Note: Judicial review of this decision [NSD433/2011] discontinued 16 November 2011.
[2011] FWAFB 1537 |
FAIR WORK AUSTRALIA |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
SENIOR DEPUTY PRESIDENT WATSON |
|
Appeal against decision [[2010] FWAA 8559] of Commissioner Raffaelli at Sydney on 10 November 2010 in matter number AG2010/2247 - permission to appeal granted - appeal upheld.
[1] This is an appeal by The Australian Institute of Marine and Power Engineers (AIMPE) under s.604 of the Fair Work Act 2009 (the Act) against a decision 1 by Commissioner Raffaelli to approve the Inco Ships Pty Ltd Officer Collective Agreement 2010 MV CSL Melbourne (the Agreement). The agreement was made between and applies to Inco Ships Pty Ltd (Inco) and its employees engaged on the vessel MV CSL Melbourne, other than an identified class of trainees. It was approved subject to undertakings annexed to the Commissioner’s decision.2
[2] The decision under appeal was made following a hearing before Commissioner Raffaelli. AIMPE (although not parties to the Agreement) and the Australian Council of Trade Unions (ACTU) sought permission to put submissions against the approval of the Agreement. The Commissioner allowed them both to put submissions and evidence 3 to inform him in accordance with s.590 of the Act.
Is the appeal competent?
[3] A preliminary issue arises concerning the competence of the appeal. The Act provides that an appeal may be made by a person who is aggrieved by a decision. The relevant section is s.604(1)(a). The question in this case is whether AIMPE is “aggrieved” by Commissioner Raffaelli’s’s decision to approve the agreement.
[4] A Full Court of the Federal Court of Australia considered the meaning of the term “person aggrieved” in Tweed Valley Fruit Processors Pty Ltd v Ross and others 4 (Tweed Valley). It may fairly be said that the term “person aggrieved” is capable of extending beyond persons whose legal interests are affected by the decision in question and extends to persons with an interest in the decision beyond that of an ordinary member of the public.5 The statutory context is not relevantly different in this case.
[5] AIMPE relies on the following matters:
1. it has an important role in the industry;
2. it is concerned with the maintenance of its members’ conditions of employment;
3. it participated in the proceedings before Commissioner Raffaelli by calling evidence and making submissions;
4. it has the right to represent marine engineers employed on the MV CSL Melbourne;
5. it has members on other vessels who perform work of the same kind as that covered by the Agreement, in competition with the MV CSL Melbourne;
6. there are serious matters in issue in the appeal. The Full Bench in CFMEU Re: TCFUA & Solaris Paper Enterprise Agreement 2010 6 held that whilst the CFMEU did not have members at the workplace, the fact that it represented employees in the industry and the seriousness of the question to be determined in that case meant that they were a person aggrieved; and
7. it has an interest in the decision and approval of the Agreement beyond that of an ordinary member of the public.
[6] AIMPE submitted that the approval decision of Commissioner Raffaelli prejudicially affects its interests and the interests of its members and that its interest is above that of an ordinary member of the public.
[7] Inco submitted that:
1. AIMPE has adduced no evidence to support that it has members working on the MV CSL Melbourne or on ships competing with it;
2. the decision in Tweed Valley makes it clear that the question of whether a person is aggrieved by a decision is governed by the statutory context. It found the relevant union to have a relevant interest in the maintenance of its members’ terms and conditions in that case because it created potential for industrial disputes which gave rise to a “clear and imminent rather than [a] remote, indirect or fanciful” 7 interest in the decision;
3. there is no clear or imminent threat of an industrial dispute. In the context of the Act, AIMPE and its members cannot take industrial action against other employers in respect of the conditions afforded by Inco to its employees on the MV CSL Melbourne;
4. the Act contemplates that the Agreement will apply to Inco and its employees on the MV CSL Melbourne. It follows that the agreement conditions on the MV CSL Melbourne do not and cannot affect conditions on other ships in the industry;
5. under the Act, AIMPE’s role in the enterprise agreement making process is prescribed. Other than for a greenfields agreement, it may only represent employees if appointed a bargaining representative and if it is entitled to represent the industrial interests of employees in relation to work under the Agreement. It would be curious if AIMPE, which had no statutory role in the making of the agreement, had a right to appeal the approval decision;
6. none of the employees covered by the Agreement, either by express choice or by default, nominated AIMPE as a bargaining representative to negotiate the Agreement. There is no evidence of any employee covered by the Agreement being aggrieved by its making or approval; and
7. AIMPE’s involvement in the proceedings before Commissioner Raffaelli, under s.590 of the Act, does not make it a person aggrieved by his decision. Its involvement in those proceedings does not make it a party to the proceedings or provide it with any special status as an intervener.
