[2018] FWC 6936
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

BGC Contracting Pty Ltd T/A BGC
(AG2016/3592)

DEPUTY PRESIDENT GOSTENCNIK

MELBOURNE, 16 NOVEMBER 2018

Application for approval of the Mining Enterprise Agreement 2016; undertaking; whether undertaking meets concerns about the requirements in s.186; application for approval dismissed as undertaking does not meet concern.

[1] BGC Contracting Pty Ltd (BGC) applied under s.185 of the Fair Work Act 2009 (Act) for approval of an enterprise agreement titled the Mining Enterprise Agreement 2016 (Agreement). The Agreement was made on 14 June 2016. The application was lodged on 21 June 2016. The Construction, Forestry, Mining and Energy Union, now named the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) and the Australian Workers’ Union (AWU) (collectively “the Unions”) were bargaining representatives for the proposed enterprise agreement concerned. Each gave notice pursuant to s.183 of the Act that it wants the Agreement to cover it, but did not support its approval.

[2] The relevant background and proceedings history are set out in my earlier decision dealing with the application for approval of the Agreement 1 and need not be repeated here. The abbreviations used in that decision, will for convenience be used here. In that decision I concluded that I was not satisfied that:

•  the Agreement has been genuinely agreed to by the employees covered by the Agreement (s.186(2)(a)); or

•  the terms of the Agreement do not contravene s.55 (s.186(2)(c)); or

•  the Agreement passes the better off overall test (s.186(2)(d)). 2

[3] I also noted that each of the concerns identified in the decision about each of the above matters was amenable to undertakings. 3 I therefore allowed BGC a period of 14 days (which was subsequently extended) within which to provide any undertakings it wishes and to seek the views of any bargaining representatives.

[4] On 20 September 2018, BGC proposed the following undertakings:

[5] Undertakings 1 – 3 are directed to the better off overall test concerns discussed at [215] – [234] of my decision. I will hereafter refer to these as the “BOOT undertakings”.

[6] Undertaking 4 is directed to the concern that clause 18.1 of the Agreement contravenes s.55 of the Act as discussed at [185] – [187] of my decision. Undertaking 5 is directed to the concern that clause 18.2 of the Agreement contravenes s.55 of the Act as discussed at [181] – [184] of my decision. Undertaking 6 is directed to the concern that clause 21.5 of the Agreement contravenes s.55 of the Act as discussed at [193] – [199] of my decision. Undertaking 7 is directed to the concern that clause 25.1 of the Agreement contravenes s.55 of the Act as discussed at [200] – [204] of my decision. I will hereafter refer to these as the “NES undertakings”.

[7] Undertaking 8 is said by BGC to be directed to the concerns about non-compliance with s.180(5) of the Act. 4 In subsequently filed submissions, BGC also contends that undertaking 8 is directed to s.180(2).5 I will hereafter refer to this as the “genuine agreement undertaking”.

[8] I am satisfied and the Unions did not submit to the contrary, that the NES undertakings are capable of being accepted and that each meets the concern that the identified terms of the Agreement contravene s.55 of the Act. The effect of the NES undertakings, if accepted, is that the identified terms operating in accordance with the undertakings would not contravene s.55 of the Act. The NES undertakings would not likely cause any financial detriment to any employee covered by the Agreement nor would these NES undertakings result in substantial changes to the Agreement. Consequently, I am able to be satisfied as to the matter identified in s.186(2)(c) of the Act.

[9] Turning next to the genuine agreement undertaking. For the reasons explained at [20]-[52] of my earlier decision, I was not satisfied that BGC had complied with s.180(2) of the Act. That is, that BGC did not take all reasonable steps to ensure that relevant employees were by the start of the access period given a copy of the Coal Award provisions listed in Schedule A that are incorporated by reference into the Agreement, or that they had access to copies of the incorporated material throughout the access period for the Agreement. For the reasons explained at [66] – [99] and [101] – [113], I was not satisfied that BGC had complied with s.180(5) of the Act because it had not taken all reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained to relevant employees. Specifically, I was not satisfied that BGC had taken all reasonable steps to explain the terms that were incorporated into the Agreement by Schedule A, or the effect of those terms to relevant employees. Consequently, I was not satisfied that the relevant employees had genuinely agreed to the Agreement as described in s.188. Accordingly, I was not satisfied as to the matter in s.186(2)(a).

[10] By undertaking 8, BGC proposes that it will not employ any Coal Mining Employees whom the Agreement covers and to apply to, unless and, until a variation of the Agreement is made and approved in accordance with Division 7 of Part 2-4 of the Act. The variation contemplated would be one that improves the terms and conditions for Coal Mining Employees so they are better than the current terms and conditions for Coal Mining Employees in the Agreement and better off overall compared to the Coal Award in force at the time the variation is made. The contemplated variation would also replace the reference to "as at the Commencement Date" in the definition of Coal Award in clause 5 of the Agreement with "as amended from time to time".

[11] It is necessary to examine the relevant provisions concerning the proffering and acceptance of undertakings and then to consider the nature of the concerns sought to be addressed by the genuine agreement undertaking in their statutory context in order to determine whether the undertaking meets that concern.

[12] The capacity of the Commission to accept an undertaking in relation to the approval of an enterprise agreement is dealt with in s.190 of the Act. Section 190 is engaged relevantly if an application for approval of an agreement has been made under s.185 and the Commission has a concern that the agreement does not meet the requirements set out in ss.186 and 187. 6 It is uncontroversial in relation to the Agreement that there is an application for its approval under s.185 and that I have concerns that the Agreement does not meet, inter alia, the requirement in s.186(2)(a) of the Act.

