Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [2016] FWCA 7494 of Deputy President Sams at Sydney on 18 October 2016 in matter number AG2016/5974.

Introduction and factual background

[1] Pennyco Pty Ltd t/a Zarraffas West Ipswich (Pennyco) has applied for permission to appeal and appealed a decision of Deputy President Sams issued on 18 October 2016 1 (Decision). In the Decision the Deputy President approved the Pennyco Pty Ltd T/A Zarraffas West Ipswich 2016 EBA (Agreement), to which Pennyco was the employer party. Unusually, Pennyco now contends that the Deputy President erred in approving the Agreement because the requirements established by ss.185 and 186 the Fair Work Act 2009 (FW Act) for the approval of enterprise agreements were incapable of satisfaction.

[2] Rule 56(2) of the Fair Work Commission Rules 2013 requires that a notice of appeal against a decision of a single member of the Commission must be lodged within 21 calendar days of the date of the decision being appealed against or within such further time allowed by the Commission on application by the appellant. Pennyco’s notice of appeal was lodged on 28 July 2017, almost nine months after the Decision was issued. The appeal is therefore incompetent unless we grant an extension of time under rule 56(2). Pennyco has applied for an extension of time, and we will deal with this application later in this decision.

[3] The application for approval of the Agreement was made on 26 September 2016 by “Platinum ER Pty Ltd” (Platinum), which was identified as “a bargaining representative appointed by the employer”. Platinum was elsewhere described in the application as “Platinum Employee Relations”. The evidentiary material before us does not permit us to reach any conclusion as to whether Platinum was ever actually appointed as Pennyco’s bargaining representative, but for reasons which will become apparent later this is immaterial to the outcome of this appeal. Platinum’s contact person was identified as Michael Corrigan. It was Mr Corrigan who signed the application. The application (at paragraph 7.2) identified that an enterprise agreement in identical or substantially identical terms to the Agreement had been approved by the Commission in matter AG2016/1141. The Commission’s files disclose that the agreement approved in that matter was the Heathwood Retail Pty Ltd 2016 EBA T/A Zarraffas Heathwood.

[4] Accompanying the application was an “Employer’s statutory declaration in support of an application for approval of an enterprise agreement” made by Scott Penrose, the Director of Pennyco, on 19 September 2016. The statutory declaration was made using the Commission’s Form F17, which is the standard form prescribed for such declarations. The form requires answers or information to be provided to various questions or requests for information that are contained in numbered paragraphs throughout the document. The statutory declaration included the following statements of fact:

(1) In response to the question at paragraph 2.2 “Does the agreement cover all the employees of the employer (other than senior executives)?”, the answer “Yes” was chosen.

(2) At paragraph 2.3, in response to the question “Did the employer take all reasonable steps to give reasonable notice of their right to be represented by a bargaining representative to each employee who will be covered by the agreement?”, the answer “Yes – please attach a copy of the notice given to each employee” was chosen. The notice attached to the declaration was in the form prescribed in Schedule 2.1 of the Fair Work Regulations 2009. The first paragraph of the notice read: “Pennyco Pty Ltd gives notice that it is bargaining in relation to an enterprise agreement Pennyco Pty Ltd T/A Zarraffas West Ipswich 2016 EBA which is proposed to cover all employees”.

(3) Paragraph 2.4 required information to be given concerning the steps taken by the employer, and the dates on which the steps were taken, to provide employees with a copy of the Agreement or give them access to it. The answer stated that employees “were given draft document to read” on 9 August 2016, “Consultation meetings occurred then a final document was produced giving employees 14 days to look at the document” on 16 August 2016, and “Voting by secret ballot commenced” on 14 September 2016.

(4) Paragraph 2.5 asked “When did you notify the relevant employees of the date and place at which the vote was to occur and the voting method to be used?”, and the answer given was: “Employees were advised on the 01/09/16 that the secret ballot process would commence on 14/09/16. The Ballot process was a secret paper ballot; ballot papers were sealed in an envelope then placed in a secure ballot box at the office in the store”.

(5) Paragraph 2.6 asked “What steps were taken by the employer to explain the terms of the agreement, and the effect of those terms, to the relevant employees?”, and the response was: “Meetings with staff at the start of the process, then a draft document was presented for consultation. The final document was drawn up after consultation. Employees had the final document for 14 days before casting their vote in the secret ballot. Employees had the opportunity to ask management or Platinum Employee Relations any questions regarding the process and document presented”.

(6) Paragraph 2.7 inquired what was done to take into account the particular circumstances and needs of the relevant employees in explaining the agreement, and the answer given was: “Agreement explained to all employees and again as stated above employees had the opportunity to ask management or Platinum Employee Relations or a representative of their choice”.

(7) In response to questions in paragraph 2.8, the declaration identified that the “notification date” was 1 August 2016, the date the last notice of representational rights was given to an employee who would be covered by the Agreement was also 1 August 2016, the date voting commenced was 14 September 2016, and the date the Agreement was made was 15 September 2016.

(8) In response to questions in paragraph 2.10, the declaration identified that 8 employees would be covered by the Agreement, 7 employees cast a valid vote, and 7 employees voted to approve the Agreement.

(9) Paragraph 4.3 asked for information about the demographic characteristics of those who voted on the Agreement, and the answer identified that 6 employees were female, 4 were under 21 years and 2 were over 45 years of age.

[5] Paragraphs 3.4 and 3.5 of the standard form required the maker of the declaration to identify benefits and detriments respectively under the Agreement as compared to the “reference instrument” (which had earlier been identified in the declaration at paragraph 3.1 as being the Restaurant Industry Award 2010). In response to the question in paragraph 3.4, the declaration identified that the Agreement contained more beneficial terms and conditions of employment in the form of “Higher rates of pay than the relevant instrument”. In response to the question in paragraph 3.5, the declaration identified that there were also less beneficial terms and conditions, and stated “Allowances and weekend penalties are covered in the higher rates of pay”.

