DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Construction, Forestry, Mining and Energy Union
v
KAEFER Integrated Services Pty Ltd
(C2017/4431)

Appeal against decision [2017] FWCA 3839 of Commissioner Gregory at Melbourne on 21 July 2017 in matter number AG2017/2240

Introduction and background

[1] The Construction, Forestry, Mining and Energy Union (CFMEU) has lodged an appeal, for which permission to appeal is required, against a decision issued by Commissioner Gregory on 21 July 2017 1 (Decision) to approve the KIS North West Onshore Operations Enterprise Agreement 2017-2021 (Agreement).

[2] The CFMEU was not a bargaining representative for the Agreement. However, having become aware of the application for approval, the union advised the Commission that it objected to it. In particular, it stated that it did not believe the Agreement passed the “better off overall test” (BOOT), as required by s 186(2)(d), and sought to be heard.

[3] In the Decision, the Commissioner noted that the CFMEU had not identified any particular reason why it believed the requirements of the BOOT had not been satisfied, 2 and stated that, in the circumstances, he was not satisfied that the union should be given an opportunity to be heard.3 The Commissioner concluded that he was satisfied that the requirements for approval of the Agreement had been met and approved the Agreement, subject to various undertakings.4

[4] In its Notice of Appeal, the CFMEU contended that it represents workers in the construction industry, that the Commissioner’s decision to approve the Agreement affects its members, and accordingly it is a “person aggrieved” by the decision of the Commissioner for the purposes of s 604(1) of the Fair Work Act 2009 (FW Act). The respondent, KAEFER Integrated Services Pty Ltd (Kaefer) accepted that the CFMEU had standing to bring the appeal, consistent with the decision of the Full Bench in CFMEU v CSRP Pty Ltd. 5

[5] An appeal under s 604 of the FW Act is an appeal by way of rehearing and the Commission’s powers on appeal are exercisable only if there is error on the part of the primary decision maker. 6 There is no right to appeal and an appeal may be made only with the permission of the Commission. Subsection 604(2) requires the Commission to grant permission to appeal if satisfied that it is “in the public interest to do so”. Permission to appeal may otherwise be granted on discretionary grounds.

[6] Other than the special case in s 604(2), the grounds for granting permission to appeal are not specified. Considerations which have traditionally been treated as justifying the grant of permission to appeal include that the decision is attended with sufficient doubt to warrant its reconsideration and that substantial injustice may result if leave is refused. 7

[7] The CFMEU’s Notice of Appeal puts forward four grounds of appeal, all of which contend that the Commissioner erred by approving the Agreement. These were elaborated upon in the CFMEU’s written submissions and in oral argument before us.

Ground 1: The better off overall test

[8] The first ground of appeal submits that the Commissioner erred by concluding that the Agreement passed the BOOT. The modern award for the purposes of assessing the BOOT in this matter is the Building and Construction General On-site Award 2010 (Award).

[9] It is well established that the test requires the identification of terms which are more beneficial for an employee, terms which are less beneficial, and an overall assessment of whether an employee would be better off under the agreement. 8 The overall assessment involves a global comparison.9 However, it is clear from s 193(1) that this global comparison must be satisfied in relation to each award covered and prospective award covered employee.10 The test is not directed at whether most employees or most classes of employees are better off.11

[10] The Agreement provides for a higher base rate of pay than the Award. However, the CFMEU points to various allowances and other provisions in the Award which are not reflected in the Agreement, and which it says result in the Agreement not passing the BOOT.

[11] The CFMEU’s outline of submissions provided a comparative financial analysis of the terms of the Agreement against those of the Award, as they would apply to a weekly hire ‘general labourer’ under the Agreement and a weekly hire CW1(d) employee under the Award. It was not in contest that these are analogous positions. The CFMEU’s financial analysis was modelled on a work pattern of 50 hours per week. We accept that this is a common work pattern in the construction industry and the employer did not take issue with it. The CFMEU’s analysis is then built on data that comprises 38 ordinary hours and 12 overtime hours, as well as payments for crib time, meal allowance, fare allowance and pro rata redundancy. On the CFMEU’s analysis, the overall result was that a general labourer engaged on a 50 hour week would be $483.72 worse off per week under the Agreement.

[12] In its outline of submissions, Kaefer contended that the CFMEU’s Attachment B contained errors and mistaken assumption. It submitted that the CFMEU had used the incorrect base rate of pay, had incorrectly calculated overtime rates (which under the Agreement are payable after 7.6 hours), had wrongly assumed that the company would not provide a crib break to employees, and had wrongly included a pro-rata redundancy benefit that might never fall due.