[8] AIMPE has the right to represent marine engineers employed on the MV CSL Melbourne. Although there was no evidence before us, AIMPE asserted that it had a member employed during the agreement making process and a member currently engaged on the MV CSL Melbourne. 8 There is at least the potential for a member or members to be employed on the MV CSL Melbourne under the terms of the Agreement approved. Further, AIMPE has members engaged on other vessels in competition with the MV CSL Melbourne. On this basis, we are satisfied that AIMPE has an interest in the Commissioner’s decision and approval of the Agreement beyond that of an ordinary member of the public. Having regard to the authorities, we are satisfied that AIMPE is a person aggrieved by the Commissioner’s decision approving and his approval of the Agreement and, therefore, has standing to appeal against the decision and approval.
Permission to appeal
[9] Section 604(1) of the Act provides that permission is required to appeal. Section 604(2) provides that Fair Work Australia must grant permission if it is satisfied that it is in the public interest to do.
[10] An appeal under s.604 of the Act can be characterised as an appeal by way of a rehearing. The authorities in relation to the predecessor provisions of the Workplace Relations Act 1996 are equally applicable to appeals under s.604. A successful appeal requires the identification of error on the part of the primary decision-maker.
[11] To the extent that any part of the decision involves the exercise of a discretion, the principles concerning appeals against discretionary decisions apply. 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.
The Appeal Grounds
[12] The appeal grounds raised by AIMPE are:
1. Commissioner Raffaelli erred in approving the Agreement by misapplying the test as to whether its terms contravened s.55 of the Act, as required by s.186(2)(c), which requires that an enterprise agreement must not exclude the National Employment Standards (NES) or any provision of the NES.
2. Commissioner Raffaelli failed to give any reasons for his decision regarding the operation of clause 3.1.3.2, in relation to redundancy, and s.55 of the Act.
3. Commissioner Raffaelli erred in approving the Agreement by misapplying the test as to whether the employees have genuinely agreed to the Agreement, as required by s.186(2)(a) of the Act.
[13] It is useful to set out a brief summary of how the matter proceeded before Commissioner Raffaelli.
[14] The proceedings commenced on 24 September 2010, with two applications before the Commissioner (AG2010/2247: MV CSL Melbourne, and AG2010/2248: MV Tassie Bridge). In that hearing, the Commissioner dealt with applications by AIMPE and the ACTU to put evidence and submissions and an adjournment application by AIMPE in favour of a bargaining order application by AIMPE. 9 That adjournment application was refused, although the matter was adjourned until 28 September 2010.
[15] On 28 September 2010, the Commissioner dealt further with the two applications before him.
[16] Evidence was given by Mr T Clarke of the ACTU and AIMPE organiser, Mr M Bakhaazi, dealing with attempts to bargain, contact with members and the nature of bargaining. Ms C Konnecke, Human Resources Manager of Inco, gave evidence in relation to bargaining and the agreement making process. Much of the evidence was directed to the MV Tassie Bridge. Mr Clarke put extensive submissions on behalf of AIMPE and the ACTU. The matters were adjourned until 27 October 2010.
[17] Prior to the matters resuming on 27 October 2010, Inco advised the Commissioner and AIMPE that it no longer pursued the application in AG2010/2248, so that the proceedings were then limited to the application to approve the MV CSL Melbourne Agreement. That position was confirmed by Inco at the commencement of the 27 October 2010 hearing. Mr P Moran, of EMA Consulting, gave evidence concerning the calculation of the loaded salary in clause 3.1 (see below). Inco put submissions, with AIMPE putting brief submissions in reply.
[18] A reasonable reading of the transcript before Commissioner Raffaelli discloses that the final appeal ground, concerning genuine agreement, was the primary issue addressed in the proceedings before him, including substantial submissions in relation to the interaction between the Agreement and the NES and associated Agreement terms, such as clauses 1.3.2, 1.6, 3.1 and 5.10 directed to the issue as to whether the Agreement was so uncertain as to prevent genuine agreement. 10 The s.186(2)(c) issue was raised only briefly in its own right in the submissions of the ACTU, AIMPE and Inco before Commissioner Raffaelli.