[6] Immediately above the place where Mr Penrose signed and dated the declaration appear the following words:

“I understand that a person who intentionally makes a false statement in a statutory declaration is guilty of an offence under section 11 of the Statutory Declarations Act 1959, and I believe that the statements in this declaration are true in every particular.”

[7] Immediately below the place where the declaration was signed and witnessed appear the following notes:

“Note 1 A person who intentionally makes a false statement in a statutory declaration is guilty of an offence, the punishment of which is imprisonment for a term of 4 years - see section 11 of the Statutory Declarations Act 1959.

Note 2 Chapter 2 of the Criminal Code applies to all offences against the Statutory Declarations Act 1959 – see section 5A of the Statutory Declarations Act 1959.”

[8] The Agreement itself was signed by Mr Penrose on behalf of Pennyco and, for the employees, by Nicole Penrose (Mr Penrose’s wife), whose position was described as that of Manager.

[9] In respect of rates of pay, the primary provision contained in clause 13.1 of the Agreement is as follows:

13.1 Rates of Pay for Adult Employees

Restaurant Industry Award

As an alternative to being paid by the week, an employee other than a casual is paid at a rate equivalent to an annual salary of at least 25% above the normal weekly rate. The rates above are reflective of this. These rates include payment for Allowances Overtime, and Penalty rates in addition to the weekly wage, provided that the salary paid over a year was sufficient to cover what the employee would have been entitled to if all award overtime and penalty rate payment obligations had been complied with.

Annualised salaries will be implemented by agreement between the individual employee and the employer.

● Annualised salaries will only be agreed with full time weekly employees.

● An annualised salary must be equivalent to at least 25% or more above the Award rate.

● An employee being paid an annual salary will be entitled to a minimum of 8 days off in each work cycle.

● The employer will keep all records relating to the start and finishing times of employees on annualise salaries and the record must be signed weekly by the employee.

● Employees will not be disadvantaged over the life of the Agreement when their terms and conditions under the Agreement are compared to the Restaurant Industry Award 2010 (the Award) as amended during the life of the Agreement; and

● All employees including casual employees covered by the Agreement will be entitled to a reconciliation on an annual basis, to establish whether for work performed under the Agreement in the preceding year, the employee’s total remuneration is less than the employee would have received under the Awards; and

● Where an employee terminates employment, that employee is entitled to a reconciliation for the year or part of a year immediately preceding termination of employment; and

● Where a reconciliation establishes that an employee has been paid less under the Agreement than the employee would have been paid for performing the same work under Award, the employee will be reimbursed for the difference between the amount paid under the Award and the amount paid under the Agreement.

[10] Clause 13.1(a) of the Agreement provides for junior rates with percentages of the rates set out in clause 13.1 prescribed for various age levels. In respect of hours of work, clause 15.1 provides:

15.1 Ordinary hours of work

15.1.1 Ordinary hours of work are 38 hours per week averaged out over a 4-week period.

15.1.2 The shifts of ordinary hours of work may be worked on any day of the days of the week, Monday to Sunday.

15.1.3 The ordinary hours of work are to be worked continuously, except for meal breaks, at the discretion of the Company between

Monday to Friday, inclusive 4.30 am–10.30 pm

Saturday 4.30 am–10.30 pm

Sunday 4.30 am–10.30 pm

15.1.4 Any work performed outside the spread of hours will be paid for at the appropriate penalty rates

[11] Upon receipt of the application for approval of the Agreement, an analysis of the Agreement was undertaken by the Commission’s staff. A report was produced which, in relation to whether the Agreement passed the BOOT, stated:

“Clause 11.1.1 states casual employees are entitled to the full time rate plus a loading of 25% however the table at Clause 13.1 provides for hourly rates of pay for casual employees which is not 25% above the full time rate – the rates of pay for casual employees is 7.91% to 8.92% above the Award.

Clause 13.1 allows the employer to pay an annual salary of at least 25% above the normal weekly rate in compensation for overtime and penalty rates. This is similar to Clause 28.1 of the Award, however the Clause states the rates of pay table are reflective of 25% above the Award, however the rates are only 20.41% to 21.53% above the Award.

Modelling indicates the rates of pay may not be high enough, depending on the rosters worked, to compensate employees if Award penalties for weekend, early morning and overtime are payable under the Award (rather than the annualised salary system).”

[12] The report also stated, on the basis of the information contained in Mr Penrose’s statutory declaration, that the procedural requirements for the making of an enterprise agreement were satisfied.

[13] The application was subsequently the subject of a hearing before the Deputy President on 11 October 2016. The hearing was not recorded. It appears that the only appearance was by Mr Corrigan, presumably on behalf of the applicant (Platinum ER Pty Ltd).

[14] As earlier stated, the Decision was issued on 18 October 2016. The Decision in its entirety was as follows:

“[1] This is an application, pursuant to s 185 of the Fair Work Act 2009 (the ‘Act’), filed by Platinum ER Pty Ltd (the ‘applicant’) which seeks the approval of the Fair Work Commission (the ‘Commission’) of a single enterprise agreement to be known as the Pennyco Pty Ltd T/A Zarraffas West Ipswich 2016 EBA (the ‘Agreement’). The Agreement is to cover 8 employees who are employed at the applicant’s café in Queensland.

[2] The employees were last notified of their representational rights on 1 August 2016, and voting for the Agreement’s approval took place on 14 September 2016. The time limits under s 181(2) of the Act are thereby satisfied. In a vote for the Agreement’s approval, all 7 of the employees who cast a valid vote, agreed to approve the Agreement. The application for approval of the Agreement was lodged on 26 September 2016, thereby satisfying s 185(3) of the Act.