[13] In response to Kaefer’s written submissions, the CFMEU filed an amended analysis. It comprised an “amended Attachment B”; however this attachment is in fact a new document which examines the position of a CW1(d) labourer engaged on a “daily hire, casual arrangement”, and indicates that such a worker would be $159.98 worse off under the Agreement than would be the case under the Award. The CFMEU also submitted a table ‘C’; this is in substance a revised version of the original Attachment B dealing with a CW1(d) labourer engaged on a weekly hire basis. It indicates that such a worker would be $216.31 worse off per week under the Agreement than under the Award, rather than $483.72, as it had originally submitted.

[14] At the hearing before us, argument focused largely on the BOOT, and in particular the significance and application of the meal allowance, fare allowance and crib time provisions in the Award. At the conclusion of oral argument, we invited the parties to file further written submissions in relation to the BOOT.

[15] The CFMEU subsequently filed a further submission in relation to the BOOT. It attached a further amended financial analysis which this time indicated a shortfall in the Agreement, as against the Award, of $126.06 for a CW1(d) labourer engaged on a casual basis, and $162.06 for such a labourer engaged on a weekly basis. Kaefer also filed a further submission, in which it contended that the union had again used the incorrect base rates of pay, and that overtime arrangements under the Agreement had not been properly reflected in the union’s analysis. It also disputed the application of the crib, meal and fares allowances to the circumstances of the work that is covered by the Agreement; the company’s position is that the financial comparison of the Agreement and the Award should omit these amounts from the Award ledger.

[16] The Commission’s modelling indicates that if crib time, meal allowance and fares allowances are all applicable, a CW1(d) weekly hire employee would be $154.72 worse off under the Agreement than under the Award (see Attachment 1 to this decision). If none of these allowances are applicable (or if they are provided as per the Award), the Commission’s modelling indicates that employees are $73.73 better off under the Agreement than under the Award (Attachment 2 to this decision). We now consider the application of these three Award-based allowances to the work covered by the Agreement.

Crib time

[17] Clause 35.3(b) of the Award provides that when employees are required to work two or more hours of overtime, they are entitled to a crib break of 20 minutes, without deduction of pay, after the normal finishing time. If the crib break is not taken, the employee is taken to have worked the 20 minutes (in effect, taken to have worked 20 minutes more than they actually worked), and is paid accordingly. It is common in the construction industry for the crib break to be paid out.

[18] Kaefer contended that the CFMEU had wrongly assumed in its analysis that the crib break would not be taken, and would therefore, under the Award, have to be paid out.The Agreement does not make any provision for crib time. Clause 11.3 deals with rest breaks and provides that an employee who works three consecutive hours or more on a day or shift is entitled to a paid 10 minute rest break during the day or shift. In the case of shift work, clause 11.4 provides that a paid twenty minute rest break is taken. However, the Agreement does not deal with paid rest breaks in relation to the working of overtime.

[19] Although Kaefer might choose to arrange its working arrangements such that crib breaks are actually taken, the BOOT must be conducted on the basis of what is provided for in the two instruments which are the subject of the comparison, namely the Agreement and the Award. What the employer might choose to do as a matter of discretion would not ordinarily be taken into account. Accordingly, we consider that crib time is an Award provision that is relevant to the application of the BOOT in the present circumstances.

Meal allowance

[20] Clause 20.2(a) of the Award provides that a meal allowance of $14.78 is payable whenever an employee is required to work overtime for a least one and a half hours after working ordinary hours. However, clause 20.2(b) states that the allowance is not payable to an employee who is provided with reasonable board and lodging.

[21] Kaefer submitted that, given the geographical coverage of the Agreement, employees are “overwhelmingly likely” to be FIFO workers on remote project work, not residential workers. Kaefer says that the significance of this is that employees will be provided with three meals per day, as required by clause 9 of the Agreement. The exception in clause 20.2(b) would therefore be engaged and no meal allowance would be payable under the Award.

[22] The CFMEU submitted that it was realistic and not fanciful that the company might engage employees on a residential basis, in which case they would be eligible for a meal allowance under the Award. We accept this contention. We note that the Agreement applies to work undertaken north of the 26^th parallel in Western Australia. 12 Above this line of latitude there are many population centres in which employees performing work under the Agreement might realistically be based. Although the BOOT is to be considered “as at the test time,”13 this requires the Commission to consider how an agreement is capable of being applied at that time; the analysis is not confined to the working arrangements that an employer currently has in place.

