[2014] FWC 1955 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
Kore Construction Pty Ltd
(AG2013/11902)
DEPUTY PRESIDENT GOSTENCNIK |
MELBOURNE, 24 MARCH 2014 |
Application for approval of the Kore Construction Enterprise Agreement 2013.
Introduction
[1] Kore Construction Pty Ltd (Applicant) has lodged an application with the Fair Work Commission (Commission) under section 185 of the Fair Work Act 2009 (Act) for the approval of the Kore Construction Enterprise Agreement 2013 (Agreement). The Construction Forestry Mining and Energy Union (CFMEU) objected to the approval of the Agreement. The CFMEU is a bargaining representative for the Agreement.
[2] I have decided not to approve the Agreement because I am not satisfied that the Agreement passes the better off overall test and I do not accept the undertakings offered by the Applicant because the undertakings would in my view result in substantial changes to the Agreement.
[3] These are my reasons for refusing to approve the Agreement.
The Issues
[4] The Applicant lodged the Agreement for approval by the Commission on 11 December 2013. Initially it maintained that the Agreement as lodged passes the better off overall test. However following an objection to the approval of the Agreement raised by the CFMEU, the Applicant offered a series of undertakings designed to overcome the objections raised, or at least some of them.
[5] The CFMEU identified two bases for their objection to the approval of the Agreement. First the CFMEU argues that the Commission cannot be satisfied that employees genuinely approved the Agreement because of the manner in which the Applicant explained the terms of the Agreement to employees who will be covered by the Agreement. The explanation of the terms of the Agreement occurred between 30 November and 3 December 2013. The CFMEU did not lead any evidence to support its contention nor did it seek to call Ms Sandra Daly, the relevant officer of the Applicant upon whose statutory declaration the Applicant relied to support its application, to be cross-examined about the steps that were taken to explain the terms of the Agreement to employees. There is little substance to this objection. Ms Daly’s statutory declaration filed with the application for approval makes clear that meetings with employees were held between 30 November 2013 and 3 December 2013 to explain the Agreement. During those meetings a full explanation of the Agreement compared to the existing Agreement and the relevant terms of the modern award was given. Employees were also informed how changes contained in the Agreement would affect employees 1. I am satisfied that the Applicant has complied with the requirement to explain the terms of the Agreement to employees who will be covered by the Agreement.
[6] The second basis for objection raised by the CFMEU is more substantial. The CFMEU alleges that the Agreement does not pass the better off overall test. Without reciting each matter raised by the CFMEU 2 demonstrating that the Agreement did not pass the better off overall test, it is sufficient for present purposes to note that the matters raised concerned:
[7] In order to assist me in determining whether the Agreement passes the better off overall test, I requested a better off overall test analysis be undertaken by a member of the Agreement’s team within the Commission. That analysis was provided to the Applicant and the CFMEU and both parties were given an opportunity to comment on the analysis. In short compass the analysis disclosed some additional matters about the Agreement which are relevant to the assessment of whether the Agreement passes the better off overall test. These matters included that:
[8] The Applicant acknowledged that CW1 (c) classification under the Agreement provided for a rate of pay which was less than the rate of pay provided for the modern award. It submitted that this was as a result of a typographical error and it sought to rectify the error by giving an undertaking. It also provided what it described as clarification or sought to give written undertakings to address the following issues:
[9] In all other respects and taking into account the undertakings that it offers, the Applicant maintained the Agreement passes the better off overall test and should be approved.
[10] Before turning to consider whether the Agreement passes the better off overall test and whether any or all of the undertakings offered by the Applicant should be accepted, I should observe that based on the materials filed in support of the application and taking into account the subsequent submissions of both the Applicant and the CFMEU, I am satisfied that all of the other requirements set out in ss186 and 187 of the Act, which must be satisfied before the Agreement may be approved, have been met.