[19] The reasons of Commissioner Raffaelli accurately reflect the manner in which the matter was argued before him.
1. The s.186(2)(c)/s.55 issue
[20] AIMPE submitted that clause 3.1.3 of the Agreement excludes the NES entitlements in respect of redundancy and long service leave, noting that the statutory declaration of Inco, in support of the approval, stated:
“The agreement excludes in whole or in part the provisions of the National Employment Standards dealing with matters of redundancy and long service leave by virtue of clause 3.1.” 11
[21] Clause 3.1 of the Agreement provides:
“3.1 REMUNERATION
3.1.1 Employees will receive the minimum annual salary at the rate applicable to their classification for permanent Employees set out in Schedule 2 to this Agreement. Relief Employees shall receive the daily rate applicable to their classification for relief Employees set out in Schedule 2 to this Agreement.
3.1.2 Where an Employee is reassigned to another position, the Employee will receive the applicable salary for that position calculated at the daily rate for each day that they work in that position provided that (except in the case where the position is for training purposes or to accrue sea time for the purpose of obtaining qualifications) it is not less than the salary for the position to which they are appointed. For the purposes of this Agreement, the daily rate will be calculated by dividing the relevant annual salary for the position by 12 and then dividing by 30.
3.1.3 For the purposes of this Agreement ‘salary’ includes compensation for ordinary hours of work, overtime and all allowances, loadings (including annual leave loading), penalties or like payments to which an Employee may otherwise be entitled under any applicable award, industrial instrument or law other than allowances, penalties or loadings under this Agreement. Without limitation, ‘salary’ also includes:
3.1.3.1 Compensation in lieu of long service leave entitlements (whether or not an Employee qualifies for long service leave). As a consequence an Employee will not be entitled to long service leave or any separate or additional payment for long service leave upon termination of their employment for whatever reason; and
3.1.3.2 Compensation in lieu of severance or redundancy pay entitlements (whether or not employment is terminated on the grounds of redundancy). As a consequence, an Employee is not entitled to any separate or additional payment for severance or redundancy upon termination of employment on the grounds of redundancy.
3.1.4 Should it be decided at some future point in time that notwithstanding the provisions of clause 3.1.3 above an employee is entitled to payment of all or any amount of severance or redundancy payment or long service leave payment (whether in whole or in part) then the component that has been incorporated into salary on an ongoing basis as provided by this Agreement shall be calculated and offset against any costs that result from such a decision.
3.1.5 In the event that the provisions of clause 3.1.4 are activated, the salaries provided for in Schedule 2 of this Agreement shall be adjusted to the extent necessary to accommodate the application of the relevant provision(s) of the NES or other provision such that the value of the Employee’s overall entitlements/remuneration remains the same.
3.1.6 Except for periods of unpaid leave, Employees will be paid fortnightly in arrears at the rate of 1/26th of their classification’s annual salary appearing in Schedule 2 or at the daily rate (as the case may be) opposite the classification of the position to which an Employee is appointed or in which they are performing duties as the case may be. Any such monies owing shall be paid by direct debit to each Employee’s bank or credit union account.
[22] Clause 1.3.2 of the Agreement provides:
“The terms of this Agreement apply subject to the National Employment Standards. Should a term of the NES provide a more beneficial entitlement to Employee (sic) than the corresponding term of this Agreement, the former will apply.”
[23] AIMPE submitted that the Agreement removes the NES entitlements in respect of long service leave and redundancy and replaces them with a salary provision said to compensate for the entitlements. It submitted that the Agreement provisions did not fall within the modifications to the NES permitted by s.55(2), (4) or (5) of the Act.
[24] AIMPE relied on the decision of a Full Bench in Armacell Australia Pty Ltd and others 12 (Armacell), submitting that clause 3.1.3 of the Agreement is a term which contravenes s.55 of the Act, contrary to s.186(2)(c) and that an undertaking of the type contemplated by the Full Bench in Armacell is incapable of rendering the Agreement capable of approval as the long service leave is entirely incorporated into salary without any regard to the Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993 (the LSL Award).
