1
[Note: refer to the Federal Court decision dated 24 February 2015 [2015] FCAFC 16 for
result of appeal.]
[2012] FWAFB 7866
DECISION
Fair Work Act 2009
s.604—Appeal of decision
Construction, Forestry, Mining and Energy Union
v
John Holland Pty Ltd
(C2012/4133)
JUSTICE BOULTON, SENIOR DEPUTY PRESIDENT
DEPUTY PRESIDENT HAMILTON
COMMISSIONER CLOGHAN
SYDNEY, 13 SEPTEMBER 2012
Appeal - s.604 Fair Work Act - meaning of “fairly chosen” in s.186(3) - geographically,
operationally or organisationally distinct - coverage clause allowing project or site specific
agreements to override agreement - permission to appeal granted - appeal upheld - decision
subject to appeal quashed..
[1] On 22 May 2012 Deputy President McCarthy issued a decision1 approving the
Western Region Agreement Western Australia 2012-2016 (‘the Agreement’). The application
for approval was made by John Holland Pty Ltd (‘John Holland’) under s.185 of the Fair
Work Act 2009 (‘the Act’). It was opposed by the Construction, Forestry, Mining and Energy
Union (‘CFMEU’).
[2] On 12 June 2012 the CFMEU lodged a Notice of Appeal against the decision,
pursuant to s.604 of the Act. The grounds of appeal stated that the Deputy President erred in
being satisfied that the Agreement met several requirements of the Act, including that the
group of employees to be covered by the Agreement was geographically, operationally and/or
organisational distinct; that the group of employees to be covered by the Agreement was
fairly chosen; that the Agreement was genuinely agreed to by the employees covered by it;
and that the Agreement passed the better off overall test (BOOT).
Background
[3] Three employees commenced employment with John Holland and began work at the
New Children’s Hospital site in early 2012. John Holland had a meeting with all three
employees on 12 January 2012 in order to discuss a new enterprise agreement. Each
1 [2012] FWAA 4449.
AUSTRALIA FAIR WORK AUSTRALIA
http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2015/2015fcafc0016
[2012] FWAFB 7866
2
employee was given a copy of the Notice of Representational Rights. Each employee
nominated themselves in writing as bargaining representatives2.
[4] John Holland had a further meeting with the employees on 3 February 2012. At the
meeting it gave them a copy of the Agreement, a request to approve the Agreement, an
indicative roster indicating ordinary hours and overtime payments, and what was described as
a rate comparison between current rates and the rates that would apply under the Agreement3.
John Holland met with the employees on two further occasions (8 and 10 February 2012) to
ensure that there were no concerns or questions regarding the Agreement4.
[5] The three employees approved the Agreement on 13 February 20125. The application
was made to Fair Work Australia (‘FWA’) for approval on the same day.
[6] The Agreement provides for its coverage in Clause 1 (“Scope and Application of the
Agreement”) as follows:
“1.1 This Agreement is made under the Fair Work Act 2009 (Cth) and subject to
clause 1.2 those bound by this Agreement are:
(a) John Holland Pty Ltd ABN: 11 004 282 268 (the Company); and
(b) All employees of John Holland Pty Ltd performing building or civil
construction work in Western Australia in accordance with a classification specified in
this Agreement (Employees).
1.2 Any project or site specific agreement entered into by the Company or by any
Joint Venture or similar business arrangement of which the Company is part, will
cover and apply to the Company and any employees at that particular project or site to
the exclusion of this Agreement.”
[7] In making the application John Holland provided the following explanation of the
scope of the agreement:
“John Holland Pty Ltd employs a broad range of employee work classifications
nationally from clerical to construction on a mix of national, regional and project
agreements. In accordance with that, this Agreement in particular will cover all
employees performing building or civil construction work on a regional basis (that
being in this case Western Australia) except for any employees on site-specific project
arrangements.”6
[8] John Holland said that the award for the purposes of the BOOT was the Building and
Construction General On-site Award 2010 (‘the Award’). It said that there were no
reductions in the Agreement when compared to the Award and that there were more
beneficial provisions.