[3] In the Employer’s Declaration in support of the application (Form F17) Mr S Penrose, Director identified the Restaurant Industry Award 2010 [MA000119] as the relevant reference instrument for the purposes of the Better Off Overall Test (the ‘BOOT’). Mr Penrose said that allowances and penalty rates for work performed on weekends have been ‘loaded’ into higher base rates of pay. Rates of pay are to be adjusted in accordance with the Commission’s Minimum Wage Review decisions. I am satisfied that the Agreement passes the BOOT. The Agreement provides for the mandatory flexibility and consultation terms at clauses 8 and 9 respectively, and a disputes resolution procedure at clause 7 provides for conciliation and arbitration by the Commission.

[4] At a hearing of the application on 11 October 2016, Mr M Corrigan appeared for the applicant. Mr Corrigan outlined the main features of the Agreement and submitted that all of the legislative requirements for approval of the Agreement have been satisfied and the Agreement should be approved by the Commission. He explained that the Agreement is very similar to an agreement that I approved in July this year; see: Platinum ER Pty Ltd [2016] FWCA 4374. He also explained that like that agreement, cl 13.1 of the Agreement provides for a reconciliation of an individual employee’s pay to be performed on an annual basis or at the end their employment and where such a reconciliation establishes that an employee has been paid less than under the Award, the employee will be reimbursed the difference.

[5] Having heard the applicant’s submissions and upon reviewing the terms of the preapproval process documentation and the Agreement itself, I am satisfied that all of the requirements of the Act, in particular ss 180, 186, 187 and 188, in so far as they are relevant to this application, have been met. Accordingly, I approve a single enterprise agreement known as the Pennyco Pty Ltd T/A Zarraffas West Ipswich 2016 EBA. Pursuant to s 54 of the Act, the Agreement shall operate from 18 October 2016 and have a nominal expiry date of 11 October 2020.”

[15] On 23 January 2017, lawyers acting for Pennyco sent the following email to the Deputy President (formal parts omitted):

“Without prejudice

Dear Deputy President Sams

We act for Pennyco Pty Ltd and seek your guidance in relation to the Pennyco Pty Ltd Zarraffas West Ipswich 2016 EBA [2016 FWCA] 7494 which you approved on 18 October 2016 (EBA).

It has come to our client’s attention that the EBA was not properly made and this has caused significant concern. Our client seeks to terminate the EBA in these circumstances, but the Fair Work Rules do not appear to provide for the termination of an EBA on this basis. As such, we seek your assistance, if you are able to provide it, as to the best approach to have the EBA terminated as soon as possible.

I have briefly set out below the background to the making of the EBA in order to provide some context to our client’s situation.

Background

In addition to Pennyco, we also act for Zarraffa’s Franchising Pty Ltd, the franchisor of the Zarraffa’s Coffee franchise system (head office) in relation to various legal matters.

I have been head office’s legal advisor in relation to HR/IR matters since about 2011, and we also act for various franchisees in relation to the provision of HR/IR legal advice.

In about 2013 we were approached by head office who advised they wanted to implement compulsory HR/IR training for their franchisees. Head office is committed to industrial relations best practice throughout its franchise system, demands strict compliance from its franchisees in relation to employment matters, and wanted to ensure franchisees were supported in this regard.

We developed a bespoke franchisee training program and have since delivered this program to all franchisees as part of the Zarraffa’s’ new store franchisee training. Attendees include all new franchisees entering the system, as well as existing franchisees who may be purchasing additional stores within the system. Franchisees are required to undergo the four hour training session with us, regardless of whether they have completed the training at some other time. From time to time, head office will also direct existing franchisees to attend the training if concerns as to HR/IR matters arise from head office’s regular QA checks.

Scott and Nicole Penrose are the directors of Pennyco. As with many franchisees, they are new to the Zarraffa’s system, and also first-time business owners/employers. Nicole previously worked in an administrative position, and Scott is currently employed in the Australian Defence Force’s armed forces in the Middle East.

We are instructed that when Scott and Nicole joined the system, they were provided with an ‘information packet’ by head office in relation to the various goods and services they would require for their store, and the contact details of Zarraffa’s’ recommended suppliers. As part of this pack, a flyer for ‘Platinum Employee Relations’ (Platinum) was included in error. Head office ceased recommending Platinum’s services some time ago (around 2011), and has not for many years provided Platinum’s details to franchisees as a preferred supplier. For some years now our office has been recommended to franchisees seeking HR/IR advice, on the preferential rates head office has negotiated on their behalf, however some early franchisees continue to use the services of Platinum.

Scott and Nicole contacted Platinum, and were advised by Michael Corrigan about the benefits of registering an EBA, particularly so that they could lock in an ‘all inclusive’ rate of pay instead of having to calculate loadings and allowances on a weekly basis under the Award. We understand Michael had previously assisted many franchisees to have similar EBAs registered. Michael provided Scott with what appears to be Platinum’s ‘template’ EBA which Scott reviewed. When Scott informed Michael he was happy with the EBA, Michael provided Scott with a pre-completed ‘Form F17—Employer’s statutory declaration in support of an application for approval of an enterprise agreement’ with the instructions to ‘please fill in the address part of the declaration and then have it witnessed in front of a JP and return to me so that I can lodge with Fair Work. I also need the signature page of the EBA signed by you and an employee, including the addresses.’ I have a copy of this email.

Our instructions are that at this point in time, Scott had been dealing with Michael on the EBA but was about to leave on a three month deployment to the Middle East. Scott completed and signed the F17 and had Nicole sign the EBA as the ‘employee’ on Michael’s instructions. At this point in time, Scott advises that Michael had not explained to him or Nicole the process for having an EBA approved, or the requirements for the EBA to be properly made. I raised these requirements with Scott and Nicole in a meeting I had with them on 13 January 2017, and they advised that this was ‘the first they’d heard of it’ (the NOERR, 21 day waiting period, 7 day inspection period, requirement to have at least two employees etc). Scott admits that he did not read the F17 in detail, but due to his imminent departure simply completed and signed the document, ensuring it was returned to Michael before he was deployed. Scott instructs that Michael was well aware that the store had not yet commenced trading, and no employees had been engaged. When the matter was listed, Michael confirmed that he would attend the hearing which was ‘usually for certification of the agreement’, and thereafter provided Pennyco with the approved EBA.