[25] Inco submitted that s.55(1) of the Act provides that an enterprise agreement must not “exclude” the NES and a term of an agreement has no effect to the extent that it contravenes s.55 of the Act. 13 It further submitted that the self-evident purpose of s.55 is that the NES establish minimum standards of employment14 which cannot be displaced but submitted that an enterprise agreement may include terms which supplement the NES to the extent that the terms are not “detrimental” to an employee in any respect when compared with the NES.15 When a term of an agreement supplements the NES it does not contravene s.55 of the Act.
[26] Inco submitted that the Agreement is more beneficial than the NES provision for redundancy pay because:
1. it compensates employees for redundancy pay even though the employee’s employment may not terminate due to redundancy; and
2. the employee receives redundancy pay in advance of termination, rather than at some undefined future date.
[27] Inco submitted that the Agreement provides for salary to include compensation for long service leave, a payment in advance of an entitlement to take long service leave. It submitted that the entitlement to long service leave arises from the award that would have applied immediately before 1 January 2010 16 - the LSL Award.17 Under the LSL Award, an employee’s entitlement to long service leave can be taken or payment in lieu can be made in accordance with its terms.18 A payment in lieu of long service leave can be made “in any…way agreed between the employer and employee”.19 The LSL Award expressly permits an employer and an employee to agree on the way in which payment of long service leave is made.
[28] Inco also submitted that the Agreement is more beneficial than the NES provision for long service leave because:
1. it compensates employees for long service leave even though the employee does not have or is not entitled to long service leave; and
2. the employee receives payment in respect of long service leave in advance of the entitlement arising, rather than at some undefined future date.
[29] Inco submitted that clause 3.1.3.1 of the Agreement is a term that supplements the NES and when a term of an agreement supplements the NES it does not contravene s.55 of the Act.
[30] In relation to long service leave, Commissioner Raffaelli found that:
“[75] While rolling up entitlements to long service leave may potentially offend section 55, it is clear that the relevant award (Exhibit AIMPE 6) enables payments to be made in advance. Given that, the incorporation of long service leave (which may not in any event ever become an entitlement) into salaries is not prima facie in breach of an award or section 55.”
[31] Section 61 of the Act provides that the NES are minimum standards applying to the employment of employees, setting minimum standards that apply to the employment of employees which cannot be displaced.
[32] Fair Work Australia must be satisfied that the agreement complies with the requirements of ss.186 and 187 of the Act. 20 Section 186(2)(c) mandates that in approving an agreement Fair Work Australia must be satisfied that:
“the terms of the agreement do not contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.)”. 21
Note 3 to s.186(2) of the Act states:
“The terms of an enterprise agreement may supplement the National Employment Standards (see paragraph 55(4)(b)).”
[33] An enterprise agreement that includes a term that contravenes s.55 must not be approved (see s.186) and a term of an enterprise agreement has no effect to the extent that it contravenes s.55 (see s.56).
[34] Section 55(1) of the Act states:
“A modern award or enterprise agreement must not exclude the National Employment Standards or any provision of the National Employment Standards”.
[35] Subsections 55(2) and (4) of the Act record terms which an Agreement may include in relation to a NES matter:
• “s.55(2) A modern award or enterprise agreement may include any terms that the award or agreement is expressly permitted to include:
(a) by a provision of Part 2-2 (which deals with the National Employment Standards); or
(b) by regulations made for the purposes of section 127.”
• s.55(4) permits ancillary and supplementary terms to be included:
“A modern award or enterprise agreement may also include the following kinds of terms:
(a) terms that are ancillary or incidental to the operation of an entitlement of an employee under the National Employment Standards;
(b) terms that supplement the National Employment Standards;
but only to the extent that the effect of those terms is not detrimental to an employee in any respect, when compared to the National Employment Standards.”
[36] Section 55(5) of the Act provides:
“An enterprise agreement may include terms that have the same (or substantially the same) effect as provisions of the National Employment Standards, whether or not ancillary or supplementary terms are included as referred to in subsection (4).”
[37] Section 55(7) of the Act provides that terms permitted by ss.55(4) or (5) do not contravene ss.55(1):
“To the extent that a term of a modern award or enterprise agreement is permitted by subsection (4) or (5), the term does not contravene subsection (1).”
[38] We deal first with long service leave.