[23] The assessment of the BOOT should take into account how an agreement might reasonably operate, including which prospective employees might be engaged under it. We agree with the union that the Commission should consider whether it is realistic that the company might engage employees on a residential basis, and that the answer to this is ‘yes’. In our view, the meal allowance under the Award is properly to be taken into account in conducting the analysis of the BOOT.

Fares allowance

[24] Clause 25 of the Award concerns a “fares and travel patterns allowance”. Clause 25.2 provides that an employee must be paid an allowance of $17.43 for each day worked at a construction site located within a radius of 50km of the GPO in a capital city or the principal post office in a regional city or town.

[25] The fares allowance would be payable in relation to ‘residential’ workers residing in cities or towns. In this regard, the same arguments are engaged as discussed above in relation to the meal allowance. Although Kaefer contends that the use of residential workers under the Agreement is a mere theoretical possibility, we consider that it is realistic and not fanciful that workers might be engaged in this way. We consider that the fares allowance under the Award is relevant to the consideration of the BOOT in this regard.

[26] It is appropriate that we also consider the application of the fares allowance to distance work. Clause 25.3 states that in relation to employees employed on distance work as defined in clause 24.1, the fares allowance is payable when work is carried out within a 50km radius from the place where, with the employer’s approval, the employee is accommodated. This might include a place of accommodation used for FIFO purposes. However, clause 25.8 then provides that no allowances (with some presently irrelevant exceptions) will be payable on any day on which the employer “provides or offers to provide transport free of charge from the employee’s home to the place of work and return”.

[27] However, the CFMEU contends that distance workers are entitled to a fares allowance despite clause 25.8. It invokes clause 24.7(d) of the Award, which states that an employee required to “reside elsewhere than on site (or adjacent to the site and supplied with transport)” must be paid the fares allowance in clause 25. The CFMEU says that clause 24.7(d) imports the allowance in clause 25 (the monetary benefit), but not the various conditions (in particular, the exclusion in clause 25.8).

[28] In relation to the application of clause 24.7(d), the CFMEU points to a decision of the Commission in which Riordan C found that a place of residence some 12km from a worksite was not ‘adjacent’ to it, for the purposes of this clause. On the CFMEU’s argument, this gives clause 24.7(d) a potentially wide application; and it is not fanciful that the employer might employ a person to reside at a place that is not ‘adjacent’ to the site in this sense, such that a fares allowance would be payable.

[29] Kaefer contends that remote projects often feature employee accommodation located within the boundaries of the site or a short distance away; and if accommodation is further away, employers almost invariably arrange transportation between the accommodation and the work site. Kaefer says there is no entitlement under the Award to fares allowance for distance work in FIFO circumstances, where the employee is transported at the employer’s expense and arrangement from the home base to the accommodation, and between the accommodation and the work site.

[30] The idea that a FIFO worker in a remote area who is provided with transportation to and from their accommodation should be paid a ‘fares allowance’ seems to us counterintuitive. In our view clause 25.8 excludes it. We do not read clause 24.7(d) as importing only the allowance and none of the conditions. As noted in clause 25.1, the purpose of a fares allowance is to recognise travel patterns and costs peculiar to the industry. If the employer is covering this travel and cost, the rationale for the payment of a ‘fares allowance’ would not appear to be applicable.

[31] However, we note that the Agreement does not state that employees will be transported at company expense and arrangement from the home base to their accommodation, and between the accommodation and the work site. Whilst we accept that this is common in FIFO work, it cannot be taken for granted. If it were not to be provided, we consider that the fares allowance would apply to distance work under the Award. Accordingly, it is relevant to the BOOT analysis.

[32] In its further submissions, the CFMEU points to an alleged error in the Award that is said to be relevant to the analysis of the fares allowance. We have not taken this into account. We proceed on the basis that the Award is to be read on its terms. If there is said to be an error in the Award, the proper course is to seek to amend it pursuant s 160 of the FW Act, not to impugn it in an appeal, after the conclusion of argument and on the basis of new evidence.

BOOT implications arising from the application of the three allowances

[33] We have found that each of the above allowances provided for in the Award is capable of application to the work covered by the Agreement. In light of the Commission’s analysis of the financial implications of these allowances applying to an award covered employee or prospective award covered employee, we conclude that the Agreement does not pass the BOOT. The Commissioner’s conclusion to the contrary was in error.