2 Employer’s Declaration in Support of Application for Approval of Enterprise Agreement, para 2.4.
3 Employer’s Declaration in Support of Application for Approval of Enterprise Agreement, para 2.5-2.6.
4 ibid, para 2.7.
5 ibid, para 2.8.
6 ibid, para 2.3.
[2012] FWAFB 7866
3
Submissions on Appeal
[9] Written and oral submissions were put by the CFMEU and John Holland. The
CFMEU submitted that there were various errors made by the Deputy President in
considering the application for the approval of the Agreement. These related mainly to the
consideration as to whether the group of employees covered by the Agreement was “fairly
chosen” as required by s.186(3) and, in this regard, whether the group was “geographically,
operationally or organisationally distinct” within the meaning of s.186(3A).
[10] It was submitted by the CFMEU that the Deputy President did not make a definitive
finding as required by s.186(3) as to what was the group of employees covered by the
Agreement. It was said that it was impossible to determine whether the group was fairly
chosen as the group itself is not capable of being identified or defined because of the
operation of the exclusion provision in clause 1.2 of the Agreement. Further it was submitted
that, contrary to the findings made by the Deputy President, the coverage of the Agreement
was not geographically, operationally or organisationally distinct as it excluded by its terms
some employees within the geographical area in which it applied, it excluded some employees
within its operational coverage (building and/or civil construction work) and it was clearly not
organisationally distinct. It was also submitted that the Agreement did not pass the BOOT.
[11] John Holland submitted that the CFMEU did not raise before the Deputy President
some of the arguments raised on appeal. In particular it submitted that the CFMEU did not
raise any argument that the Agreement was not geographically, operationally or
organisationally distinct, and that the CFMEU’s “fairly chosen” argument was at the highest
“directed at residual discretionary factors in respect of which it elected not to call evidence or
advance specific arguments”7. However in the proceedings before the Deputy President, John
Holland addressed what it saw as issues raised in the Full Bench decision in Cimeco v
CFMEU8 (‘Cimeco’), namely the “fairly chosen” test9, and also reserved its position on
providing further witness evidence on the “fairly chosen” issues10.
[12] John Holland submitted that the Deputy President, in considering whether the group of
employees was “fairly chosen”, did make specific findings in relation to the coverage and
application of the Agreement and took into account whether the group of employees was
geographically, operationally or organisationally distinct. The Deputy President found that the
Agreement covered construction work in Western Australia where there is not a project-
specific agreement, and that the group of employees was geographically distinct and
operationally distinct but not organisationally distinct. It was said that these findings were
correct and that the CFMEU should not be allowed on appeal to challenge the findings as to
the distinctiveness of the group as these were not contested before the Deputy President.
7 Outline of Submissions of the Respondent at paras 9-17.
8 [2012] FWAFB 2206, Ross J, Hamilton DP, Spencer C, 12 April 2012.
9 PN173.
10 PN254.
[2012] FWAFB 7866
4
[13] It was submitted by John Holland that there was no error in the decision-making
process regarding the BOOT. It was open to the Deputy President under s.590(1) and (2)(c) to
inform himself as he deemed appropriate and this included by asking the employer to provide
a comparison worksheet with examples of what the expected usual working hours and
entitlements would be under the Agreement. It was said that the CFMEU did not object to this
course.
The Appeal
[14] Section 604 of the Act and an appeal concerning the “fairly chosen” issue were
described by the Full Bench in Cimeco as follows:
“[7] An appeal under s.604 is an appeal by way of rehearing and the tribunal’s powers
on appeal are only exercisable if there is error on the part of the primary decision
maker.
[8] A member’s decision as to whether or not they are satisfied that the group of
employees covered by the agreement was ‘fairly chosen’ involves a degree of
subjectivity or value judgment. Hence, in a broad sense that decision can be
characterised as a discretionary decision. In Coal and Allied v AIRC the High Court
addressed the concept of error in the context of an appeal from a discretionary
decision, in these terms:
‘Because a decision-maker charged with the making of a discretionary decision
has some latitude as to the decision to be made, the correctness of the decision
can only be challenged by showing error in the decision-making process. And
unless the relevant statute directs otherwise, it is only if there is error in that
process that a discretionary decision can be set aside by an appellate tribunal.
