1
Fair Work Act 2009
s.604 - Appeal of decisions
KCL Industries Pty Ltd
(C2016/372)
VICE PRESIDENT HATCHER
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER SIMPSON SYDNEY, 3 JUNE 2016
Appeal against decision [2016] FWC 1031 of Commissioner Roe at Melbourne on 18
February 2016 in matter number AG2016/71.
Introduction
[1] On 22 February 2016 KCL Industries Pty Ltd (KCL) filed a notice of appeal under
s.604 of the Fair Work Act 2009 (FW Act) in which it sought permission to appeal and
appealed a decision of Commissioner Roe issued on 18 February 20161 (Decision). In the
Decision the Commissioner dismissed KCL’s application under s.185 of the FW Act for
approval of the KCL Industries Enterprise Agreement 2015 (Agreement) on the basis that he
could not be satisfied that employees would be “Better Off Overall” under the Agreement and
that the employer’s proposed undertakings did not resolve this problem.2
[2] In the Decision, the Commissioner identified his concerns about whether the
Agreement satisfied the better off overall test requirement (in s.186(2)(d) and explicated in
s.193) in the following way:
“[2] The hourly rates of pay in the Agreement excluding any penalty payments and
allowance which may be applicable are approximately 2% above the corresponding
Award rates. The Agreement does not specifically require the payment of allowances,
penalty payments and loadings including weekend penalties and most allowances,
such as the tool, leading hand and first aid allowances.
[3] On 29 January 2016, the Commission wrote to the Applicant outlining a number of
issues with the Agreement. Relevantly, I noted that I could not be satisfied employees
will be Better Off Overall under the Agreement due to Part III(b) and (h), which
provides as follows:
b) Payment for work
1 [2016] FWC 1031
2 Decision at [8]-[9]
[2016] FWCFB 3048
DECISION
E AUSTRALIA FairWork Commission
[2016] FWCFB 3048
2
…
Tool allowance will be payable weekly where appropriate in accordance with
the table, and for casual or part-time staff the allowance will be paid pro-rata.
Tool allowance will be absorbed where a higher rate is paid to an employee
…
h) Additional allowances
In general terms, employees are entitled to any allowances, penalties or
loadings which would have applied under the Award which would otherwise
have applied to their employment, provided that any such additional
entitlements will be absorbed where the employee is paid sufficiently above the
base rate to cover those entitlements, or to the extent that additional payment
covers those entitlements.”
[3] The Decision went on to describe the undertakings proposed by KCL (pursuant to
s.190 of the FW Act), and the Commissioner’s consideration of those undertakings, as
follows:
“[4] The employer proposed an undertaking that the above terms would be interpreted
in accordance with Part I(c) of the Agreement, which provides that any agreements
entered between employer and employee must always provide an entitlement to the
employee which is greater than the entitlements provided by this agreement or the
industrial instrument which would otherwise have applied. The Commission wrote to
the Applicant stating that I still could not be satisfied that employees were Better Off
Overall under the Agreement as the clauses referenced in the undertaking were too
vague to be clear as to what employees' enforceable entitlements were.
[5] The employer proposed another undertaking in similar terms to the first, providing
that the application of Part III(b) and (h) of the Agreement would be made subject to
provisions at Part I(c) and (d) of the agreement, resulting in the employee being better
off than they would otherwise have been. Once again I am not satisfied that this
undertaking is sufficient to address the uncertainty contained in Part III(b) and (h) and
therefore satisfy me that employees will be Better Off Overall. This is particularly the
case when the rates of pay in the Agreement are not significantly greater than those in
the Award. There is a very real prospect that employees would not be Better Off
Overall if they were entitled to allowances, penalties or loadings under the Award and
these were not required to be paid under the Agreement.
[6] The employer provided submissions in relation to the application of the above
terms and their inclusion in Agreements previously approved by the Commission as
well as in the Modern Awards. I am not persuaded by these submissions.
[7] In particular I rely on the Full Bench Decision the 4 yearly review of modern
awards, in which it was determined that absorption clauses contained in Modern
Awards were intended to be transitional and not directed at over-award payments in
the traditional sense, but rather at payments referable to pre-modernisation obligations
in award or agreement based transitional instruments.
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[8] The abovementioned terms and proposed undertakings would give the employer
the responsibility of assessing whether or not employees are Better Off Overall under
the Agreement instead of the Commission, and as such I cannot be satisfied that
employees are Better Off Overall with these terms included.”
[4] KCL’s grounds of appeal were as follows:
“1. The decision contains errors of law, in the incorrect interpretation of the
Enterprise Agreement as reached by the Commissioner.
2. The decision contains errors of law in misrepresenting the decision and effect
of the full bench decision on the Four Yearly Review of Modern Awards in
regard to absorption clauses [2015] FWCFB 6656 [37].
3. The decision contains errors of law in that it omits the proposal advanced by
the Commissioner to the Applicant that an alternative Employer’s Undertaking
be provided, which would have the effect of maintaining or increasing over-
award payments and would amount to substantial change to the Enterprise
Agreement, such that the Enterprise Agreement could not then be approved.