We understand that the store has not yet opened, and as at 13 January 2017 there are no employees of Pennyco Pty Ltd. Nicole will become an ‘employee’ (as director), and while Scott has since returned to the Middle East on another deployment, Nicole commenced interviews for their new store’s employees on Monday 16 January 2017.

HR/IR Training

Nicole underwent the HR/IR training on 15 December 2016. Scott was not present as he was on deployment. The training was conducted by Saasha Greeney, a paralegal in our HR/IR legal team. Prior to conducting the training, we usually request head office to inform us as to whether the franchisee will be covered by an EBA. While the standard training covers Award entitlements, we will also run through the EBA if one applies. Often new franchisees will be covered by an EBA if they are purchasing an existing store and the EBA is a transferring instrument, so it is not unusual for us to include a training component on the applicable EBA in addition to the general EBA information covered in the training.

As usual, head office confirmed that the franchisee was covered by an EBA and forwarded us a copy of that EBA.

Upon Saasha’s return to the office having delivered the training to Nicole, she spoke with me about the West Ipswich store’s EBA. Saasha explained that while Nicole had had little to do with the EBA (as Scott had primarily dealt with Michael and Platinum), she was not aware of any of the procedures leading up to the EBA being approved having been followed, and confirmed the store had no employees.

I located the decision in relation to the EBA’s approval, and having reviewed the decision I contacted Zarraffa’s Executive Director at head office in relation to my concerns around the legitimacy of the EBA as I am acutely aware of their commitment to legitimate industrial relations practises. While I have not had the opportunity to review a transcript in relation to the submissions made by Michael at the hearing, it appears from the decision that the Commission may have been misled with regards to the following matters:

[1] the EBA cannot be said to cover eight employees ‘who are employed’, as the store has not yet opened and as at 13 January 2017 had no employees;

[2] neither Nicole, nor any other person was provided with a notice of representational rights; no vote took place at all – there are not seven employees who are alleged to have cast a vote;

[3] there is no provision for ‘loaded’ weekend rates. The agreed rates are ‘all inclusive’ of all penalties and loadings for all hours worked with the exception of public holidays. The permanent and part-time rates in the EBA have been ‘loaded’ by 25% but the casual rates (where the bulk of employees will be casual) have only been ‘loaded’ by about 11%. As an example, a casual who only works weekends will be severely disadvantaged by this rate; and

[4] it appears that the legal requirements for the approval of the EBA were not met despite the submissions made to the Commission by Michael.

The Executive Director was extremely concerned and advised that he would discuss our concerns with the franchisees and revert to us. We were subsequently informed that this discussion occurred, and the Executive Director was also told that the franchisees were never informed of the EBA requirements by Michael, and simply did as he instructed. The Executive Director advised me that he had asked Scott and Nicole to arrange a meeting with me to discuss their options. Head office views this matter in the most serious light and have agreed to cover any legal expenses to rectify the situation.

I met with Scott and Nicole on 13 January 2017. I confirmed (to my own satisfaction) that they were not complicit in the misrepresentations made to the Commission. While Scott admits to executing the F17 and agrees he should have been more vigilant as to its contents, he was about to be deployed and assumed it was ‘standard’.

Termination of EBA

On the advice of head office who has significant concerns regarding the conduct of Platinum and the adverse potential consequences for the franchise system’s brand as a result, Nicole and Scott have instructed me to attend to the termination of the EBA. At my meeting with them, I took them through the process which would normally be followed to negotiate an EBA with employees, and the steps and timelines which are required to be followed. Nicole and Scott are of the view that they would prefer to negotiate a genuine EBA with their employees in good faith, and are committed to engaging in a high standard of industrial relations practices as new employers. It is their preference to revert to Award coverage until such time as they are in a position to commence negotiations with employees, and would ideally prefer the EBA to be terminated prior to any employees being engaged who will be covered by the EBA.

As mentioned above, I have reviewed the relevant provisions of the FW Act and Rules, and cannot identify the basis upon which to have the EBA terminated in the current circumstances as there are still no ‘employees’. Also, with the above in mind, Nicole and Scott are reluctant to make any further representations to the Commission which imply that the EBA was properly made in the first instance (such as making an application for termination by agreement before the nominal expiry date).

Given that this is not a situation I have come across in the past, I would appreciate your assistance in determining the best way forward and would welcome any suggestions you may have as to process.

We note that the above matters have not been put to Platinum or Michael Corrigan for reply. Given that Scott is now away, Nicole is focussed on the upcoming store opening and ensuring that the EBA is terminated as soon as possible. I understand that it is Scott’s preference that he be afforded the opportunity to deal with Platinum upon his return to Australia, and will be seeking a refund of fees paid for the EBA. However should you determine that a reply from Platinum is required before any further steps can be taken, it is Pennyco’s priority to have the EBA terminated and I have instructions to contact Platinum on their behalf should this become necessary.

Please feel free to call me if you have any questions or wish to discuss.”

[16] On 24 January 2017 the Deputy President’s Associate sent the following email to Pennyco’s lawyers in response (formal parts omitted):

“Thank you for your correspondence concerning the approval of the Pennyco Pty Ltd Zarraffas West Ipswich 2016 EBA 2016.

You may be assured His Honour is very concerned with the matters you have raised and is considering what options might be available to him in respect to the likelihood His Honour was seriously misled by Mr Corrigan in the hearing of the application for the Agreement’s approval and in light of the apparent false information in the Form F17.

While it would be inappropriate for His Honour to give you any advice as to the ‘way forward’, it would appear the only option available is to appeal His Honour’s decision of 18 October 2016. Given the seriousness of the matter, it is likely an application to extend the time for filing the appeal and application to admit new evidence would be granted, noting of course that such matters would be entirely for the Full Bench constituted to hear the appeal to determine.”