[39] After the decision by Commissioner Raffaelli, a Full Bench in Armacell 22 considered the question of an agreement provision in relation to long service leave against the NES. The agreement provision in that case provided for the cashing out of accrued long service leave, in the following terms:
“An Employee who has been employed by Armacell for no less than 7 years may apply in writing to cash in their long service leave entitlement (or part thereof) in exchange for payment. Armacell may, in its discretion, grant this application.” 23
[40] In that case, the relevant long service leave entitlement arose from either the operation of State long service leave legislation, through the effect of ss.26, 27 and 29 of the Act, 24 or an applicable award-derived long service leave entitlement.25 In the latter respect, the Full Bench in Armacell found:
“[32] We deal now with the position of employees to whom a federal long service leave award may apply as a result of the operation of s.113(1). As we understand it the metal industry award does not generally provide for cashing out of long service leave, at least not to the extent permitted by the Armacell and DPS agreements. Accordingly, in that respect, the term contravenes s.55, contrary to the requirement in s.186(2)(c). We add for completeness that in our view a term which permits cashing out of long service leave cannot be characterised as a supplementation of the NES pursuant to s.55(4). Cashing out of leave generally cannot be regarded as an additional or supplementary provision. We point out by analogy that, despite provision for supplementation of the NES in s.55(4), the legislature deemed it necessary to include separate provisions dealing specifically with cashing out of annual leave (ss.92-4).
[34] In relation to employees with an entitlement to long service leave arising from the terms of the metal industry award, the situation is different. If, as we have concluded, there is a long service leave term in the agreements which is inconsistent with the long service leave term of the metal industry award, the requirement in s.186(2)(c) has not been met. That situation is capable of being dealt with by an undertaking under s.190. An appropriate undertaking would be that the employer in question undertakes that in relation to an employee entitled to long service leave under the terms of the Metal, Engineering and Associated Industries Award 1998 the employer will not consent to cashing out of long service leave other than in accordance with the terms of that award.”
[41] The Metal, Engineering and Associated Industries Award 1998 (Metals Award) long service leave provision is materially the same as that found in the LSL Award in respect of payment for long service leave to an “employee on leave” 26 or “an employee who is entitled to and takes leave pursuant to this Award”.27 Both provide for payment in respect of leave accrued and taken in one of the following ways: in advance for the whole of the period at the commencement of leave; at the same time or times as payment would have been made if the employee had remained on duty; or in any other way agreed between the employer and the employee.28 In each case, the payment options relate to the taking of leave. Both awards provide for payment in respect of accrued leave in the circumstances of termination of employment or death.29 The awards are materially different, however, in that the LSL Award is in the nature of a portable long service leave entitlement, with service accruing in respect of continuous service with one and the same employer, or more than one employer, respondent to the award.30
[42] Unlike in the Armacell matter, the Agreement provision in this case is not in the nature of a cashing out of an entitlement accrued under the award long service leave provision. Rather clause 3.1.3.1 of the Agreement provides for the incorporation into salary of an amount in respect of long service leave, based on six days per annum, 31 and the extinguishment of any entitlement to long service leave or any separate or additional payment for long service leave upon termination. It may be characterised as buying out the long service leave entitlement, rather than cashing out an entitlement derived from the award.
[43] Clause 1.3.2 subjects the terms of the Agreement to the NES, to the extent that it applies the NES in circumstances where the NES provides a more beneficial entitlement to “Employee”, which we take to mean an employee, than the corresponding term of the Agreement. Clause 1.3.2 has the effect of applying the NES, as reflected in the LSL Award, only in circumstances where a more beneficial entitlement of an employee exists under it. Such an entitlement might arise, for example, in circumstances where an entitlement of an employee to leave arises from continuous service predominantly with another employer respondent to the LSL award. 32 Otherwise the Agreement displaces any entitlement to long service leave under the NES, as reflected in the LSL Award.
[44] The Agreement excludes the NES entitlement in relation to long service leave, except in the circumstances where clause 1.3.2 applies and it is not possible to be satisfied that the terms of the Agreement do not contravene s.55 (s.186(2)(5)). Except where the NES in relation to long service leave entitlements apply to an employee as a result of the operation of clause 1.3.2, the Agreement buys out those entitlements. The Agreement does not provide an entitlement to the taking of long service leave, subject to an agreed method of payment in accordance with clause 11(b)(iii) of the LSL Award. The Agreement simply does not provide for the taking of long service leave in accordance with the LSL Award entitlement. It substitutes an addition to salary in place of that entitlement, save for the limited circumstances where clause 1.3.2 applies the NES. It is analogous, in our view, to an agreement provision which excludes the NES entitlement to, for example, parental leave or the right to request flexible working hours, but provides a monetary compensation. Such a buyout of NES entitlements has the effect of excluding a National Employment Standard.