4. The decision contains errors of law in that it abjectly ignores the numerous
prior decisions of a multitude of Commissioners who have approved other
Enterprise Agreements expressed in identical terms. The decision thus fails to
comply with the requirement that decisions of the commission be consistent.”
[5] KCL contended that permission to appeal should be granted because “It is in the
public interest that permission to appeal be granted because of the evident errors of law,
including the misrepresentation of the provisions of the Enterprise Agreement, the
inappropriate interpretation and reliance on the Full Bench decision, and the failure to
adequately explain a decision that is contrary to the decisions made in numerous identical
Enterprise Agreement Approval applications”.
[6] The appeal was, at KCL’s request, heard on the papers without a formal hearing.
Pursuant to s.607(1), we considered that the appeal could adequately be determined without
receiving oral submissions, and KCL as the only person making submissions in the appeal
consented to this course.
Consideration - permission to appeal
[7] There is no right to appeal under s.604 of the FW Act, and an appeal may only be
made with the permission of the Commission. Subsection 604(2) requires the Commission to
grant permission to appeal if satisfied that it is “in the public interest to do so”. Permission to
appeal may otherwise be granted on discretionary grounds.
[8] Permission to appeal may be refused on the ground that the appeal lacks utility in the
sense that the ultimate outcome of the application before the Commission to which the appeal
relates would not be affected by the outcome of the appeal, or that the appeal otherwise has no
[2016] FWCFB 3048
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practical purpose, even if appealable error is demonstrated.3 In this case, the utility of the
appeal is to be assessed by reference to whether the Agreement is one capable of approval
even if permission to appeal is granted and the appeal is upheld.
[9] We do not consider that the Agreement is capable of approval, for two reasons. The
first is that KCL failed to issue a Notice of Employee Representation Rights (NERR) in
accordance with s.174(1A) of the FW Act.
[10] The provisions of the FW Act pertaining to the issue of the NERR as relevant to this
case are as follows:
173 Notice of employee representational rights
Employer to notify each employee of representational rights
(1) An employer that will be covered by a proposed enterprise agreement that is not a
greenfields agreement must take all reasonable steps to give notice of the right to be
represented by a bargaining representative to each employee who:
(a) will be covered by the agreement; and
(b) is employed at the notification time for the agreement.
Note: For the content of the notice, see section 174.
...
174 Content and form of notice of employee representational rights
Application of this section
(1) This section applies if an employer that will be covered by a proposed enterprise
agreement is required to give a notice under subsection 173(1) to an employee.
Notice requirements
(1A) The notice must:
(a) contain the content prescribed by the regulations; and
(b) not contain any other content; and
(c) be in the form prescribed by the regulations.
(1B) When prescribing the content of the notice for the purposes of paragraph (1A)(a),
the regulations must ensure that the notice complies with this section.
Content of notice—employee may appoint a bargaining representative
3 See e.g. Bechtel Construction (Australia) Pty Ltd v Maritime Union of Australia [2013] FWCFB 4250 at [14]; Ferrymen
Pty Ltd [2013] FWCFB 8025 at [48]; at [28]; New South Wales Bar Association v McAuliffe [2014] FWCFB 1663 at [28]
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(2) The notice must specify that the employee may appoint a bargaining representative
to represent the employee:
(a) in bargaining for the agreement; and
(b) in a matter before the FWC that relates to bargaining for the agreement.
Content of notice—default bargaining representative
(3) If subsection (4) does not apply, the notice must explain that:
(a) if the employee is a member of an employee organisation that is entitled to
represent the industrial interests of the employee in relation to work that will be
performed under the agreement; and
(b) the employee does not appoint another person as his or her bargaining
representative for the agreement;
the organisation will be the bargaining representative of the employee.
...
Content of notice—copy of instrument of appointment to be given
(5) The notice must explain the effect of paragraph 178(2)(a) (which deals with giving
a copy of an instrument of appointment of a bargaining representative to an
employee’s employer).
[11] Regulation 2.05 of the Fair Work Regulations 2009 (FW Regulations) provides:
2.05 Notice of employee representational rights—prescribed form
For subsection 174(6) of the Act, the notice of employee representational rights in
Schedule 2.1 is prescribed.
[12] Schedule 2.1 of the FW Regulations prescribes the form and content of the NERR,
when a low paid authorisation does not apply and the employee to whom the NERR is not
covered by an individual agreement-based transitional instrument, as follows (omitting the
heading):
[Name of employer] gives notice that it is bargaining in relation to an enterprise
agreement ([name of the proposed enterprise agreement]) which is proposed to cover
employees that [proposed coverage].
What is an enterprise agreement?
An enterprise agreement is an agreement between an employer and its employees that
will be covered by the agreement that sets the wages and conditions of those
employees for a period of up to 4 years. To come into operation, the agreement must
be supported by a majority of the employees who cast a vote to approve the agreement
and it must be approved by an independent authority, Fair Work Commission.