[17] Notwithstanding the high degree of concern expressed about the Agreement and the circumstances of its approval in the 23 January 2017 email and the declared readiness of “Head office” to “cover any legal expenses to rectify the situation”, no further action was taken by Pennyco in relation to the Agreement until it lodged its notice of appeal on 28 July 2017, over six months later. It appears to be the case that during that period Pennyco began to operate its coffee shop franchise, employ persons for that purpose, and pay them in accordance with the Agreement.

[18] In its notice of appeal, Pennyco contended that the Decision to approve the Agreement should be quashed on two bases. The first was that Pennyco did not at the time of the approval of the Agreement have any employees. In this respect the notice of appeal contended:

“Material factual considerations not taken into account: Appellant did not have any employees

a. The decision to approve the EBA pursuant to section 185 of the Fair Work Act 2009 (Cth) (FW Act) (Decision) was made based on incorrect facts provided to the FWC which were material to the FWC's decision that the EBA met the requirements for approval prescribed by the FW Act.

b. The Appellant did not have any employees at the time of the application for approval of the EBA (Application) or the Decision. To the extent that the materials filed with the FWC included statements about employees, these statements were factually incorrect.

c. The FWC could not be satisfied that the relevant requirements of the FW Act were met, including in particular sections 172, 173, 180 and 181of the FW Act.

d. Accordingly, 'material consideration[s]' were not taken into account by the FWC when the Decision was made.

e. The FWC could not have properly reached the same Decision having knowledge of the correct facts, which stem from the fact that the Appellant had no employees at the time of the application for approval of the EBA and Decision.”

[19] The second basis of appeal was that the Agreement did not pass the better off overall test (BOOT). Pennyco contended:

“Material factual considerations not taken into account: EBA does not pass the BOOT

f. The FWC failed to take into account the material consideration that casual employees who work only weekends would not be better off overall if the EBA applied to them and the Restaurant Industry Award 2010 (Award) did not apply to them.

g. The EBA does not provide for weekend penalty wage rates. The EBA wage rates are 'all inclusive' of all penalties and loadings for all hours worked with the exception of public holidays. The EBA wage rates for permanent and part-time employees have been 'loaded' by 25%, but the casual rates (where the bulk of the Appellant's employees will be casual employees) have only been 'loaded' by about 11%. Therefore, a casual who only works weekends will earn less if the EBA applied to them than they would if the Award applied to them.

h. Accordingly, the FWC could not have been satisfied that the EBA passed the better off overall test (BOOT) and thereby met the requirements of section 186(2)(d) of the FW Act.”

[20] Pennyco contended in its notice of appeal that permission to appeal should be granted in the public interest because the Decision manifested an injustice in that the Commission relied on facts which were incorrect and the “Appellant’s previous representative in its application for approval of the EBA (Mr Michael Corrigan of Platinum Employee Relations) knowingly or negligently misrepresented facts to the FWC…”, and quashing the Decision was for those reasons a matter of importance and general application.

[21] Having regard to the contentions advanced in the notice of appeal, on 21 August 2017 the Full Bench caused an email in the following terms to be sent to each of Mr Penrose and Mr Corrigan (formal parts omitted):

“Your attention is drawn to the notice of listing, Form F7 notice of appeal, correspondence from lawyers for the appellant, directions, Form F17 statutory declaration and decision at first instance in the above matter (attached).

In this matter it appears that the appellant contends, among other things, that:

1. The Form F17 statutory declaration made by Mr Scott Penrose on 19 September 2016 stated “incorrect facts”;

2. Mr Michael Corrigan of Platium Employee Relations prepared the Form F17 statutory declaration knowing that it contained statements of “incorrect facts”;

3. Mr Michael Corrigan made submissions to the Commission that were known by him to be factually incorrect at a hearing before Sams DP on 11 October 2016; and

4. The above conduct caused the Commission to wrongly approve the Pennyco Pty Ltd Zarraffas West Ipswich 2016 Enterprise Bargaining Agreement.

In the event that these contentions are accepted by the Full Bench in the above appeal, this may lead to the Full Bench making an adverse finding against you.

It may also cause the Full Bench to consider whether you should be referred to the appropriate Commonwealth authorities for investigation as to whether any criminal offence has been committed.

In the circumstances, the Full Bench considers that you should be given the opportunity to be heard in the matter.

Accordingly, if you wish to file any written submission and/or written statement of evidence you should do so on or before 5.00pm Tuesday 12 September 2017 to the Brisbane Registry.

Brisbane Registry [email protected]

Level 14/66 Eagle St,

Brisbane City QLD 4000.

Additionally, if you wish to make oral submissions or give evidence in the matter, you should attend the hearing at the Fair Work Commission at 10am Monday 18 September 2017 at Level 14/66 Eagle St, Brisbane City QLD 4000 (see attached notice of listing).”

[22] On 4 September 2017 Pennyco filed two witness statements - the statement of Scott Penrose dated 4 September 2017, and the undated statement of Nicole Penrose. These statements were admitted into evidence at the hearing of the appeal, notwithstanding that neither Mr nor Mrs Penrose attended the hearing to give sworn evidence as to the matters contained in their respective statements. The salient points in Mr Penrose’s statement were as follows:

● he and Mrs Penrose were the two directors of Pennyco;

● he was also employed in the Australian Defence Force, and was regularly deployed for duty abroad;

● in or about June 2016, he and Mrs Penrose undertook the process of purchasing a Zarraffa’s Coffee franchise, and acquired a store located in West Ipswich;

● when he and Mrs Penrose attended workplace relations training at the Zarraffa’s franchisor’s head office, they were provided with material on the franchisor’s preferred service providers, which included an industrial relations consultant firm, Platinum Employee Relations;

● they became aware that Platinum had been used by other Zarraffa’s franchisees in relation to developing and seeking the approval of enterprise agreements;