[45] Further, it is our view that neither ss.55(2) nor (4) applies in this case. No provision within Part 2-2, nor any regulation for the purpose of s.127 applies in this case. Nor, given the effect of the Agreement, in displacing the NES entitlement in relation to long service leave, other than where they are more beneficial to employees, can the Agreement provisions in respect of long service leave be seen as ancillary or incidental to the operation of an entitlement of an employee under the NES or terms that supplement the NES. In this respect, the observations of the Full Bench in Armacell 33 are relevant. We think that in circumstances where cash payments instead of a NES entitlement are expressly allowed for by a provision of Part 2-2,34 to the extent prescribed, and permissible under s.55(2) of the Act, such payments cannot be regarded as ancillary or incidental or as additional or supplementary provisions.
[46] Given clause 3.1.3.1 of the Agreement provides for the incorporation into salary of an amount in respect of long service leave and extinguishes any entitlement to long service leave or any separate or additional payment for long service leave upon termination, it cannot be said to include terms that have the same (or substantially the same) effect as provisions of the NES in respect of long service leave (s.55(5)).
[47] For these reasons, we find that Commissioner Raffaelli erred in finding that the Agreement provisions in clause 3.1 - Remuneration, did not contravene s.55 of the Act in respect of long service leave and did not preclude approval of the agreement by reference to s.186(2)(c) of the Act. For that reason we grant permission to appeal and uphold the appeal.
[48] We do not think that the contravention of s.55 can be remedied by an undertaking under s.190 of the Act. The nature of such an undertaking would need to be to the effect that the employer would apply the terms of the LSL leave, rather than the terms of clause 3.1.3.1. Given the nature of the Agreement, displacing the NES entitlement in relation to long service leave in favour of a monetary payment, such an undertaking would result in substantial changes to the Agreement and, insofar as the monetary payment arises in circumstances where there is no entitlement to long service leave under the LSL Award, cause financial detriment to an employee covered by the Agreement. As such, such an undertaking cannot be accepted given the requirements of s.190(3) of the Act.
[49] We accept the submissions of Inco, reflected in the reasons of Commissioner Raffaelli, that in circumstances where payment is made as part of salary in respect of long service leave, which are contingent entitlements, employees would be better off under the Agreement than the LSL Award, other than in limited circumstances where clause 1.3.2 of the Agreement would apply the NES. It is for this reason that an undertaking in the terms set out above would cause financial detriment to an employee covered by the Agreement. However, this is no answer to the fact that the Agreement in this case excludes the National Employment Standard in relation to long service leave, except in the circumstances where clause 1.3.2 applies, for the reasons stated above. Consideration of the impact upon employees’ terms and conditions of employment, such as those arising in s.186(2)(d) of the Act, do not arise in respect of s.186(2)(c), except to the extent that whether ancillary or supplementary terms may be included in an agreement under s.55(4) of the Act requires consideration of whether their effect is not detrimental to an employee in any respect, when compared to the NES.
[50] We turn now to deal with the NES provision in relation to redundancy.
[51] No specific finding was made by Commissioner Raffaelli in relation to redundancy. The Commissioner noted the competing positions in respect of redundancy in his decision. 35 Given the commonality of argument with that arising in respect of the long service leave issue, save for the LSL Award provisions in clause 11(b), it is reasonable to infer that the same reasoning process applied - that whilst rolling up entitlements to redundancy may potentially offend s.55, the payment in salary in respect of a contingent liability for redundancy is not prima facie in breach of s.55 of the Act.
[52] The NES entitlement in respect of redundancy arises directly from s.119 of the Act. It provides an entitlement to be paid redundancy pay by the employer when an employee’s employment is terminated due to redundancy and specifies the amount of redundancy pay.