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If you are an employee who would be covered by the proposed agreement:
You have the right to appoint a bargaining representative to represent you in
bargaining for the agreement or in a matter before Fair Work Commission about
bargaining for the agreement.
You can do this by notifying the person in writing that you appoint that person as your
bargaining representative. You can also appoint yourself as a bargaining
representative. In either case you must give a copy of the appointment to your
employer.
If you are a member of a union that is entitled to represent your industrial interests in
relation to the work to be performed under the agreement, your union will be your
bargaining representative for the agreement unless you appoint another person as your
representative or you revoke the union’s status as your representative.
Questions?
If you have any questions about this notice or about enterprise bargaining, please
speak to either your employer, bargaining representative, go to www.fairwork.gov.au,
or contact the Fair Work Commission Infoline on [insert number].
[13] The telephone number of the Fair Work Commission Infoline in the last paragraph is
not set out in the form. The number is obtainable from a sample NERR on the Commission’s
website, and has at all relevant times been 1300 799 675.
[14] In Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union4, a
Full Bench of the Commission determined that:
(1) Subsection 174(1A) established a clear and unambiguous requirement that the
form and content of the NERR had to be as set out in the template provided for
in the FW Regulations.
(2) There was no capacity to depart from the template in the FW Regulations. The
Commission accepted the submission of the Commonwealth Minister for
Employment that “A mandatory template is provided in the Regulations. The
provisions make it clear that there is not scope to modify either the content or
the form of the Notice other than as set out in the template.”
(3) A failure to comply with the form and content requirement in s.174(1A)
renders the NERR invalid.
(4) The consequence of failing to give a valid NERR is that the Commission
cannot approve any subsequent enterprise agreement that is made.
4 [2014] FWCFB 2042 at [44]-[47]
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[15] The statutory declaration of Douglas Paul, the Director of KCL, made on 11 January
2016 in support of KCL’s application for approval of the Agreement stated that the NERR
was given to employees on 7 December 2015. The copy of the NERR provided to KCL’s
employees which was attached to Mr Paul’s declaration provided (omitting the heading):
“KCL Industries Pty Ltd gives notice that it is bargaining in relation to an enterprise
agreement (the KCL Industries Pty Ltd Enterprise Agreement 2015). It is intended to
cover all employees of the company.
What is an enterprise agreement?
An enterprise agreement is an agreement between an employer and its employees that
will be covered by the agreement that sets the wages and conditions of those
employees for a period of up to 4 years. To come into operation, the agreement must
be supported by a majority of the employees who cast a vote to approve the agreement
and it must be approved by an independent authority, Fair Work Australia.
If you are an employee who would be covered by the proposed agreement:
You have the right to appoint a bargaining representative to represent you in
bargaining for the agreement or in a matter before Fair Work Australia about
bargaining for the agreement.
You can do this by notifying the person in writing that you appoint that person as your
bargaining representative. You can also appoint yourself as a bargaining
representative. In either case you must give a copy of the appointment to your
employer.
If you are a member of a union that is entitled to represent your industrial interests in
relation to the work to be performed under the agreement, your union will be your
bargaining representative for the agreement unless you appoint another person as your
representative or you revoke the union’s status as your representative.
Questions?
If you have any questions about this notice or about enterprise bargaining, please
speak to either your employer, bargaining representative, go to www.fairwork.gov.au,
or contact the Fair Work Infoline on 13 13 94.”
[16] The NERR issued by KCL, on its face, departs from the prescribed form in at least
three respects:
(1) The first paragraph is restructured into two separate sentences.
(2) The Fair Work Commission is described as “Fair Work Australia”, which was
the name of the Commission prior to 1 January 2013.
(3) In the last paragraph, rather than referring to the Fair Work Commission
Infoline, the reference is to the “Fair Work Infoline” with the number “13 13
94”.
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[17] The second departure referred to above does not constitute a failure to comply with
s.174(1A), for the reasons explained in the Full Bench decision in Serco Australia Pty Limited
v United Voice and the Union of Christmas Island Workers5. The first is, arguably, a triviality
with which s.174(1A) might not be concerned. However the third cannot be ignored. The
“Fair Work Infoline on 13 13 94” is in fact an entirely different infoline to that operated by
this Commission. It is operated by the Fair Work Ombudsman. If the intention had been that
the template NERR advise employees of the existence of the Fair Work Ombudsman’s
infoline (rather than the Commission’s infoline) as a source of relevant information, the
prescribed form in Schedule 2.1 of the FW Regulations would have referred to it.
[18] When this issue was raised with KCL, its primary response was that the reference to
the Fair Work Commission Infoline in the prescribed NERR, as well as other parts of the
NERR, constituted “non-permitted content” which was in breach of the FW Act and invalid.
The basis of this contention was that the prescribed NERR contained content that went
beyond that specified in subsections (2)-(5) of s.174, and that s.174 required that the NERR
had to contain this content and no other content.