Statutory context
[11] If the Agreement is to be approved by the Commission it must inter alia pass the better off overall test. If the Agreement does not pass the better off overall test, then the Applicant will need to persuade the Commission that because of exceptional circumstances the approval of the proposed Agreement would not be contrary to the public interest. The Applicant was given an opportunity to so submit, but did not seek to suggest that there are exceptional circumstances that would warrant the approval of the Agreement if it did not pass the better off overall test. Further, if the Commission has concerns that the Agreement does not pass the better off overall test the Commission may accept a written undertaking and approve the Agreement.
[12] Section 193 deals with the better off overall test and relevantly provides the following:
193 Passing the better off overall test
When a non-greenfields agreement passes the better off overall test
(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.
FWC must disregard individual flexibility arrangement
(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.
. . .
Award covered employee
(4) An award covered employee for an enterprise agreement is an employee who:
(a) is covered by the agreement; and
(b) at the test time, is covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(iii) covers his or her employer.
Prospective award covered employee
(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:
(a) would be covered by the agreement; and
(b) would be covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) would cover the person in relation to the work that he or she would perform under the Agreement; and
(iii) covers the employer.
Test time
(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.
FWC may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.
[13] Section 190 deals with undertakings in relation to enterprise agreements and provides as follows:
190 FWC may approve an enterprise agreement with undertakings
Application of this section
(1) This section applies if:
(a) an application for the approval of an enterprise agreement has been made under section 185; and
(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.
Approval of agreement with undertakings
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.
Undertakings
(3) The FWC may only accept a written undertaking from one or more employers covered by the Agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:
(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.
FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.
Signature requirements
(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.
[14] The test time for purposes of assessing whether the passes the Agreement better off overall test is 11 December 2013, the date on which the application for approval was made.
[15] Relevantly the Agreement will pass the better off overall test if the Commission is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the Agreement would be better off overall if the Agreement applied to the employee than if the relevant modern award applied to the employee.
[16] The application of the better off overall test is not to be applied as a line by line analysis. Rather it is a global test requiring consideration of advantages and disadvantages to award covered employees and prospective award covered employees. The application of the better off overall test therefore requires the identification of terms of an Agreement which are more beneficial to the relevant employees when compared to the relevant modern award, the terms of an Agreement which are less beneficial and then an overall assessment of whether each relevant employee would be better off under the Agreement. 3
Analysis
[17] It is common ground that the relevant modern award that covers the relevant employees is the Building and Construction General On-site Award 2010 4. Having regard to the terms of the Agreement, I have concluded that the Agreement as lodged for approval does not pass the better off overall test. This is because at least some of the award covered employees and some of the prospective award covered employees would not be better off overall if the Agreement applied to those employees than if the modern award applied to those employees. My reasons for coming to this conclusion are as follows.
[18] Firstly, the Agreement does not provide for a wage rate for employees who are apprentices that is higher than the modern award. There is no increase provided for that classification and there is no other benefit provided in the Agreement which is more beneficial to apprentices when compared with the modern award. The apprentices employed or who will be employed by the Applicant and covered by the Agreement will not be better off overall under the Agreement when compared to the modern award. Their employment terms and conditions will be the same as those terms and conditions that would have been applicable under the modern award. The Applicant submitted that the Agreement in relation to apprentices nevertheless passes the better off overall test because:
[19] Neither of these arguments is relevant to the assessment and application of the better off overall test. The arguments might be relevant in assessing whether exceptional circumstances exist enabling the Agreement to be approved notwithstanding that it did not pass the better off overall test, however that argument was not advanced by the Applicant. Given that apprentices would not be better off overall if the Agreement applied to apprentices than if the modern award applied to the apprentices, the Agreement does not pass the better off overall test.
[20] Secondly, the major and indeed the only condition of the Agreement said to be “more beneficial” than the the modern award identified by the Applicant is the higher rates of pay contained in the Agreement 6. The only conditions of employment that are identified by the Applicant to be less beneficial in the Agreement when compared to the equivalent conditions of the modern award are the allowances in clauses 20 to 26 of the modern award, and to the extent that the allowances have application, these allowances are said to be incorporated to the higher hourly rates of pay set out the Agreement7.