The errors that might be made in the decision-making process were identified,
in relation to judicial discretions, in House v The King in these terms:
If the judge acts upon a wrong principle, if he allows extraneous or
irrelevant matters to guide or affect him, if he mistakes the facts, if he
does not take into account some material consideration, then his
determination should be reviewed and the appellate court may exercise
its own discretion in substitution for his if it has the materials for doing
so [Coal and Allied v AIRC (2000) 203 CLR 194 at 205 [21] citations
omitted].’”
[15] It was submitted by the CFMEU that permission to appeal should be granted in this
case as there are serious errors in the decision of the Deputy President, including errors going
to jurisdiction. Further it was submitted that there is a need for further guidance from a Full
Bench in relation to the application of s.186(3A) in the circumstances of the present matter
and, in particular, in regard to the operation of the exclusion provision in the coverage clause
of the Agreement and the issues raised about fairness to future employees. We recognise that
there are novel issues raised by the present appeal which warrant consideration by a Full
Bench. Accordingly we have decided to grant permission to appeal.
[16] The main issues in the appeal relate to the requirement in s.186(3) of the Act that the
group of employees to be covered by an agreement must be “fairly chosen”. These issues
[2012] FWAFB 7866
5
were raised in the proceedings before the Deputy President, including by the CFMEU.11
However we note that its arguments were considerably less clear and well-expressed on this
issue than the submissions put to us on appeal. Nevertheless the Deputy President addressed
the arguments put to him on this point and decided that the group was fairly chosen within the
meaning of s.186(3)12. In our view there is in the circumstances no barrier to the issues
relating to s.186(3) and other matters being raised by the CFMEU on appeal, particularly
given that it is alleged that there were errors of the kind described in House v The King in the
determination of those issues.
[17] We now turn to consider the main issues raised in the appeal.
(i) Whether the group of employees was fairly chosen
[18] The provisions of the Act relating to enterprise agreements appear in Part 2-4. The
objects of that Part are set out in s.171 as follows:
“171 The objects of this Part are:
(a) to provide a simple, flexible and fair framework that enables collective
bargaining in good faith, particularly at the enterprise level, for enterprise
agreements that deliver productivity benefits; and
(b) to enable FWA to facilitate good faith bargaining and the making of
enterprise agreements, including through:
(i) making bargaining orders; and
(ii) dealing with disputes where the bargaining representatives request
assistance; and
(iii) ensuring that applications to FWA for approval of enterprise
agreements are dealt with without delay.”
[19] Section 186 sets out when FWA must approve an enterprise agreement. The relevant
parts of s.186 are as follows:
“186 When FWA must approve an enterprise agreement—general requirements
Basic rule
(1) If an application for the approval of an enterprise agreement is made under
section 185, FWA must approve the agreement under this section if the requirements
set out in this section and section 187 are met.
Note: FWA may approve an enterprise agreement under this section with undertakings
(see section 190) ...
11 Outline of CFMEU Objections to Approval of the Western Region Agreement 2012-2016, paras 14-16.
12 At paras [15]-[21].
[2012] FWAFB 7866
6
Requirement that the group of employees covered by the agreement is fairly chosen
(3) FWA 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, FWA must, in deciding whether the group of
employees covered was fairly chosen, take into account whether the group is
geographically, operationally or organisationally distinct...”
[20] In Cimeco the Full Bench considered s.186(3) of the Act and the matters to be
considered in determining whether or not the employees covered by an agreement were
“fairly chosen”. The Full Bench said:
“[19] Given the context and the legislative history it can reasonably be assumed that if
the group of employees covered by the agreement are geographically, operationally or
organisationally distinct then that would be a factor telling in favour of a finding that
the group of employees was fairly chosen. Conversely, if the group of employees
covered by the agreement was not geographically, operationally or organisationally
distinct then that would be a factor telling against a finding that the group was fairly
chosen.
[20] It is important to appreciate that whether or not the group of employees covered
by the agreement is geographically, operationally or organisationally distinct is not
decisive, rather it is a matter to be given due weight, having regard to all other relevant
considerations.