[34] It was suggested by Kaefer that the CFMEU’s challenge to the Commissioner’s decision in ground 1 of the notice of appeal invoked legal unreasonableness. This is not so. In the present case, by failing to factor into the financial analysis the application of the three allowances, the Commissioner did not take into account material considerations, as referred to in the ‘first limb’ of House v R. 14

[35] Our conclusion in relation to the application of the three allowances would provide a sufficient basis for us to dispose of the appeal. However, given Kaefer’s submission that it would seek the opportunity to provide further undertakings upon rehearing in the event the appeal were upheld, it is appropriate that we consider the further grounds of appeal that might prevent the future approval of the Agreement.

Other BOOT issues

[36] The CFMEU submitted that the Agreement did not contain several site and general wage-related allowances found in the Award, including underground allowance, multi-story allowance and laser allowance. However, in our view, the absence of specialist allowances that appear to have no relevance to the employer’s operations does not call into question the Commissioner’s application of the BOOT. They were not the subject of argument before us.

[37] The CFMEU further contends that the Agreement allows a span of ordinary hours of 6.00am to 6.00pm, whereas the Award provides for 7.00am to 6.00pm; and that the 38 hour week can be averaged over an undefined work cycle under the Agreement, rather than over 4 weeks under the Award. It notes also that individual flexibility arrangements can be terminated under the Agreement by giving 28 days’ notice, rather than 13 weeks’ notice under the Award. Finally, the CFMEU submits that clause 8.1(a)(iv) of the Agreement allows the company to engage employees on a specified task basis, whereas the Award does not. We do not consider any of these differences affect the outcome of the financial analysis discussed above.

Ground 2: substantial undertakings

[38] The CFMEU’s second ground of appeal contended that the Commissioner erred in accepting undertakings that resulted in substantial changes to the Agreement. Section 190(3) of the FW Act provides that the Commission may only accept a written undertaking if it is satisfied that the effect of accepting it is “not likely to cause financial detriment” to any employee covered by the agreement, or “result in substantial changes to the agreement”.

[39] The changes brought about by the undertaking provided by Kaefer remove, rather than cause financial detriment to employees. However, the CFMEU contends that the undertakings resulted in significant changes to the Agreement, including by replacing several allowances and the minimum ordinary hourly rates of pay, and inserting clauses related to apprentice rates. The CFMEU refers to the decision in Perth Access Scaffolding Pty Ltd, 15 in which it was found that the significant number of undertakings provided by the employer had resulted in the agreement bearing no resemblance to the instrument on which employees had voted. The Commissioner found that the essential character of the agreement in question was that it would exclude the award, and that employees would instead receive a small margin above the award rate. The Commissioner found that this essential character would have been changed by accepting the numerous undertakings.

[40] In our view, simply increasing the quantum of various benefits will not ordinarily result in “substantial changes” for the purposes of s 190(3). It seems to us that the legislative concern is to avoid imposing on employees arrangements that they have not approved; employees are not likely to object to higher monetary amounts. The position might be more complex in relation to the reintroduction through undertakings of award-based benefits that were otherwise excluded by the agreement, if this were to have a significant bearing on working arrangements. However, this does not arise in the present matter.

[41] Section 190(3) does not permit undertakings that result in the wholesale reshaping of the agreement, such that it bears no resemblance to the pre-undertaking agreement that was approved by employees. 16 In considering the application of s 190(3), each case will turn on its own circumstances. However, in the present case, we do not consider that the undertakings provided to date have resulted in substantial changes.

Ground 3: whether the Agreement was genuinely agreed

[42] The third ground of appeal submitted that the Commissioner erred in concluding that employees had genuinely agreed to the Agreement for the purposes of s 188, because future pay rates under the Agreement are unilaterally determined by the company. It was contended that employees could not have given informed consent to such rates of pay.

[43] In fact, clause 22.1(d) of the Agreement states that the minimum hourly rates of pay will be increased in July each year in accordance with the labour market, and the performance of the company and individual employees, but in any event by at least the CPI percentage movement for the year to March quarter for the eight capital cities in Australia. This formula is readily comprehensible. It is also certain enough to allow the Commission to effectively assess the BOOT. We see no merit in this ground of appeal.

Ground 4: significance of erroneous information in the F17 declaration

[44] The fourth ground of appeal submitted that the Commissioner erred in concluding that employees had genuinely agreed to the Agreement in circumstances where Kaefer had provided erroneous information in its Form F17 statutory declaration, to the effect that no terms of the Agreement were less beneficial than the Award.