[53] Clause 3.1.3.2 provides for the inclusion within salary of compensation, calculated by Inco at the level of two weeks per annum, 36 instead of severance or redundancy pay entitlements and removes any entitlement to separate or additional payment for severance or redundancy upon termination of employment on the grounds of redundancy. Clause 1.3.2 of the Agreement subjects the terms of the Agreement to the NES, to the extent that it applies the NES in circumstances where the NES provides a more beneficial entitlement to an employee than the corresponding term of the Agreement.
[54] Clause 1.3.2 has the effect of applying the NES entitlement in s.119 of the Act only in circumstances where a more beneficial entitlement of an employee exists under s.119. Otherwise the Agreement displaces any entitlement to redundancy under the NES.
[55] As is the case in respect of long service leave, the effect of the Agreement is to buy out the NES entitlement. This contravenes s.55(1) of the Act and none of ss.55(2), (4) and (5) applies. For the same reasons as apply in respect of long service leave, the Agreement excludes the NES entitlement in relation to redundancy, except in the circumstances where clause 1.3.2 applies and it is not possible to be satisfied that the terms of the Agreement do not contravene s.55 of the Act and to be satisfied in relation to s.186(2)(c) of the Act.
[56] We accept that the Agreement provision in supplementing salary by two weeks per annum is more favourable than the entitlement to redundancy pay under the NES, in circumstances where it appears that redundancies by Inco are uncommon. 37 Nonetheless, the Agreement in this case excludes the NES entitlement in relation to redundancy, except in the circumstances where clause 1.3.2 applies.
[57] We find that Commissioner Raffaelli erred in finding that the Agreement provisions in clause 3.1 - Remuneration, did not contravene s.55 of the Act in respect of redundancy and did not preclude approval of the Agreement by reference to s.186(2)(c) of the Act. We also grant permission to appeal and uphold the appeal in respect of redundancy.
[58] For the reasons we give above, in respect of long service leave, we do not think that the contravention of s.55 can be remedied by an undertaking under s.190 of the Act.
2. Failure to give reasons in respect of redundancy
[59] AIMPE submitted that the Commissioner failed to give any reasons why the incorporation of redundancy pay into the salary in clause 3.1.3.2 of the Agreement does not breach s.55 of the Act.
[60] Inco submitted that Fair Work Australia is not obliged to give reasons for every matter of fact or law raised in proceedings before it. The Commissioner’s reasons in paragraph 28 of his decision deal adequately with the essential matters raised before him.
[61] As noted above, whilst no specific finding was made in relation to the s.186(2)(c) argument, advanced in relation to redundancy, it is reasonable to infer that the reasoning process applied in respect of long service leave was applied by the Commissioner. The Commissioner’s reasons were sufficient for the substantive s.186(2)(c) argument in relation to the redundancy provision to be considered and disposed of in the appeal.
3. Genuine agreement to the Agreement
[62] AIMPE submitted that Inco management provided an explanatory memorandum to employees which was fundamentally incorrect and later erroneous information was given to employees. Further the full terms of the Agreement were not explained to employees. It submitted that the Commissioner erred in being satisfied as to genuine agreement.
[63] Inco submitted that s.180(5) of the Act requires an employer to take reasonable steps to ensure that the terms and effect of an enterprise agreement are explained to employees. It does not require an employer to make a formal explanation of its full terms. The explanation must take into account the particular circumstances and needs of relevant employees. 38 The Commissioner acknowledged that the employees required an adequate understanding of English to obtain the relevant maritime certification and to be educated to obtain marine qualifications. The Commissioner stated that the terms of clause 1.4 are clear and there is no evidence to suggest that any employee did not understand the Agreement. The evidence was that the employees spoke English and had educational qualifications. Any suggestion that employees did not genuinely agree due to allegedly incorrect information is completely speculative.
[64] The decision of Commissioner Raffaelli noted:
“[62] In my view, while the Agreement contains matters which are not simple to understand, that is an observation that might be made of many agreements or indeed of the Act or the Award.
[63] There is nothing to suggest that because of its terms, the fact that employees represented themselves and that some were from non-English speaking backgrounds that reasonable steps were not taken to make the necessary explanation. Inco relevantly referred to Marine Orders where knowledge of English at a level necessary to understand directions was required. I also restate my view as to the high level of training and knowledge possessed by these employees in carrying out the duties of marine officers.
[64] The material filed by Inco and referred to in part in [5] above is sufficient to satisfy me that all reasonable steps were taken as required by subsection 180(5).”