[21] It is not appropriate to seek to exhaustively identify what might be the other
relevant considerations. They will vary from case to case and will need to be
demonstrated to the satisfaction of the tribunal. The word ‘fairly’ suggests that the
selection of the group was not arbitrary or discriminatory. For example, selection
based upon employee characteristics such as date of employment, age or gender would
be unlikely to be fair. Similarly, selection based on criteria which would have the
effect of undermining collective bargaining or other legislative objectives would also
be unlikely to be fair. It is also appropriate to have regard to the interests of the
employer, such as enhancing productivity, and the interests of employees in
determining whether the group of employees was fairly chosen. In this regard, it is not
only the interests of the employees covered by the agreement that are relevant; the
interests of those employees who are excluded from the coverage of the agreement are
also relevant. We note that there is a suggestion to the contrary in the oral submissions
put on behalf of Cimeco when counsel submitted that:
‘It was an erroneous approach to introduce the identification of the persons who
were relevantly employed at the time of the making of the agreement for the
purposes of testing the group chosen.’ [citation omitted]
[22] To the extent that it is suggested that the interests of the excluded employees are
irrelevant we reject that submission. In evaluating whether the group to be covered by
the agreement has been fairly chosen it is entirely appropriate to have regard to the
[2012] FWAFB 7866
7
consequences of that choice, that is, which employees have been excluded from the
agreement.”
[21] These comments have been adopted by other Full Benches of this tribunal, see e.g.
CFMEU v New Oakleigh Coal Pty Ltd13 and CFMEU v Queensland Bulk Handling Pty Ltd.14
[22] In the present matter, the Deputy President referred in his decision to Cimeco and
considered whether the group of employees covered by the Agreement was “fairly chosen”. In
this regard the Deputy President made express findings as to whether the group of employees
was “geographically, operationally or organisationally distinct”. The Deputy President said:
“[19] The group of employees here are geographically distinct in that the Agreement
applies in Western Australia only. They are also operationally distinct in that it applies
to building or civil works. The employees chosen do not appear to me to be
organisationally distinct.
[20] Practices of the industry concerned and the past practices of the Applicant are
also relevant to my considerations of fairly chosen. I do not sense anything in the
making of this Agreement as evincing any intention by the Applicant to circumvent
the objects of the FW Act and, in particular, an intention to prevent or frustrate the
right of employees to be represented and collectively bargain.
[21] I am satisfied that the employees were fairly chosen.”
[23] We have considered the submissions and material before the Deputy President and the
submissions on appeal and we have come to the conclusion that, in deciding that the
requirements in s.186(3) of the Act were satisfied, the Deputy President fell into error of the
kind referred to in House v The King. The reasons we have reached this conclusion are as
follows.
[24] Clause 1 of the Agreement deals with the Scope and Application of the Agreement and
sets out the relevant “group of employees covered by the agreement” for the purposes of
s.186(3). The “group” is expressed to be “All employees of John Holland Pty Ltd performing
building or civil construction work in Western Australia in accordance with a classification
specified in this Agreement (Employees)” (clause 1.1(b)). There is an important exception to
this set out in clause 1.2. This subclause provides that “Any project or site specific agreement
entered into by the Company or by any Joint Venture or similar business arrangement of
which the Company is part, will cover and apply to the Company and any employees at that
particular project or site to the exclusion of this Agreement” (clause 1.2). The term “project
or site specific agreement” is not defined.
[25] Given the nature of the exclusion provision, we doubt that it would be possible to
make any definitive finding as to the group of employees covered by the Agreement as
required for the purposes of s.186(3). This would depend upon how many building and civil
construction employees are now covered or may in the future be covered by site-specific
arrangements. At most the group to be covered by the Agreement may be described as
13 [2012] FWAFB 5107, Acton SDP, O’Callaghan SDP, Lewin C, 18 June 2012.
14 [2012] FWAFB 7551, Ross J, Boulton J, Smith DP, Booth C, Gregory C, 3 September 2012.