● he had subsequently learned that the Platinum brochure was included by mistake, since the franchisor had ceased to recommend its service;

● as he and his wife were first-time franchisees with very limited business management experience, and based on advice from existing franchisees he decided to contact Platinum;

● he spoke Mr Michael Corrigan of Platinum, who recommended that they put an enterprise agreement in place to cover employees who would be hired to work at their store;

● in or around mid-2016, he informed Mr Corrigan that they intended to open the store in late 2016, and that Pennyco had no employees at that time;

● Mr Corrigan informed him in the same conversation that he had experience in preparing enterprise agreements, and had previously prepared other enterprise agreements for other Zarraffa’s franchisees which had been approved by the Commission;

● while Mr Corrigan briefly referred to some aspects of the enterprise agreement approval process, Mr Penrose did not recall being informed that Pennyco had to have at least 2 employees at the time the enterprise agreement was to be voted on, that Pennyco had to provide such employees with a notice of representational rights, that Pennyco had to provide such employees with a copy of the proposed agreement and explain its terms and effect, that such employees had to be given an opportunity to ask questions about the agreement, and that Pennyco had to conduct a vote for the agreement’s approval by employees;

● if Mr Corrigan had discussed these requirements, Mr Penrose would have told him that the requirements could not be met as Pennyco did not have any employees at that stage;

● in August to October 2016, he and Mr Corrigan exchanged several emails in relation to the agreement;

● on 17 August 2016 Mr Corrigan emailed him a draft copy of the agreement, and asked him to read and sign it;

● after requesting an amendment to the provisions of the agreement concerning unpaid meal breaks, he sent back a signed copy of the enterprise agreement on 26 August 2016;

● in an email to Mr Corrigan sent on 8 September 2016, Mr Penrose requested an update on whether the agreement had been lodged, and said they were “looking at staffing in the coming weeks”;

● in response, Mr Corrigan sent a draft Form F17 statutory declaration which had been filled out, and instructed him to “fill in the address part of the declaration and then have it witnessed in front of a JP and return it to me so that I can lodge with Fair Work”, and also that he “needed the signature page of the EBA signed by you and an employee, including the addresses”;

● Mr Corrigan never advised him that he should carefully review and confirm the factual accuracy of the information in the Form F17, which led him to believe that it contained correct information because Mr Corrigan informed him he was an experienced advisor in these matters;

● Mr Corrigan also never advised him that including incorrect information in the Form F17 could amount to a criminal offence;

● Mr Penrose read the Form F17, but did not scrutinise the information in it as much as he would have if he understood he was required to ensure that the information in it was correct;

● he was also under pressure at this time and rushed to complete it because he was to be deployed in the Middle East on or about 20 September 2016;

● Pennyco still had no employees at this time;

● on or about 14 December 2016, Mrs Penrose informed a representative of the Zarraffa’s franchise at a training session that the store had an enterprise agreement in place even though it had not yet commenced trading and had no employees; and

● the franchisor eventually informed them that the Agreement had been approved based on incorrect information and without the required procedure being followed, and it was agreed that Pennyco would seek to have the Agreement terminated by whatever means required, with the result that the email of 23 January 2017 was sent to the Deputy President’s Associate.

[23] In her statement Mrs Penrose simply said that the process of obtaining and applying for the enterprise agreement was managed by Mr Penrose, that she had no dealings with Mr Corrigan, and that the only role she played was to read the enterprise agreement, consult with Mr Penrose regarding changes and “sign it on behalf of Pennyco”.

[24] In response to the Commission’s letter of 21 August 2017, Mr Corrigan also made and filed an unsigned witness statement dated 11 September 2017. Mr Corrigan also did not attend the hearing of the appeal and thus did not give sworn evidence in relation to the matters in his statement, but it was nonetheless admitted into evidence. Mr Corrigan said that:

● in an initial telephone conversation with Mr Penrose on 17 August 2016, Mr Corrigan advised him about the enterprise agreement process, including that it was necessary to have a minimum of two employees to begin the voting process, and that he had completed enterprise agreements for other Zarraffas franchisees;

● Mr Penrose told him there would not be an issue complying with the requirements;

● they agreed on a discounted price, and Mr Corrigan then sent him an invoice and a notice of employee representational rights for bargaining in relation to the proposed agreement;

● he then prepared a draft agreement and sent it to Mr Penrose;

● Mr Penrose in response requested changes to the agreement, which were made, and Mr Corrigan then advised again that a vote needed to take place;

● at 10.36 am on 15 September 2016 Mr Corrigan sent a draft of the Form F17 statutory declaration attached to an email, in which he asked for the postal address and instructed Mr Penrose that the declaration had to be witnessed and the agreement signed by himself and an employee;

● after sending this email Mr Corrigan realised that he “had not clarified all sections of the F17”, so he sent a further email at 10.53 on the same day which highlighted paragraphs 2.4, 2.8, 2.10 and 4.3 in yellow;

● Mr Penrose returned the completed documents to him, and Mr Corrigan “did not thoroughly check the F17 documents as I thought Mr Penrose would have followed the instructions from both my emails and read the documents and made the necessary changes”;

● he then lodged the documents with the Commission online;

● he had not been aware of any issue with the process until made aware of the appeal proceedings in August 2017;

● Mr Corrigan denied misleading the Commission, ignorance of the law was no excuse for Mr Penrose, and “I did compile the F17 and asked for the facts to be checked as it was a draft, I did not as inferred knowingly lodge F17 with incorrect facts”; and

● “Being a small business when I get files back I do trust my clients, after instructions are given to believe that they have been carried out”.