[19] This submission is based upon a misreading of s.174 and is rejected. Section 174(1B)
empowers the making of regulations prescribing the content of the NERR on the condition
that the regulations ensure that the NERR “complies with this section”. The matters required
to be contained in the prescribed NERR are set out in subsections (2)-(5) of s.174, so that the
prescribed form must deal with these matters in order to comply with the section. However
there is no requirement that the prescribed form must not contain any other content, or that the
power to prescribe the content of the NERR is restricted to the matters referred to in
subsections (2)-(5). Subsection 174(1A) does not constitute such a limitation, since its effect
is to require that any NERR actually issued by an employer contain the content prescribed by
the regulations and no other content, and be in the form prescribed by the regulations.
Subsection 174(1A) is not concerned with what content may be included in the form
prescribed by the regulations. Accordingly, the prescribed NERR in Schedule 2.1 of the FW
Regulations is not invalid in whole or part.
[20] KCL raised two other matters in its response which require some comment, although
they are not strictly relevant to the question of the validity of its NERR. It firstly contended
that the NERR it issued “was in fact ... downloaded from the Fair Work Commission website,
evidently subsequently superseded”. This is simply not correct. The version of the NERR
currently on the Commission’s website has not changed since 2013, when it was modified to
reflect the change in name of the institution from “Fair Work Australia” to its current name.
That version has at all times correctly reproduced Schedule 2.1 of the FW Regulations. Indeed
the Commission inserted the following warning notice on its website in August 2015 after
previous cases where it became apparent that versions of the NERR were in circulation which
did not conform with Schedule 2.1 of the FW Regulations:
“The Fair Work Commission is aware that there are a number of different versions of
the Notice of Employee Representational Rights (the notice) currently in circulation.
Section 174 of the Fair Work Act 2009 was amended in 2012. Since the amendment
came into operation the notice must contain the content and be in the form prescribed
5 [2015] FWCFB 5618
[2016] FWCFB 3048
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by the Fair Work Regulations 2009. The notice must not contain any other content. In
2014 a Full Bench of the Commission held that where a notice departs from the
template prescribed in the Regulations, the application may be found to be invalid
(Peabody Moorvale v CFMEU [2014] FWCFB 2042).
In particular, the Commission notes that there appears to be a number of versions of
the notice that erroneously refer to the Commission’s (or its predecessor’s) website
(www.fwc.gov.au or www.fwa.gov.au) in the concluding paragraph. As prescribed by
the Regulations, the notice must refer to the website of the Fair Work Ombudsman,
which is www.fairwork.gov.au. If the notice refers to a website other
than www.fairwork.gov.au, the notice may be found not to comply with s.174 of
the Fair Work Act 2009 and therefore be invalid.
Download:
A copy of the correct Notice of Employee Representational Rights (Word) as
extracted from the Regulations
More information in the Guide: Notice of employee representational rights
(PDF).”
[21] The underlined parts of the last two items in the above notice were hyperlinks to the
identified documents.
[22] KCL also contended that the Fair Work Commission Infoline identified in the
prescribed NERR did not in fact provide information about “representation or bargaining”,
because when the number was rung, the five information options offered in the recorded
directions did not refer to these matters. That is not an accurate representation of the position,
since the recorded message expressly refers to the availability of information about “making
an enterprise agreement”.
[23] The second reason why we consider that the Agreement is incapable of approval is
that we do not consider that, on any reasonable view, it could be regarded as having been
“genuinely agreed” as required by s.186(2)(a) of the FW Act having regard to s.188(c).
Section 188, which explicates the “genuinely agreed” in s.186(2)(a), provides:
188 When employees have genuinely agreed to an enterprise agreement
An enterprise agreement has been genuinely agreed to by the employees covered by
the agreement if the FWC is satisfied that:
(a) the employer, or each of the employers, covered by the agreement complied with
the following provisions in relation to the agreement:
(i) subsections 180(2), (3) and (5) (which deal with pre-approval steps);
(ii) subsection 181(2) (which requires that employees not be requested to
approve an enterprise agreement until 21 days after the last notice of employee
representational rights is given); and
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(b) the agreement was made in accordance with whichever of subsection 182(1) or (2)
applies (those subsections deal with the making of different kinds of enterprise
agreements by employee vote); and
(c) there are no other reasonable grounds for believing that the agreement has not been
genuinely agreed to by the employees.