[2012] FWAFB 7866
8
comprising some of John Holland’s employees working on some building and civil
construction sites at some locations in Western Australia. As it is not possible to identify with
any certainty the group of employees to be covered by the Agreement, it is not possible to be
satisfied that the group of employees was fairly chosen as required by s.186(3) or to apply the
requirements of s.186(3A).
[26] The agreement reached between John Holland and the three employees would, if
approved, apply to all employees of John Holland performing building or civil construction
work in Western Australia, unless clause 1.2 applies. It would seem that the Agreement is not
intended to cover currently employed building and civil construction employees at sites where
there are project or site agreements in place. However the effect of clause 1.2 is not certain,
particularly in regard to future employees. In theory the Agreement could cover three, many,
or all of John Holland’s employees in Western Australia doing certain work and covered by
classifications referred to in clause 1.1(b). How many employees the Agreement covers will
depend on how many employees are covered by site-specific agreements as referred to in
clause 1.2. This cannot be predicted now.
[27] We have reached a number of conclusions about the coverage clause in the Agreement
and its relevance to s.186(3) and (3A).
[28] Firstly, given the provisions of clause 1.2 we are unable to conclude that the group of
employees covered by the agreement is “geographically, operationally or organisationally”
distinct within the meaning of s.186(3A). Clause 1.1 of the Agreement and the criteria
referred to in that clause cannot be relied upon for the purposes of s.186(3A) because of the
very broad exemption from those criteria provided in clause 1.2, which is not limited by
reference to those criteria. Clause 1.2 could potentially lead to coverage which is not distinct
on the basis of any of the criteria in s.186(3A). To give an example, the geographical
coverage of the Agreement once project or site agreements are reached could be ad hoc or
random in nature rather than geographical in any real sense.
[29] Similar comments could be made about operational or organisational coverage. By
virtue of the operation of the exclusion provision in clause 1.2, the Agreement may not cover
all of the building and civil construction employees of John Holland in Western Australia.
The exclusion of some building and civil construction employees from the coverage of the
Agreement on the basis that they are on site-specific arrangements means that the group of
employees covered by the Agreement is not operationally or organisationally distinct from the
other employees of John Holland. We recognise that this may need to be considered having
regard to the overall arrangements and other circumstances relating to the performance of
building and civil construction work by John Holland employees. However the material
before FWA does not provide a basis for concluding in the present case that the group of
employees covered by the Agreement is operationally or organisationally distinct.
[30] Secondly, the agreement reached between John Holland and three employees on the
New Children’s Hospital site potentially has application to many employees on many sites.
Cimeco is authority for the proposition, amongst other things, that selection of the group
covered based on criteria which would have the effect of undermining collective bargaining or
other legislative objects (for example those in s.171) would be unlikely to be fair within the
meaning of s.186(3).15 In this case three employees on one site have bargained and agreed on
15 [2012] FWAFB 2206 at para [21].
[2012] FWAFB 7866
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an agreement with potentially very wide application to other employees who have not
engaged in bargaining under Part 2-4 of the Act and will not be given the opportunity to
bargain. The Agreement before us can potentially cover all employees of John Holland
engaged in building and civil construction work in Western Australia who fall within the
relevant classifications (clause 1).
[31] It was submitted by John Holland that the making of the Agreement did not preclude
all bargaining activity. While it is true that some bargaining may occur notwithstanding the
Agreement, it is still the case that only some aspects of the bargaining options under the Act
would be available to employees covered by the Agreement. For example, employees at a
new site who fall within the terms of clause 1.1(b) would be covered by the Agreement and
therefore would not be able to take protected industrial action in relation to the bargaining for
a site or project specific agreement during the operation of the Agreement. The taking of
protected action is part of the bargaining scheme of the Act. The purpose of a protected
action ballot, for example, is to “to determine whether employees wish to engage in particular
protected industrial action for the agreement” (s.437). The date of expiry of an agreement is
relevant to such action, as well as for example the making of a bargaining order under
s.229(3).