[21] The absorption of allowances into the rates of pay of employees who will be covered by the Agreement does not adequately compensate for the value of the allowances and thus will leave many employees receiving a lesser of remuneration overall under the Agreement than would be the case if the modern award applied to those employees. The Applicant maintained that the only allowances contained in the modern award that would be relevant are those relating to meal allowance, multi-storey allowance and fares and travel patterns allowance. Given the nature of the employer’s business, I doubt very much that that is the case but I do not need to decide that issue as the effect of the absorption of allowance is evident by simply looking at the fares and travel patterns allowance. This is an allowance that the Applicant accepts would be applicable. The table below illustrates the effect of the absorption to the rate of pay of the fares and travel patterns allowance that is provided for in the modern award. Although not identified by the Applicant as a more beneficial term, I have included in the comparison calculations, annual leave and leave loading calculated at the higher Agreement rate of pay. The classification that is the subject of the analysis in the table below was chosen because employees in that classification will receive the highest increase in the base rate of pay available under the Agreement when compared to the modern award.
Table - CW 4 classification with a percentage increase 6.95% compared with modern award rate, including 5 daily fares allowances at 17.01 per day.
Agreement Ordinary Rate |
$22.00 |
|
Award Ordinary Rate |
$20.57 |
| |||
|
Hours |
Loading |
weekly total |
|
Hours |
Loading |
weekly total | |
Ordinary Time |
38 |
100% |
$836.00 |
Ordinary Time |
38 |
100% |
$781.66 | |
Allowances |
Amount |
Value |
|
Allowances |
Amount |
Value |
| |
Allowance |
|
|
$0.00 |
Daily fares |
5 |
$17.01 |
$85.05 | |
Annual Leave |
Yes |
|
$64.31 |
Annual Leave |
Yes |
|
$60.13 | |
Leave Loading |
Yes |
|
$11.25 |
Leave Loading |
Yes |
|
$10.52 | |
Totals |
38.00 |
Hrs |
$911.56 |
Totals |
38.00 |
Hrs |
$937.36 | |
Agreement Total Weekly Rate |
$911.56 |
Model Summary | ||||||
Award Total Weekly Rate |
$937.36 |
|||||||
Dollar / Actual Percentage Difference |
-$25.80 |
The Dollar / Actual Percentage Difference identifies the modelled difference between the Agreement and the award in dollar terms and as a percentage. | ||||||
2.75% |
||||||||
Agreement Percentage Increase Required |
2.83% |
The Agreement Percentage Increase Required is the amount the Agreement rate would need to be increased by to satisfy the BOOT under this modelling. | ||||||
[22] The above table shows the impact of absorbing only one allowance on employees that will be covered by the Agreement receiving the highest increase. It follows that the impact of the absorption of this allowance will be proportionately greater in respect of employees in other classifications covered by the Agreement, whose increase in the base rate of pay will be is as little as 0.15% when compared to the modern award rate of pay. It also follows that by absorbing the three allowances conceded by the Applicant to be applicable, the negative impact will be even greater. As there is no other identifiable “advantage” conferred by the Agreement on these employees, they will not be better off under the Agreement than if the modern award applied. Consequently, I am not satisfied that the Agreement passes the better off over all test.
[23] I accept the Applicant’s submission that many of the so-called “disadvantage” provisions identified by the CFMEU as being either included in or absent from the Agreement, provide neither a benefit nor disadvantage. I also accept the Applicant’s submission that the reduction in ordinary rate of pay provided for in the Agreement for the classification of CW 1 (c) was a typographical error and in the ordinary course I would accept an undertaking rectifying the error. However it is not necessary to deal with any of those matters, nor to analyse further the other matters identified earlier in this decision because it is sufficient and indeed inevitable, on the basis of the two matters identified above for me to conclude that the Agreement does not pass the better off over test.
[24] However, I would also note for completeness that the disadvantage to employees that results from the absence in the Agreement, of a minimum engagement period for overtime work that is performed on a Saturday, Sunday or Public holiday, the absorption of other allowances and the uncertainty in the Agreement about a casual employee’s entitlement to overtime, has not in my view been adequately offset by increasing the ordinary rate of pay provided for in the Agreement. These matters would therefore compound the disadvantage to some employees under the Agreement than if the modern award applied those employees.
