet any requirements relating to the signing of
undertakings that are prescribed by the regulations.
[27] Section 191(1) identifies the legal effect of an undertaking given in relation to a
single-employer enterprise agreement as follows:
(1) If:
(a) the FWC approves an enterprise agreement after accepting an undertaking
under subsection 190(3) in relation to the agreement; and
(b) the agreement covers a single employer;
the undertaking is taken to be a term of the agreement, as the agreement applies to the
employer.
Consideration
Fairly chosen issue
[28] We accept Main People’s submission that the appeal, insofar as it raises the issue of
whether the Agreement satisfied the “fairly chosen” requirement in s.186(3), is incompetent
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because this issue was not a matter determined by the Deputy President in the Decision. In the
Initial Decision, there was a finding that all the approval requirements in s.186, which
necessarily included the “fairly chosen” requirement in s.186(3), had been met. Insofar as the
unions’ first appeal challenged that conclusion, it was unsuccessful. As we have earlier set
out, the first Full Bench in the Appeal Decision said that there was no error in the conclusion
that the requirement in s.186(3) had been met. It is clear that the remittal of the matter to the
Deputy President (which involved the exercise of power under s.607(3)(c) of the FW Act)
only required consideration as to whether the provision of an undertaking would permit the
Agreement to be approved notwithstanding that it did not pass the better off overall test. That
being the case, the Deputy President correctly refrained from revisiting the issue. There was
therefore no decision by the Deputy President in relation to the “fairly chosen” issue which
could legitimately be the subject of an appeal under s.604.
[29] In substance, the unions’ appeal on this issue amounts to an invitation to us to
reconsider the conclusion reached by the earlier Full Bench about the “fairly chosen” issue in
the Appeal Decision and, if we disagree with it, to replace it with our own conclusion. We do
not consider that this is a course available to us in what is an appeal under s.604 of the FW
Act against the Decision made by the Deputy President, not the Appeal Decision made by the
earlier Full Bench.
[30] In any event, we do not disagree with the conclusion on this issue in the Appeal
Decision. The Federal Court Full Court decision in Construction, Forestry, Mining and
Energy Union v John Holland Pty Ltd8, which was issued after the Appeal Decision, does not
provide support for the unions’ case that the s.186(3) requirement was not met here. In that
decision, the Court rejected the proposition that, because a business enters into an enterprise
agreement with a small number of employees engaged shortly after the business starts
operation rather than making a greenfields agreement before anyone is employed, collective
bargaining as contemplated by the FW Act is thereby undermined and the enterprise
agreement becomes incapable of approval. To the extent that the unions submitted that
CFMEU v John Holland was wrongly decided in this respect, we can do no more than note
that submission.
[31] The unions pointed to the following passage in CFMEU v John Holland (in the
judgment of Buchanan J, with whom Besanko and Barker JJ relevantly agreed) as supporting
its position (emphasis added):
“[33] There is no requirement that employees who vote to make an agreement must
have been in employment for any length of time, and there is no requirement that they
remain in employment after the agreement is made. Presumably, the presently
employed members of such a group will act from self-interest, rather than from any
particular concern for the interests of future employees. The potential for manipulation
of the agreement-making procedures is, accordingly, a real one. However, no
suggestion of that kind is made in the present case and the possibility may therefore be
put to one side for the purpose of the discussion. That is an important consideration
because it suggests, as the primary judge thought, that determination of whether the
group of employees was fairly chosen in the present case needed to bring to account
the business rationale for the choice, as well as deal with any possibility of unfair
exploitation. It was not irrelevant in that assessment to bear in mind, as the primary
8 [2015] FCAFC 16
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judge said, that the agreement provided benefits, not detriments, for those to whom it
would apply.”
[32] It may be accepted that in the above passage the possibility is recognised that the
enterprise bargaining process may be manipulated in such a way as to lead to the unfair
exploitation of employees to be covered by the agreement. However, it is clear from the
Appeal Decision that the first Full Bench was alive to this possibility, as paragraphs [18]-[21]
(quoted above) demonstrate. As the Full Bench observed, merely because, at the time an
agreement is negotiated and made, the employer only has a small number of employees with
whom to negotiate, and the coverage of the resultant agreement encompasses a much wider
range of employees, it does not follow that the process has been manipulated and the “fairly
chosen” requirement has not been met. This situation may simply reflect the hopes and
ambitions of a small business which desires to become a much larger business.
[33] The position might be different if, for example, the small group of employees with
whom the agreement was negotiated were not employed at the time for bona fide business
reasons but rather only for a short period for the purpose of negotiating and making an
agreement which was disadvantageous to genuine future employees. In that circumstance, it
might be concluded that the group of employees covered by the agreement was not fairly
chosen. But there was no evidence of anything like this here.
The undertaking
[34] We consider that in two respects the Deputy President erred in approving the
Agreement on the basis of the undertaking proposed by Main People. First, we consider that
acceptance of paragraph 1 of the undertaking, which confined the coverage of the Agreement
to work covered by the Metals Award, resulted in a significant change to the Agreement
contrary to the requirement in s.190(3)(b) of the FW Act. It may be accepted that an
undertaking which clarifies an ambiguous provision of an agreement for which approval is
sought in accordance with the intention of the parties will not be likely to cause a significant
change in that agreement. However, this was not a case of ambiguity. The breadth of the
classifications in the Agreement, and the geographical scope of its coverage, made it apparent
that it had application beyond work covered by the Metals Award. The first Full Bench made
a clear finding to that effect in the Appeal Decision with which we agree.
[35] The scope of coverage of an enterprise agreement is one of its fundamental features.