[24] The “genuinely agreed” requirement has its origin in the scheme for the making and
certification of collective agreements under the Workplace Relations Act 1996. Section
170LT(6) of that Act (as it was prior to the amendments effected by the Workplace Relations
Amendment (Work Choices) Act 2005) provided, as a requirement in order for an agreement
with employees to be certified, that “a valid majority of persons employed at the time whose
employment would be subject to the agreement must have genuinely made the agreement”. In
CFMEU v Australian Industrial Relations Commission6 (Gordonstone) the Federal Court Full
Court said that s.170LT(6) “plainly betokens a concern with the authenticity and, as it were,
the moral authority of the agreement”. An example of the application of Gordonstone under
the Workplace Relations Act was Grocon Pty Ltd Enterprise Agreement (Victoria)7, in which
it was held that an agreement had not been genuinely agreed because the employees’ consent
was not informed and they were not advised of the consequences of their vote.8
[25] The Explanatory Memorandum for the Fair Work Bill 2008, in relation to subclause
188(c) of the Bill, made express reference to Gordonstone and Grocon as follows:
“796. Paragraph 188(c) provides that FWA must only approve an agreement if there
are no other reasonable grounds to believe that the agreement was not
genuinely agreed to by the employees. FWA can refuse to approve an
agreement where there are reasonable grounds to believe that the agreement
has not been genuinely agreed to by the employees who will be covered by the
agreement.
797. In determining whether there are reasonable grounds for believing that the
agreement has not been genuinely agreed to by employees, FWA may
consider whether the agreement has been validly made in accordance with
clause 182 (see, e.g., Construction Forestry Mining and Energy Union v
Australian Industrial Relations Commission (1999) 93 FCR 317 and the
decision of the AIRC in Grocon Pty Ltd Enterprise Agreement (Victoria)
(2003) 127 IR 13).”
[26] The reference in paragraph 797 to clause 182 is to the requirements for making
agreements now contained in s.182 of the FW Act. In s.182(1), a single-enterprise non-
greenfields agreement is treated as having been made when a majority of employees that will
be covered by the agreement and who cast a valid vote approve the agreement.
6 [1999] FCA 847, (1999) 93 FCR 317 at [126] per Wilcox and Madgwick JJ, with whom Moore J relevantly agreed at [155]
7 (2003) 127 IR 13
8 Ibid at [49]-[54] per Ross VP (as he then was)
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[27] Of relevance to this matter, the Explanatory Memorandum made a further observation
concerning subclause 188(c) in the context of its discussion about the better off overall test
(underlining added):
“824. The better off overall test also refers to prospective award covered
employees because sometimes an agreement may cover classifications of
employees in which no employees are actually engaged at the test time.
Extending the application of the better off overall test to these types of
employees guarantees the integrity of the safety net. Note that where an
agreement covers a large number of classifications of employees in which no
employees are actually engaged there may be a question as to whether the
agreement has been genuinely agreed - see clause 188.”
[28] Section 188 was considered in general terms by a Full Bench in Ostwald Bros Pty Ltd
v Construction, Forestry, Mining and Energy Union9. The Full Bench majority (Watson SDP
and Gooley C, as she then was) said:
“[78] ...“Genuinely agreed”, in s.188 is expressed in terms of satisfaction that particular
bargaining provisions within the Act have been complied with (ss.188(a) and (b)) and
satisfaction of a more general criterion in s.188(c), rather than in terms of a general
consideration of whether in the circumstances of a particular agreement a member is
satisfied that the agreement has been genuinely agreed to by the employees.
[79] As the Full Bench in Galintel10 noted “Section 188 establishes a set of
requirements, each of which must be satisfied if the necessary finding is to be made
under s186(2)(a).”
[80] Section 188 of the Act does not provide a wide general discretion for determining
whether employees have genuinely agreed to an enterprise agreement focussed at the
point of approval. Rather it requires specific actions to have been undertaken (in ss.
188(a) and (b) at specified times in advance of approval), with s 188(c) then requiring
satisfaction that there are no other reasonable grounds for believing that the agreement
has not been genuinely agreed to by the employees. Section 188(c) of the Act,
although itself a broad discretionary consideration, is an additional matter about which
[the Commission] needs to be satisfied and relates to grounds other than those arising
in relation to the ss. 188(a) and (b) matters”.