Proposed undertakings
[25] The Applicant has proposed a series of undertakings under s. 190 of the Act. On 22 January 2014 the Applicant offered an undertaking as follows:
“In Clause 5.1 of the Kore Construction Enterprise Agreement 2013, delete the rate for the Labourer-less than 12 months experience of $18.50 and insert in lieu $18.80.”
[26] On 5 February 2014 it offered the following additional undertakings:
“Amend the following clauses in the kore [sic] Construction Enterprise Agreement 2013 as follows:-
1 Clause 4 – Contract of Service
1.1 Delete subclause 4.2 (b) and insert in lieu
b) Part-time employee means an employee who is employed as such, who normally works less than an average of 38 hours per week and has reasonably predictable hours of work. Before commencing a period of part-time employment the employee and the employer will agree in writing the ordinary hours of work, the days and the start and finishing times to be worked by the employee. The terms of the part time engagement may be varied, in writing, by consent.
1.2 Insert new subclauses 4.12 and 4.13
Inclement weather
4.12 The employees on any inclement weather affected site or section of a site can be transferred to another site or section for alternative work. Training can also be undertaken should it be practical. This will also include tool box meetings and maintenance of equipment and plant as directed.
4.13 If no alternative duties can be sourced, at the discretion of the Company, employees may cease for the day and will receive up to 7.6 hrs ordinary time. Payment for time lost due to inclement weather is subject to a maximum of 32 hours pay in any four week period for each employee. Payment is subject to adherence to the terms of this Clause.
2 Clause 5 – Classifications and Wage Rates
2.1 In clause 5.1 delete the rate for the Labourer – less than 12 months experience of $18.50 and insert in lieu $18.80.
2.2 Amend subclause 5.4 to include the term “all-purpose” before the term “allowance”.
2.3 Amend subclause 5.5 to include the term “all-purpose” before the term “tool allowance”. 5
2.4 Renumber the following clauses:
Clause 5.6 renumbered to clause 5.9
Clause 5.7 renumbered to clause 5.10
Clause 5.8 renumbered to clause 5.11
2.5 Insert new clause 5.6
Travel allowance
5.6 Employees shall receive an allowance of $17.01 per day for each day worked when employed at a construction site located.
2.6 Insert new clause 5.7
Meal allowance
5.7 Where an employee is required to work overtime for at least one and a half hours after working ordinary hours they will be provided with a meal or amount of $13.70 to meet the cost of a meal.
2.6 Insert new clause 5.8
Multistorey allowance
5.8 Employees shall receive a multistorey allowance of $0.59 per hour when they are engaged in the construction or renovation of a multistorey building.
3 Clause 15 – Superannuation
3.1 Delete subclause 15.3 and insert in lieu
15.3 Employees contributions shall be paid into an eligible fund nominated by the employee. Provided that where an employee does not nominate a fund, or the Company is unable to pay into that fund, contributions will be paid into CBUS Super.”
[27] On 23 February 2014 the Applicant offered a further undertaking as follows:
“Clause 5.6 shall be removed and replaced with the clause below:
5.6 Where an employee is undertaking an apprenticeship or registered traineeship they shall be paid:
• no less than the relevant award minimum apprentice or trainee rate plus 2%; and
• no less than the minimum terms specified in the relevant award that would apply but for the operation of this Agreement.”
[28] A written undertaking given pursuant to section 190 of the Act may be accepted if the Commission is satisfied that the undertaking is not likely to cause financial detriment to any employee covered by the Agreement or result in substantial changes to the Agreement. The CFMEU as bargaining representative for the proposed Agreement submits that the undertakings proposed should not be accepted by the Commission because they are not “undertakings” within the meaning of section 190 of the Act. Rather the proposed undertakings amount to proposed variations to the Agreement. Further the CFMEU argued that even if that is incorrect, the proposed undertakings would result in a substantial change to the Agreement and consequently should not be accepted.