The coverage provision of an agreement serves to identify the class of persons who will be
entitled to its benefits while it is in operation. The importance of an agreement’s coverage is
signified by the fact that, under the FW Act, s.186(3) requires the group of employees covered
by the agreement to be fairly chosen. For that reason an undertaking which purports to alter
the coverage of an enterprise agreement by excluding classes of persons who, on the face of
the agreement, would be covered by it, will always be likely to be a significant change.
[36] Further, it was with respect an incorrect approach to attempt to discern the parties’
common intention concerning the coverage of the Agreement from the statutory declarations
supporting the application for approval of the Agreement rather than from the text of the
Agreement itself. As was stated by the Full Bench in Australasian Meat Industry Employees
Union v Golden Cockerel Pty Limited 9:
9 [2014] FWCFB 7447 at [41]
[2015] FWCFB 4467
15
“Where the common intention of the parties is sought to be identified, regard is not to
be had to the subjective intentions or expectations of the parties. A common intention
is identified objectively, that is by reference to that which a reasonable person would
understand by the language the parties have used to express their agreement.”
[37] The Agreement disclosed in plain terms an intention for it to apply well beyond work
covered by the Metals Award. In those circumstances, there was no basis for a different
intention to be discerned from the statutory declarations supporting the application.
[38] Second, we do not consider that paragraphs 2 and 6 of the undertaking, read together,
are such as to have permitted satisfaction under s.190(2) that the concern that the Agreement
did not pass the better off overall test had been met. In considering whether to accept an
undertaking relevant to a better off overall test concern, it is necessary to analyse the
undertaking to ensure that it is expressed in a way which allows it to be enforced as a term of
the Agreement in accordance with s.191. An undertaking which is uncertain, ambiguous or
merely aspirational such that it does not establish an enforceable entitlement for the purpose
of s.191 is unlikely to meet a concern that an agreement does not pass the better off overall
test.
[39] Paragraphs 2 and 6 are incapable of meeting the concern that the Agreement did not
pass the better off overall test for the following reasons:
(1) Paragraph 2 is expressed in terms which make it unclear whether it is intended
to give rise to an entitlement or is merely an assertion about the effect of the
Agreement if approved.
(2) Even if paragraph 2 is read as if it is intended to create an entitlement, it is
entirely unclear what the entitlement created by the paragraph is. To the extent
that it purports to increase the rates of pay specified in the Agreement by an
amount that would make employees better off than under the Metals Award, it
is entirely unclear what the amount of that increase is or what the new rates of
pay are to which the employees are entitled. In the event that an employee
alleged a breach of the Agreement by Main People, it would be impossible for
a claimant employee or a court with jurisdiction to enforce the Agreement to
quantify how much, if anything, was owed to the employee. Paragraph 2 lacks
sufficient certainty to constitute an enforceable entitlement.
(3) When read with paragraph 6, it is clear that to the extent that paragraph 2
purports to create a pay entitlement, it is an entitlement which is only payable
annually and upon request. We reject the submission that the undertaking is to
be read with the payment of wages provision in the Agreement itself, since
paragraph 6 establishes a specific payment mechanism in respect of “an
amount which is required by this undertaking to be paid ...”. Any entitlement
to a wages top-up which is only payable on this basis cannot be considered
more beneficial than the payment entitlements under the Metals Award, where
the full rate must be paid by the employer in each pay period (specified as
weekly or fortnightly).
[2015] FWCFB 4467
16
[40] We therefore consider that the Decision was attended by appealable error. Permission
to appeal is granted because the errors we have identified were jurisdictional in nature (going
as they did to the power of the Commission to approve the Agreement), and because the issue
concerning the undertaking raised by this appeal is likely to have relevance to the
Commission’s enterprise agreement approvals processes generally. For the reasons we have
identified, we uphold the appeal and quash the Decision.
Re-hearing
[41] It will be necessary for Main People’s application for approval of the Agreement to be
re-determined. Pursuant to s.607(3)(c)(ii) of the FW Act, we will refer the matter to a member
of this Full Bench for this purpose on the basis that the Agreement may be approved if a re-
formulated undertaking is proffered which:
(1) does not purport to change the coverage of the Agreement;
(2) retains paragraphs 4 and 5 of the existing undertaking;
(3) requires the employer to identify, with respect to each employee engaged who
is covered by the Agreement, which modern award would apply to the
employee’s employment if the Agreement did not apply (the relevant award);
(4) requires the employer to pay to each employee, within each pay cycle, a total
amount which is a specified and not nominal monetary amount more than the
amount of pay the employee would have received if paid under the relevant
award for the work performed in that pay cycle; and
(5) provide the employee, each pay cycle, with a reconciliation which identifies
how the payment amount in (4) was calculated.
[42] The member to whom the matter is referred may in addition consider whether there
needs to be any additional requirements contained in the undertaking in order to make it
capable of acceptance under s.190(2). It will of course be necessary under s.190(4) to seek the
views of the bargaining representatives with respect to any revised undertaking, and we
consider in the circumstances of this case that the unions are also entitled to be heard on the
matter.
Conclusion
[43] We order as follows:
(1) Permission to appeal is granted.
(2) The appeal is upheld.
(3) The Decision is quashed.
(4) The application for approval of the Agreement is referred to Deputy President
Gostencnik for re-determination on the basis identified in paragraphs [41] and
[42] of this decision.
[2015] FWCFB 4467
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VICE PRESIDENT
Appearances:
W. Friend QC with C. Massy solicitor for the Communications, Electrical, Electronic, Energy,
Information, Postal, Plumbing and Allied Services Union of Australia and the Australian
Manufacturing Workers’ Union.
D. Williams with T. Walthall solicitors for Main People Pty Ltd.
Hearing details:
2015.
Brisbane:
3 June.
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