[29] In Central Queensland Services Pty Ltd11, Asbury DP undertook a detailed analysis of
decided cases relevant to the proper interpretation and application of s.188(c). The Deputy
President referred to the above passage in Ostwald and then continued as follows:
“[65] The approach to considering whether employees have genuinely agreed has been
discussed in a number of cases considering s. 188(c) and similar provisions in earlier
versions of the legislation and can be summarised as follows:
9 [2012] FWAFB 9512
10 Galintel Rolling Mills Pty Ltd T/A The Graham Group [2011] FWAFB 6772 at [36]
11 [2015] FWC 1554
http://www.fwc.gov.au/decisionssigned/html/2012fwafb9512.htm
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In deciding whether there are no other reasonable grounds for believing that an
agreement has not been genuinely agreed to [by] employees who will be
covered, the circumstances to be considered are those that existed when the
agreement was voted on.12
A consideration of all relevant circumstances revealed by the material before
the Commission, at the time the Commissions considers the application for
approval is required, in order to ascertain whether there are reasonable grounds
for rejecting the genuineness of the agreement;13
Circumstances including the provision of material or information to employees
which has the character of being misleading or intimidating,14 or where
approval is affected by a material non-disclosure, or there is a scheme
underpinning the agreement about which employees are not informed,15 will be
relevant to the Commission’s assessment of whether the agreement has been
genuinely agreed by the employees;
Genuine agreement requires that the consent of employees was informed and
that there was an absence of coercion.16
Section 188(c) is only a basis for finding that an agreement is not genuinely
agreed to if there are found to be reasonable grounds for this belief. This
requires a consideration of the soundness of the agreement.17
The requirement for genuine agreement considered in conjunction with the
objects of the Act in relation to agreement making betokens a concern with the
authenticity and moral authority of an agreement.18
[66] The facts in the cases where the genuineness of the agreement of employees has
been brought into question are instructive. In Re Toys “R” Us (Australia) Pty Limited
Enterprise Flexibility Agreement 199419 it was found that the material supplied by the
Company to employees did not fully disclose the impact of the agreement when
compared to the existing award conditions. It was also found that the union with
coverage of the employees was hampered in its efforts to disseminate an alternative
view, at least over two crucial days when the ballot for approval of the Agreement was
12 CJ Manfield Pty Ltd v CEPU PR522805 Per Watson VP, McCarthy DP and Jones C
13 Manfield Coalair and CEPU Electrical Division Northern Territory Enterprise Agreement Gove Alumina Refinery and
Mine Site - 2010-2012 [2011] FWAA 9129 per Lawler VP at [22]
14 Peabody Moorvale Pty Ltd v CFMEU [2014] FWAFB at [7] (Although this observation was made in the context of
additional written material distributed at the same time as the Notice of Employee Representational Rights it is equally
relevant in circumstances where oral presentations are made to employees); Re MSS Security Pty Ltd [2010] FWA 3687
15 Grocon Enterprise Agreement (Victoria) AIRC(2003) 127 IR 13 at 48; Manfield Coalair and CEPU Electrical Division
Northern Territory Enterprise Agreement Gove Alumina Refinery and Mine Site - 2010-2012 [2011] FWAA 9129 per Lawler
VP at [23]
16 Re Toys R Us (Aust) Pty Ltd Enterprise Flexibility Agreement 1994 Print L9066; Grocon Pty Ltd Enterprise Agreement
(Victoria) (2003) 127 IR 13 at 14
17 Ostwald Bros Pty Ltd v CFMEU [2012] FWAFB 9512 at [154] per Watson VP (dissenting)
18 CFMEU v AIRC 93 FCR 317 at 357 per Wilcox and Madgwick JJ
19 Print L9066 (C No 23663 of 1994)
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s188.html
[2016] FWCFB 3048
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held. As a result it was found that the employees had not genuinely agreed to the
agreement.
[67] The Manfield Colair Enterprise Agreement20 involved circumstances where the
employer resisted the approval of an agreement that had been voted on and approved
by employees, on the ground that the final version of the agreement distributed to
employees by the employer contained a significant mistake. Vice President Lawler
found that there was no indication that the agreement was other than the product of a
bona fide bargaining process. It was also held that a unilateral mistake made by the
employer in the version of the agreement that was distributed, did not mean that the
version of the Agreement voted on was not the true agreement and that there was no
question of there being some other agreement, different to the one annexed to the
application for approval that is the “true agreement”.21 On appeal,22 a Full Bench of
the Commission upheld that decision and held that an employer who wishes to
propose an agreement to its employees has an obligation to ensure that the agreement
reflects its intentions.
[68] In Re MSS Security Pty Ltd Enterprise Agreement 201223 the matters that were
held to constitute reasonable grounds for the Commission to believe that the
agreement was not genuinely agreed to were that employees were incorrectly advised
of the date upon which the approval ballot would close and as the percentage of
employees who cast a vote was small, it was more probable than not that a significant
number of employees did not vote because of incorrect information about the closing
date of the ballot. The version of the Agreement that was voted on by the employees in
that case was also missing pages.
[69] The Decision of the Federal Court in Construction, Forestry, Mining and Energy
Union v Australian Industrial Relations Commission and Others (Gordonstone)24 dealt
with the issue of whether an agreement was validly made in circumstances where the
group of employees who made it were not yet employed and may never have been
employed in the relevant single business. The Court concluded that the agreement had
not been genuinely made.
[70] In Grocon Pty Ltd Enterprise Agreement (Victoria)25 it was held that the
employer had created a structure or scheme involving employees being covered by a
number of agreements in circumstances where the employees who voted to approve an
agreement had been misinformed or had not been informed about the effect of the
arrangements, and in particular the fact that they could be the only employees bound
by the conditions in the agreement while other employees had different conditions. As
a result, the vote of employees to approve the agreement was not genuine.
20 [2011] FWAA 9129
21 Manfield Coalair and CEPU Electrical Division Northern Territory Enterprise Agreement Gove Alumina Refinery and
Mine Site - 2010-2012 [2011] FWAA 9129 per Lawler VP at [25] and [36]
22 CJ Manfield Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services
Union of Australia [2012] FWAFB 3534
23 [2010] FWA 3687
24 [1999] FCA 847, (1999) 93 FCR 317
25 Print PR927672, (2003) 127 IR 13
[2016] FWCFB 3048
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[71] It can be seen from the cases that the question of whether the Commission is
satisfied that there are no other reasonable grounds for believing that an agreement has
not been genuinely agreed to by employees is not limited to a consideration of whether
there has been coercion or misinformation in relation to the agreement and its effect.