[32] In relation to the potential for the selection of the group to undermine collective
bargaining, we also note the provisions in the Act regarding the making and approval of
greenfields agreements (e.g. s.182(3)). The agreement before us is not a greenfields
agreement within the meaning of s.182(3). It is an agreement reached through bargaining with
three employees. If it were possible to make an agreement with such a limited number of
employees on one site with potential application to many sites and employees in a large
geographical area such as Western Australia, this would mean that it is possible to make an
agreement with a similar effect to a greenfields agreement for possibly a very large number of
employees, without meeting the requirements of s.182(3).
[33] Thirdly, the effect of the exclusion provision in clause 1.2 is that any project or site
specific agreement entered into by John Holland will displace the operation of the Agreement
in relation to any employees at the particular project or site. The nature of the exclusion set
out in clause 1.2 could be an agreement approved under federal or State legislation, or not
approved under any legislation. We note that John Holland submitted in the proceedings that
in the circumstances the agreements referred to in clause 1.2 would be agreements approved
under the Act. However there is no express provision to that effect in the Agreement. It is not
clear from the subclause that the project or site agreement would need to satisfy the
requirements of the Act for approval (particularly, the BOOT) or that it would need to be
made in a way which is consistent with one of the purposes of the provisions in Part 2-4 of the
Act, namely to facilitate the making of a democratic and informed decision on whether an
agreement should be made.16 The interests of the employees excluded from the coverage of an
agreement, along with the interests of those covered, are relevant considerations in
determining whether the group of employees was fairly chosen.17
[34] For the abovementioned reasons, we consider that the group of employees covered by
the Agreement is not geographically, operationally or organisationally distinct. We also
consider that the operation of the Agreement, as made with the three employees, would
16 See CFMEU v Fair Work Australia [2011] FCA 719 at para [27].
17 [2012] FWAFB 2206 at para [21].
[2012] FWAFB 7866
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undermine collective bargaining by other employees in a manner not compatible with the
objects of Part 2-4, and that the exclusion provision in the clause is contrary to the purpose
and policy of the Act.
[35] We have taken these factors into account in considering whether the group of
employees covered by the Agreement was fairly chosen within the meaning of s.186(3). We
have also had regard to the difficulty in the present matter of making any definitive finding as
to the group of employees covered by the Agreement. In the circumstances of this matter, we
do not consider that a conclusion could be reached that the group of employees was fairly
chosen. In reaching such a conclusion, we consider that the Deputy President erred both in the
application of the relevant legislative provisions and in the exercise of discretion.
(ii) Natural Justice and the ‘Better Off Overall Test’
[36] It is not necessary, in view of the above findings, to make any final determination in
relation the ground of appeal alleging a denial of natural justice.
[37] We note that the Deputy President required John Holland to provide him with a
spreadsheet comparing the Agreement with the Award “based on indicative hours to be
worked, or expected to be worked”18. He did not provide the CFMEU with a copy of the
spreadsheet or an opportunity be heard on its contents. The CFMEU appeared in the
proceedings before the Deputy President, and put submissions to the effect that the
Agreement did not meet the requirements of the BOOT. It is true that the CFMEU did not
object when the Deputy President indicated that had would probably not provide it with the
opportunity to consider the spreadsheet and provide any submissions it had on its contents19.
Nevertheless, given the nature of the objections made by the CFMEU, we consider that as a
matter of procedural fairness it should have been provided with an opportunity to put
submissions on the conclusions to be drawn from the spreadsheet comparisons.
Conclusion
[38] For all the reasons given, we consider that the decision appealed against is attended by
errors of the kind referred to in House v The King. In particular, the requirements of s.186(3)
were not met and accordingly there was no proper basis for the Deputy President to approve
the Agreement. We have therefore decided to allow the appeal and to quash the approval of
the Agreement. We so order.
SENIOR DEPUTY PRESIDENT
18 [2012] FWAA 4449 at para 23.
19 PN462.
[2012] FWAFB 7866
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Appearances:
R Reitano of counsel and K Sneddon for the CFMEU.
R Dalton of counsel and C Gianetti for John Holland Pty Ltd.
Hearing details:
2012.
Perth:
July 10.
Final written submissions:
Appellant: 11 July 2012.
Respondent: 12 July 2012.
[2012] FWAFB 7866
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