[45] The CFMEU refers to the decision of Binet DP in BCG Contracting Pty Ltd ,17 in which the employer failed to identify in its F17 the terms and conditions that were less beneficial than the relevant award. The Deputy President found that, as in Falcon Mining Pty Ltd,18 this provided reasonable grounds for believing that the employer did not take reasonable steps to explain to employees the terms of the agreement and their effect, as required by s 180(5). However, in Falcon Mining, the error in the Form F17 was only one of many factors which led Asbury DP to the conclusion that the employer had not complied with its obligation to explain the agreement to employees, including direct witness evidence as to the inadequacy of the explanation.19 This is not the case in the present matter.

[46] We note that the Commission’s Form F17 statutory declaration is in a question and answer format. Question 3.5 in the Form F17 asks the deponent:

“Does the agreement contain any terms that are less beneficial than the equivalent

terms and conditions in the reference instrument(s) listed in questions 3.1 and 3.2 and/or does the agreement confer any entitlements that are not conferred by those reference instruments.”

[47] The deponent in this case marked the “no” box on the form. That answer was incorrect. The Agreement contains a number of terms that are less beneficial than the equivalent terms of the Award. The deponent should have marked the “yes” box and identified the terms and conditions of the Agreement that are less beneficial than the Award or not conferred by the Award. Evidently, Kaefer believed that its agreement, as submitted to the Commission, passed the BOOT. However this is not the question posed by question 3.5 and care must be taken when answering it.

[48] The CFMEU contends that in light of the incorrect answer to the F17, it would have been impossible for the company to take reasonable steps to explain the terms of the agreement and their effect to employees. We do not agree. The information that the Commission requires the maker of a statutory declaration to depose to, in support of an application for approval of an enterprise agreement, is a matter determined by the Commission pursuant to its Rules. The obligation on an employer to take all reasonable steps to ensure that the terms of the agreement and its effect are explained to relevant employees is imposed by s 180(5). It need not necessarily cover the same information in the F17.

[49] An incorrect answer in the F17 might well give pause to query whether the employer understood the full effect of the Agreement, and whether it could then impart relevant information to employees. In this case, the only evidence before the Commission on this question is the sworn evidence of the deponent in response to the question in the Form F17 concerning the steps taken to explain the Agreement. This was to the effect that Kaefer’s industrial relations manager met personally with the five employees who were to be covered by the agreement and explained the terms of the Agreement and its effects on them. In the circumstances, the CFMEU’s contention that Kaefer did not meet the requirements of s 180(5) has not been substantiated.

Conclusion

[50] In follows from our conclusions above that the Agreement does not pass the BOOT and that the Commissioner’s decision to the contrary was in error. On this basis, permission to appeal should be granted, the appeal should be upheld and the decision quashed.

[51] The company’s application for approval of the Agreement will need to be re-determined. We consider that the application should be referred to a member of this Full Bench for this purpose. The company will have an opportunity to offer further undertakings to rectify the BOOT deficiencies.

[52] We order as follows:

(1) Permission to appeal is granted.

(2) The appeal is upheld.

(3) The decision ([2017] FWCA 3839) is quashed.

(4) The company’s application for approval of the KIS North West Onshore Operations Enterprise Agreement 2017-2021 is referred to Commissioner Harper-Greenwell for re-determination.

VICE PRESIDENT

Appearances:

K.Wilson on behalf of the CFMEU.

A.Pollock of counsel with B. Milne on behalf of KAEFER Integrated Services Pty Ltd.

Hearing details:

2017

Brisbane:

18 September

Attachment 1

Crib time, meal allowance, fares allowance apply - $154.72 per week worse off

Attachment 2

No crib time, meals or fares allowances apply - $73.73 per week better off

 1   [2017] FWCA 3839

 2   Decision at [6]

 3   Decision at [10]

 4   Decision at [3]

 5  [2017] FWCFB 2101

 6  Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ

 7  Also see CFMEU v AIRC (1998) 89 FCR 200; and Wan v AIRC (2001) 116 FCR 481

 8  See AKN Pty Ltd t/a Aitkin Crane Services [2015] FWCFB 1833; Armacell Australia Pty Ltd [2010] FWAFB 9985

 9   CFMEU v TR Construction Services Pty Ltd [2017] FWCFB 1928 at [20]

 10   Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited [2016] FWCFB 2887 at [33]

 11   See CFMEU v SESLS Industrial Pty Ltd [2017] FWCFB 3659

 12   Clause 2(a) of the Agreement

 13   See ss 193(1) and 193(5) of the FW Act

 14   (1936) 55 CLR 499

 15   [2016] FWC 8042

 16   Re AKN Pty Ltd t/a Aitkin Crane Service [2015] FWCFB 1833 at [34]

 17  17 [2017] FWC 852

 18   [2016] FWC 5315

 19   See Falcon Mining at [160]

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