The consideration under s.188(c) is not limited to these matters and incorporates all of
the relevant circumstances surrounding the process by which employees indicate their
agreement.”
[30] We agree with and adopt the majority analysis in Ostwald, and that of Asbury DP in
Central Queensland Services.
[31] In this matter there is an obvious disjunction between the content of the Agreement
and the characteristics of those who entered into it. The Agreement describes itself as
applicable to all employees of KCL, whether full-time, part-time, casual or temporary.26 It
sets out classifications and pay rates for private sector clerical employees, manufacturing
employees, and production and staff employees in the black coal mining industry (with the
last category including classifications for surveyors, safety officers, deputies, forepersons,
open cut overseers, geologists, chemists, production supervisors and undermanagers).27 The
Agreement also contains provisions whereby individual employees can enter into agreements
with the employer for flat rates of pay on a “better off overall basis”, and contains redundancy
pay provisions equivalent to the NES redundancy pay provisions.
[32] KCL’s application for approval of the Agreement, and the accompanying statutory
declaration of Mr Paul, disclose the following:
KCL’s industry was manufacturing;
its primary activity was described as “Manufacturing including providing services
on coal sites”;
the Agreement covered all the employees of KCL (except senior executives);
three employees would be covered by the Agreement, of whom two cast a valid
vote and voted to approve the Agreement; and
two of the employees were casuals.
[33] The document issued by KCL to explain the terms of the Agreement issued on 7
December 2015 together with a copy of the Agreement itself included the following statement
(underlining added):
“You are entitled to vote on the proposed Enterprise Agreement, and you will see that it
provides a safety net along the same lines as Awards do, but the safety net is higher
than that provided under the awards. It provides for employees to be paid on the same
26 Part I(a) of the Agreement
27 Part III(c) of the Agreement
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structure as the awards, meaning a base rate, with penalties for overtime, weekend and
late work etc, or if it suits you and the company, you can be paid a flat rate, as agreed.
It also allows for payout of annual leave and long service leave where agreed.
Approval of the Enterprise Agreement will not mean that you are then paid at the rates
stipulated in the Agreement. Subject to operational needs and satisfactory
performance, you will continue to be paid for your current work in accordance with
our existing arrangements.”
[34] After an inquiry was made of KCL as to the meaning and purpose of the underlined
paragraph of the above statement, KCL in a written submission identified that the relevant
employees were all paid above the rates contained in the Agreement, but were otherwise to be
subject to the other aspects of the Agreement.
[35] In the same submission, in response to an invitation from the Full Bench to address
how the aspect of the “genuinely agreed” requirement contained in s.188(c) was capable of
satisfaction, KCL stated:
“56. The employees currently engaged by the employer are at Trades level under the
Manufacturing and Associated Industries and Occupations Award, and it is expected
that employees in supporting roles such as Trades Assistant may become necessary.
57. While the business is currently under the Manufacturing etc award, it is entirely
feasible that in time the business may develop to be predominantly mine-based, in
which case the Black Coal Mining classifications and provisions are ready in place.
58. It is also conceivable that the business will evolve into a solely workshop-based
(off-site) business.
59. There is also the prospect that the business will grow and require various clerical
or administration staff, and again the appropriate provisions are in place to facilitate
that.”
[36] In summary, the position is that the Agreement covers a wide range of classifications
most of which have no relevance to the work performed by KCL’s three existing employees,
encompasses industries in which KCL does not currently operate, and contains rates of pay
which, even in respect of those classifications relevant to the current employees, are not to
apply to those employees. In those circumstances we do not consider that any authenticity
could attach to the agreement of the two employees to the rates and conditions in the
Agreement. The employees had no “stake” in the Agreement’s rates of pay, since they were
assured that their existing, higher rates of pay would remain in place (subject to “operational
needs and satisfactory performance”), and they could not have given informed consent in
relation to occupation and industries in which they did not work and presumably had no
experience.
[37] The latter consideration applies with particular force to the Agreement’s coverage of
work in the black coal mining industry. The award covering that industry, the Black Coal
[2016] FWCFB 3048
16
Mining Industry Award 201028, contains a range of provisions which are specifically tailored
to the unique circumstances of that industry. An example of that is the industry-specific
redundancy scheme contained in clause 14 of the Award, which provides for severance and
retrenchment benefits greatly in excess of the NES redundancy pay provisions. Those benefits
have not been included in the Agreement, and thus would not apply to hypothetical future
coal mining employees. The two employees who agreed to this outcome could never have
received the benefit of these provisions, because their work is not covered by the Black Coal
Mining Industry Award, and there is nothing to suggest that they had any knowledge of the
existence of these benefits. It is impossible to conclude that the provisions of the Agreement
applicable to black coal mining were agreed with the informed consent of the existing
employees.