Consideration

Extension of time and permission to appeal

[25] The principles usually applied to consideration of an application to extend time to lodge an appeal under rule 56(2)(c) of the Fair Work Commission Rules 2013 were summarised in the Full Bench decision in Jobs Australia v Eland² as follows (footnotes omitted):

“[5] Time limits of the kind in Rule 56 should not simply be extended as a matter of course. There are sound administrative and industrial reasons for setting a limit to the time for bringing an appeal and it should only be extended where there are good reasons for doing so. The authorities indicate that the following matters are relevant to the exercise of the Tribunal’s discretion under Rule 56(2)(c):

● whether there is a satisfactory reason for the delay;

● the length of the delay;

● the nature of the grounds of appeal and the likelihood that one or more of those grounds being upheld if time was extended; and

● any prejudice to the respondent if time were extended.”

[26] In this case there is no satisfactory explanation for the very lengthy delay in the lodgment of the appeal. If the contents of the witness statements of Mr and Mrs Penrose are accepted in their entirety, there may be an explanation for the delay in filing the appeal up until about January 2017 on the basis that they had not previously been aware that the Agreement had been approved on the basis of false information. However there is no explanation for the delay between the correspondence from the Deputy President’s chambers of 24 January 2017 advising that it would be necessary for Pennyco to lodge an appeal in order for the decision to approve the Agreement to be reconsidered and the actual lodgment of the appeal on 28 July 2017, over six months later. No real explanation was advanced for this delay at the hearing beyond a vague reference to Pennyco having to obtain legal funding for the appeal. This explanation is not credible. Pennyco’s letter of 23 January 2017 to the Deputy President, which we have earlier set out, indicated that the Zarraffas franchisor, because of the seriousness with which it viewed the matter, had “agreed to cover any legal expenses to rectify the situation”. What is more disturbing is that, notwithstanding its knowledge that the Agreement was approved on the basis of false information and that it now submits that the Agreement could not pass the BOOT, Pennyco has over the period of the delay commenced employing persons and has paid them in accordance with Agreement rather than the relevant award.

[27] However these matters are outweighed by the public interest considerations which support the grant of permission to appeal and the overwhelming merits of the appeal. For the reasons set out below, it is obvious that the Agreement was incapable of approval in accordance with the requirements of the FW Act. Its approval was procured by the use of a statutory declaration containing blatantly false information, in circumstances where the Commission’s processes for approval of enterprise agreements in accordance with the FW Act are dependent to a very significant degree upon the veracity of the information in the Form F17 statutory declaration which is required to be made in support of all agreement approval applications. It is necessary in those circumstances for an extension of time to be granted so that the appeal may be heard and determined.

[28] For the same reasons it is necessary to grant permission to appeal. Section 604(2) requires that permission to appeal be granted where the Commission is satisfied that it is in the public interest to do so, and it is clear that the public interest is attracted in this case.

The false statutory declaration

[29] We accept on the basis of the evidentiary material before us that the answers/responses given in paragraphs 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.10 and 4.3 of the statutory declaration of Scott Penrose made on 19 September 2016 were false. Pennyco had no employees at the time, and therefore could not have issued notices of representational rights, could not have held consultation meetings with employees or provided them with a copy of the Agreement, and could not have conducted a vote on the Agreement. It may be added that there was no proper basis for Nicole Penrose to have signed the Agreement on behalf of employees. It is not now suggested that Mrs Penrose was herself an employee of Pennyco at this time.

[30] The requirements for the making and approval of a non-greenfields single enterprise agreement relevantly include the following:

(1) The agreement must be made with the employees who are employed at the time the agreement is made and will be covered by the agreement: s.172(2)(a). If the agreement relates to a genuine new enterprise which has not yet employed anyone it needs for the normal conduct of the enterprise, it must be made with one or more relevant employee organisations as a greenfields agreement: s.172(2)(b).

(2) All reasonable steps must be taken by the employer to give employees who will be covered by the agreement a notice of employee representational rights: s.173.

(3) Before employees are asked to vote upon an agreement, the employer must take all reasonable steps to ensure that employees are provided with a copy of the written text of the agreement, are notified of the time and place at which the vote will occur and the voting method to be used, and the terms of the agreement and the effect of those terms are explained to employees: s.180(2), (3) and (5).

(4) A request to vote on an agreement must not be made until 21 days after the day on which the last notice of representational rights was issued: s.181(2).

(5) The agreement is only made when a majority of those employees who will be covered by the agreement and cast a valid vote approve the agreement: s.182(1).

(6) In order to be approved, the agreement must have been genuinely agreed to by the employees covered by it: s.186(2)(a). Genuine agreement requires, among other things, that the requirements of s.180(2), (3) and (5) and s.181(2) be complied with: s.188(a)(i).

[31] None of the above requirements was satisfied in respect of the Agreement. Indeed, because there were no employees at the time, no enterprise agreement as comprehended by Pt.2-4 of the FW Act was ever made. For this reason, the Decision was in error, although not through the fault of the Deputy President who had no basis to consider that facts asserted in Mr Penrose’s statutory declaration were false. The Decision, which approved the Agreement, must therefore be quashed. The consequence of the approval of the Agreement being quashed by our decision and order is that it never commenced operation. 3 The further consequence would appear to be that Pennyco has been required to pay its employees in accordance with the Restaurant Industry Award 2010 since it commenced operating its West Ipswich coffee shop.

[32] It is of course a serious matter that a false statutory declaration caused the Commission to make a decision which was beyond its power under the FW Act to make, and which may have caused detriment to Pennyco’s employees. The limited evidentiary material before us, and the failure of Scott Penrose, Nicole Penrose and Michael Corrigan to attend the appeal hearing to give sworn evidence and be tested on that evidence, does not permit us to form any proper conclusion as to who bears responsibility for this state of affairs. There are significant differences in the versions of events given by Mr and Mrs Penrose and Mr Corrigan, most notably that Mr Corrigan says that he advised Mr Penrose from the outset that it was necessary for Pennyco to have at least two employees, while Mr Penrose denies this. The factual position of each person additionally raises questions which have not been answered. Mr Penrose’s position in his witness statement was that he had no experience in workplace relations matters and relied upon Mr Corrigan’s advice. That may be accepted, but it is impossible to understand how, if Mr Penrose had read the statutory declaration even cursorily before signing it, he could not have realised that it asserted facts that had no basis in reality. That is particularly the case given that Mr Corrigan highlighted in yellow certain (false) paragraphs for Mr Penrose’s attention. Mrs Penrose’s witness statement gives no explanation as to how she could have signed the Agreement on behalf of employees when there were no such employees, and indeed on one view her statement seeks to mislead by saying she signed the Agreement on behalf of Pennyco. However, we take note of the fact that it was Mrs Penrose who brought the true factual circumstances surrounding the purported making of the agreement to the attention of the franchisor’s lawyers.