[65] The Commissioner disagreed with AIMPE’s submissions that a series of terms in the Agreement were said to potentially reduce the benefits provided by the Agreement, or were uncertain as to their effect or were unusually complex and brought into question the ability of employees to genuinely agree, finding that:
“[66] While the provisions of clause 1.3.2 do not make it clear whether a benefit arises under the Agreement or under the NES, what is clear is that an employee is guaranteed the best provision of either instrument. I reject any suggestion that employees can not have genuinely agreed to such a provision, albeit with the uncertainty as to whether a benefit comes from the Agreement or the NES. ...
[79] I make a general point concerning AIMPE’s arguments which go to questioning the terms of the Agreement (including as to uncertainty of certain provisions) and the ability of employees to genuinely agree to it. In my view much of what AIMPE put is speculation. It is surely answered by the fact that some months having now passed since the vote, no employee has come forward to complain as to the approval process or the terms of the Agreement.”
[66] Section 186(2)(a) of the Act requires that FWA must be satisfied that if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement.
[67] Section 180(5) of the Act requires that the employer must take all reasonable steps to ensure that the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.
[68] In our view, AIMPE has not established an error on the part of the Commissioner in finding that he was satisfied that all reasonable steps were taken as required by s.180(5) of the Act. His conclusion was properly made on the evidence, with there being no evidence to support the speculative attack by AIMPE on the genuine agreement by the employees to the Agreement. This ground provides no basis for permission to appeal.
Conclusion
[69] We find Commissioner Raffaelli erred in finding that the Agreement provisions in clause 3.1 - Remuneration, did not contravene s.55 of the Act in respect of long service leave and redundancy and did not preclude approval of the Agreement by reference to s.186(2)(c) of the Act. Permission to appeal is granted and we uphold the appeal on this basis. The 10 November 2010 decision of Commissioner Raffaelli approving the Inco Ships Pty Ltd Officer Collective Agreement 2010 MV CSL Melbourne is quashed.
SENIOR DEPUTY PRESIDENT
Appearances:
W McNally with N Keats for the appellant.
G Hatcher, of counsel, with M Seck for the respondent.
Hearing details:
2011.
Melbourne:
February 15.
2 [2010] FWAA 8559, at p. 19.
3 Transcript of 24 September 2010 before Raffaelli C, at para 48.
4 (1996) 137 ALR 70.
5 Ibid at pp. 90 and 91.
7 (1986) 13 FCR 124 at 133.
8 Transcript in the appeal at para 10.
9 B2010/3391.
10 Transcript of 28 September 2010 before Raffaelli C, at paras 465-78, 482-4, 488-9, 564, 626, 640 and Transcript of 27 October 2010 before Raffaelli C, at paras 359, 381 and 415.
11 [2010] FWAA 8559, at para 5.
13 Section 56, Fair Work Act 2009.
14 Section 61(1), Fair Work Act 2009.
15 Section 55(4)(b), Fair Work Act 2009.
16 Section 113, Fair Work Act 2009.
17 AP788130.
18 Clause 8 of the Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993.
19 Clause 11(3) of the Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993.
20 Section 186(1), Fair Work Act 2009.
21 Section 186(2)(c), Fair Work Act 2009.
23 Ibid, at paras 20 and 21.
24 Ibid, at paras 24-30.
25 Section 113(1), Fair Work Act 2009.
26 Metal, Engineering and Associated Industries Award 1998, schedule A , clause 7.1.
27 Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993, at clause 11(a).
28 Metal, Engineering and Associated Industries Award 1998, schedule A , clause 7.2 and the Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993, at clause 11(a).
29 Metal, Engineering and Associated Industries Award 1998, schedule A , clause 8.6 and the Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993, at clause 11(c) and (d).
30 Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993, at clause 6.
31 Transcript of 27 October 2010 before Raffaelli C, at para 91.
32 Maritime Officers (Seagoing and Offshore Industries) Long Service Leave Award 1993, at clause 6.
33 [2010] FWAFB 9985, at para 32.
34 For example in relation to annual leave in ss.92-94 of the Fair Work Act 2009.
35 [2010] FWAA 8559, at paras 30 and 42.
36 Transcript of 27 October 2010 before Raffaelli C, at para 91.
37 Ibid, at para 92.
38 Subsections 180(5)(b) and (6), Fair Work Act 2009.
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