[38] A situation not dissimilar to this was considered by the Commission in McMah Pty
Ltd.29 In that matter Commissioner Bull (as he then was) said (footnote omitted):
“[30] As discussed above, the Agreement incorporates industries that no voting
employee was engaged in at the time. Adopting the principle of “the moral
authority of the agreement” it is hard to see where the moral authority of the
Agreement exists, for example, in respect of medical practitioners or law graduates.
[31] It is understandable and unremarkable that employees voting on an agreement
will not always cover the full range of classifications in a modern award that the
agreement is to either supplant or as in this Agreement, incorporate, subject to the
terms of the Agreement. It is another matter for employees to make an enterprise
agreement covering industries where no employees in any classification are engaged
when the agreement is made and may possibly never be engaged. The Act provides the
ability for employers to enter into Greenfield agreements in situations that relate to
new enterprises that employers are establishing or propose to establish but have not
yet employed any persons necessary for the conduct of that enterprise who will be
covered by the agreement.
[32] A further example of the difficulty is found at Clause 12 of the Agreement Hours
of Work. This clause provides that where the relevant award stipulates the days on
which ordinary hours can be worked and/or the span of ordinary hours and the relevant
award allows for a variation by agreement between the employer and employee, it is
taken that agreement has been reached to the extent permitted by the relevant award. It
is difficult to accept how agreement could be reached on the span of hours or days
worked where no employees in a particular industry have voted on the Agreement.”
[39] In McMah the problem identified by the Commissioner was resolved by his
acceptance of undertakings “to reduce the Agreement’s coverage to industries of the type and
nature the employees covered by the Agreement are engaged in” (that is, the industries of the
existing employees at the time the agreement was made).30 However, it has since been held at
the Full Bench level that an undertaking which sought to confine the coverage of an enterprise
agreement in a significant way could not be accepted because it would necessarily result in a
28 MA000001
29 [2015] FWCA 253
30 Ibid at [33]-[34]
[2016] FWCFB 3048
17
significant change to the Agreement contrary to the requirement in s.190(3)(b) of the FW
Act.31 Accordingly we do not consider that course would be available here even if such an
undertaking was proffered by KCL (which it has not been).
[40] KCL submitted that the Commission had commonly approved enterprise agreements
“where only a handful of employees are currently engaged yet the Enterprise Agreement
provides for wide-ranging classification levels and/or scales” because such agreements are
“legitimate on the basis that the intention of the employer is usually to grow the business, and
that in time more and varied employees will come on board”. In that connection KCL referred
to the Full Bench decision in CEPU v Sustaining Works Pty Ltd32 as supporting the
proposition that providing for prospective employees in a business that is intended to grow is
reasonable and legitimate.
[41] That submission does not pay regard to the distinction adverted to in McMah between
an agreement which accommodates a wider range of classifications in the business in which
the employer is currently engaged, and an agreement which extends into industries in which
the business has never previously operated. Sustaining Works, which was not concerned with
the “genuinely agreed’ approval requirement but rather whether the agreement in that case
satisfied the requirement in s.186(3) that the “group of employee covered by the agreement
was fairly chosen”, concerned a scenario which fell into the former category. The employer’s
business, in which the employees who approved the agreement worked, was to obtain “small-
scale supplementary gas supply project work in the Surat Basin”, and because it was
necessary for the employer “to have an enterprise agreement which covered the whole range
of functions required by this work”, the Full Bench found that there was an “intelligible and
legitimate business rationale for the selection by Sustaining Works of the employees to be
covered by the Agreement”.33 None of that reasoning supports the proposition that the
“genuinely agreed” requirement in this case is capable of satisfaction.
[42] The Agreement is therefore incapable of approval because there are reasonable
grounds for believing that it has not been genuinely agreed to by the employees. KCL
submitted that in any event the appeal had utility and we should grant permission to appeal
and determine its appeal grounds because it was in the public interest that we should correct
the errors it asserted were apparent in the Decision. We do not consider this is the appropriate
course for two alternative reasons. First, we do not consider that the appeal raises any issue of
such general importance that the public interest in favour of its resolution would outweigh the
lack of practical utility in hearing the appeal. Second, even if the appeal did raise such an
issue, we do not consider this appeal would be an appropriate vehicle for its resolution
because of the absence of a contradictor.
[43] We conclude therefore that the appeal has no practical utility because, even if the
appeal was successful, it would still be necessary to dismiss KCL’s application for approval
of the Agreement. In those circumstances we do not consider there is a proper basis to grant
permission to appeal either in the public interest or on discretionary grounds.
Order
31 CEPU v Main People Pty Ltd [2015] FWCFB 4467, (2015) 252 IR 340 at [34]
32 [2015] FWCFB 4422
33 Ibid at [25]-[26]
[2016] FWCFB 3048
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[44] Permission to appeal is refused.
VICE PRESIDENT
Final written submissions:
22 February 2016.
4 May 2016.
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OF THE FAIR WORK MISSION THE