[29] I do not accept the CFMEU’s proposition that the proposed undertakings are not written undertakings for the purposes of section 190 of the Act. There is no basis for importing additional requirements about the particular form of an undertaking that may be accepted, beyond the requirements expressly set out in the Act. Section 190 simply requires that an undertaking be written and signed in accordance with the requirements of the regulations. The undertakings offered meet these requirements. Section 190 also places preconditions on accepting an undertaking so that an undertaking must not cause financial detriment to any employee covered by the Agreement, must not result in a substantial change to the Agreement and the views of known bargaining representatives for the Agreement must be sought before an undertaking is accepted. The fact that an undertaking is expressed to vary the Agreement does not change the character of the undertaking as an undertaking given in accordance with section 190 of the Act. If the undertaking is accepted the terms of the undertaking are taken to be a term of the Agreement 8.
[30] An undertaking which is intended to overcome concerns about whether an agreement passes the better off overall test will often need to take the form of varying the operation of the agreement, for example, by undertaking that a term of the agreement which provides a disadvantage when compared with the relevant modern award will not apply or will apply in a particular way. Once an undertaking is accepted by the Commission and an agreement is approved, the undertaking will have that effect because it will become a term of the agreement. An undertaking that is expressed as varying a particular provision in a proposed agreement should be taken to be a promise by the employer that a particular term in an agreement about which concern has been expressed, will not be applied and the term as set out in the undertaking will be applied. Moreover the fact that section 190 itself requires that a written undertaking not “result in substantial changes to the agreement” 9, suggests that minor changes to an agreement resulting from a written undertaking are permissible. To view the proposed written undertakings as a variation to an agreement rather than an undertaking within the meaning of section 190 of the Act merely because of the expression used in the undertakings is to adopt an unnecessarily technical approach to the giving undertakings and is not one that is warranted when regard is had to the express requirements of the form and effect of an undertaking that are set out in sections 190 and 191 of the Act.
[31] It is clear from the nature of the proposed undertakings that each seeks to address that which what might be perceived as financial disadvantage under the Agreement when compared to the modern award. With the exception of the undertaking in relation to superannuation, each of the remaining proposed undertakings provides for a financial improvement in the position of particular employees that will be covered by the Agreement. I am therefore satisfied the undertakings offered will not cause any financial detriment to any employee that will be covered by the Agreement.
[32] I have given a great deal of consideration to whether the undertakings that are offered should be accepted. Clearly the undertakings are designed to ensure that the Agreement, when read with the undertakings, would pass the better off overall test. However when one examines the proposed undertakings in their entirety it is clear that, taken as a whole, the undertakings result in substantial changes to the Agreement. The undertakings do not merely propose minor alterations to the Agreement or clarify the operation of the Agreement. They involve changes to the wage rates attached to classifications in the Agreement, the inclusion of substantive new provisions into the Agreement, and the inclusion of substantive allowances not previously provided for in the Agreement. The proposed undertakings are therefore not accepted.
Conclusion
[33] The Agreement does not pass the better off overall test. Consequently, the application for the approval of the Agreement is dismissed. An order giving effect to this decision is separately issued in PR548916.
DEPUTY PRESIDENT
Appearances:
L. Mehrari for the Applicant
J. Nicholas for the CFMEU
Hearing details:
2014
Melbourne, Perth
3, 21 February
Final written submissions:
CFMEU 20 December 2013
Applicant 22 January 2014
CFMEU (Further submissions) 13 February 2014
Applicant (Further submissions) 13 February 2014
1 Employer's Declaration in support of application for approval of enterprise Agreement at 2.7
2 CFMEU's outline of submissions contains all of the matters which it says are a relevant to the assessment of the better off overall test in relation to which the Agreement makes inadequate or no provision, with the consequence that the Agreement fails of off overall test
3 See Re: Armacell Australia Enterprise Agreement 2010 [2010] FWAFB 9985; National Tertiary Education Industry Union v University of New South Wales [2011] FWAFB 5163
5 Outline of the employer's submissions 12 February 2014 at [25]
6 Employer's Declaration in support of application for approval of enterprise Agreement at 3.4 – 3.5
7 Ibid at 3.6 – 3.7
8 Section 191
9 Section 190 (3)(b)
Printed by authority of the Commonwealth Government Printer
<Price code C, PR548914>