[33] Mr Corrigan’s position in his witness statement was that it was ultimately Mr Penrose’s responsibility to ensure that the facts asserted in his statutory declaration were true and correct. That may also be accepted. However Mr Corrigan gives no explanation as to how those factual assertions came to appear in the draft declaration which he sent to Mr Penrose. Those assertions involved precise statements about the dates upon which certain purported events took place, what occurred in relation to those events, and the number and characteristics of the purported employees. Mr Corrigan does not say that he drafted the declaration on the basis of instructions or information provided by Mr or Mrs Penrose, and the facts asserted in the declaration have every appearance of having been fabricated in a way that would make it appear that the process-related approval requirements in the FW Act were satisfied.

[34] Under s.11 of the Statutory Declarations Act 1959 (Cth), it is a criminal offence for a person to intentionally make a false statement in a statutory declaration. Under s.11.2(1) of the Schedule to the Criminal Code Act 1995 (Cth), a person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly. We consider that there are reasonable grounds to suspect that an offence may have occurred in relation to the statutory declaration. Accordingly we will provide the declaration together with a copy of this decision and the witness statements of Scott Penrose, Nicole Penrose and Michael Corrigan to the General Manager of the Commission for the purpose of referral to the Australian Federal Police for investigation.

The Better Off Overall Test

[35] Having expressed the above conclusions, it is not strictly necessary for us to determine Pennyco’s other ground of appeal concerning the BOOT. However we consider that we should express a view about it, particularly given that Platinum appears to be associated with the making and approval of enterprise agreements for a number of other employers that are in the same or similar terms. This includes the following agreements involving Zarraffa’s franchisees:

● Bean Away Pty Ltd t/a Zarraffas Pacific Pines and Bean Away Ferry Rd Pty Ltd t/a Zaraffas Ferry Rd enterprise agreements approved on 19 June 2013 ([2013] FWCA 3921);

● B&T Beans Pty Ltd t/a Zarraffas Richlands EBA approved on 29 May 2013 ([2013] FWCA 3411);

● J&D Thoroughbreds Pty Ltd, ATF Sea Zulu Family Trust t/a Zarraffas Longanlea EBA 2013 approved on 30 May 2013 ([2013] FWCA 3452); and

● Heathwood Retail Pty Ltd 2016 EBA approved on 7 July 2016 ([2016] FWCA 4374).

[36] Section 186(2)(d) requires that an enterprise agreement must pass the BOOT in order to be approved. Section 193(1) provides that a non-greenfields agreement passess the BOOT if the Commission is satisfied, as at test time (being the date application for approval of the Agreement was made), that each award covered employee, and each prospective award covered employee, would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee. The relevant modern award here is the Restaurant Industry Award 2010.

[37] In its appeal submissions Pennyco modelled the wages payable for a Trainee Barista under the Agreement for a weekend roster of 11 hours per day, Saturday and Sunday, compared to the Restaurant Industry Award. The results were as follows:

[38] Pennyco’s modelling is in error in two respects. First, it uses current award rates of pay rather than those applicable at the time the application for approval of the Agreement was made. Second, it fails to take into account that the higher ordinary rate of pay under the Agreement gives a small countervailing benefit in terms of the quantum of pay when a part-time employee takes annual leave. However the corrected results set out below (which incorporate the annual leave benefit for part-time employees on an hourly basis) show that the outcome remains the same, namely that on the postulated weekend roster the employee was worse off under the Agreement at test time than under the award:

[39] This demonstrates that the loaded penalty rates for which the Agreement provides are not high enough to compensate for the loss of weekend and overtime penalty rates for employees working primarily on weekends.

[40] At the hearing before the Deputy President, it appears that Mr Corrigan submitted (and the Deputy President accepted) that any deficiency was wholly answered by the reconciliation provision in clause 13.1. This was patently incorrect. Leaving aside the detriment occasioned to an employee because of the delay in receiving pay entitlements at the end of a year or at the end of employment as compared to at the end of a weekly or fortnightly pay period 4, the reconciliation provision only provides reimbursement up to the level of the award. It does not make any provision which would leave an employee better off overall, and there is no other provision in the Agreement which would lead to that result.

Orders

[41] We order as follows:

(1) An extension of time until 28 July 2017 is allowed for the lodgment of the notice of appeal.

(2) Permission to appeal is granted.

(3) The appeal is upheld.

(4) The Decision ([2016] FWCA 7494) is quashed.

[42] Further, as earlier stated, the statutory declaration of Scott Penrose made on on 19 September 2016 together with a copy of this decision and the witness statements of Mr Penrose, Nicole Penrose and Michael Corrigan will be provided to the General Manager for the purpose of referral to the Australian Federal Police for investigation as to whether a crime has been committed.

VICE PRESIDENT

Appearances:
M. Cole solicitor on behalf of Pennyco Pty Ltd t/a Zarraffas West Ipswich.

Hearing details:
2017.
Brisbane:
18 September.

 1   [2016] FWCA 7494

² [2014] FWCFB 4822

 3   Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union [2015] FCAFC 11 at [90]-[111] per Buchanan J, with whom Katzmann J agreed, [131]-[152] per Logan J

 4   See Shop, Distributive and Allied Employees Association v Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery [2017] FWCFB 1664 at [45]

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