[13] Section 190(2) confers discretion on the Commission to approve an agreement under s.186 if satisfied that acceptance of the undertaking, subject to the fetters in s.190(3), meets the concern. It is clear, therefore, that the undertaking proffered must meet the concern that the agreement does not meet one or more of the identified requirements set out in ss.186 and 187 of the Act. The relevant requirement here, about which there is a concern, is the requirement that the Agreement was genuinely agreed to by the employees covered by it.

[14] By s.190(3), the Commission may only accept a written undertaking if satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in a substantial change of the agreement. Section 190(4) prevents the Commission from accepting an undertaking unless it has sought the views of each person who the Commission knows is a bargaining representative for the agreement. Finally, an undertaking that is proffered must meet the signing requirements prescribed by regulations. 7

[15] The process for proffering, accepting undertakings, assessing whether an accepted undertaking meets the requisite concern, and considering whether to approve an enterprise agreement may be summarised, chronologically as follows:

[16] First, there must be made an application for approval of an enterprise agreement.

[17] Secondly, the Commission must have a concern that the agreement does not meet one or more of the requirements set out in ss.186 and 187 of the Act. It should go without saying that the relevant concern needs to be identified by the Commission and communicated to the applicant for the approval of the agreement, and where the applicant is a bargaining representative for the agreement which is not the employer, also communicated to the employer or employers covered by the agreement. Only an employer or employers covered by an agreement can give an undertaking.

[18] Thirdly, there must be a written undertaking from one or more of the employers covered by the agreement and that undertaking must meet the signing requirements.

[19] Fourthly, the Commission must assess and be satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement.

[20] Fifthly, before accepting an undertaking the Commission must seek the views of known bargaining representatives for the agreement.

[21] Sixthly, if the undertaking is accepted the Commission must be satisfied that the accepted undertaking meets its concern before it may approve the agreement.

[22] Seventhly, there is a residual discretion to be exercised whether to approve the agreement with the undertaking that has been accepted and that meets the identified concern.

[23] The Unions were given an opportunity to make submissions in respect of the proposed undertakings. So far as the genuine agreement undertaking is concerned, the Unions’ contention as to whether the undertaking can be accepted under s.190(3), was confined to the assertion that the undertaking was directed to the scope and coverage of the Agreement. I take this submission to be directed to the substantial changes constraint in s.190(3). They contended that the undertaking in effect, proposed to narrow the coverage of the Agreement by excluding as eligible from employment those employees engaged in the classifications referred to in Schedule A of the Agreement performing work in the BGC’s Mining Business Unit.

[24] This submission must be rejected. The genuine agreement undertaking does not vary the coverage or application of the Agreement either immediately or through the contemplated variation process set out in the undertaking. The effect of the undertaking, if it were accepted, would be directed to the employment of persons in particular classifications that is, in those described by the Agreement as Coal Mining Employees. Both before and after the undertaking is accepted, the Agreement would cover employees who are Coal Mining Employees. The practical effect of the undertaking would however be that BGC would not employ persons as Coal Mining Employees unless and until the happening of the events set out in the remainder of the genuine agreement undertaking. This is an alteration to BGC’s employment practice. It does not alter the coverage term of the Agreement.
[25] The principal focus of the Unions’ submissions concerned the question whether the genuine agreement undertaking met the concern that the Agreement did not meet the requirements set out in s.186(2)(a) of the Act.

[26] In this respect the Unions contended that the genuine agreement undertaking did not address, nor can it overcome, the conclusion reached that the Agreement was not genuinely agreed to by the employees as required by s.186(2)(a) of the Act. The Unions contend that ss.180(2) and 180(5) are pre-approval requirements concerned with ensuring employees have adequate information about the terms of a proposed enterprise agreement to facilitate their genuine agreement in bargaining. They contend that BGC is incapable of retrospectively curing its non-compliance with ss.180(2) and 180(5) by proffering an undertaking at the agreement approval stage.

[27] The Unions also point out that in proffering the undertakings, BGC, through its lawyers, contends in its email to the Commission of 20 September 2018 that the genuine agreement undertaking is directed to compliance with s.180(5), and it is clear that the undertaking does not concern s.180(2), which was one of the bases for the concern that the agreement was not genuinely agreed to by the relevant employees. They contend that BGC has failed to consider the temporal dimension of s.186. They say that the Commission must be satisfied that there has been compliance with s.180(5), and the other provisions with prior to approving the Agreement – not after approval, as is sought by the BGC.

[28] The Unions contend that BGC through its proffered undertaking suggest that the Commission should approve the Agreement and take at face value that it may (or may not) seek to vary the Agreement, at which point it will engage in the proper consultation process as required by s.180(5). Such action cannot overcome the obligation to comply with s.180(5) before the agreement is agreed to by employees and approved by the Commission.

[29] The Unions also contend that:

•  the genuine agreement undertaking is inconsistent with and undermines the scheme of the Act for the approval of enterprise agreements because it suggests that regardless of the nature and extent of non-compliance or the lack of requisite satisfaction on the part of the Commission, the non-compliance can be remedied by a non-specific undertaking to vary the Agreement at some point in the future in an attempt to purge non-compliance or a deficit in the satisfaction of the Commission;

•  BGC’s contention that s.190 does not require the “undoing” of any defects is to misread my decision. The decision does not say that any concern with s.186(2)(a) can necessarily be resolved by an undertaking; and

•  while s.190(2) has no explicit limitation, it does not follow that the Commission has a discretion to accept any undertaking. The Unions submit that the genuine agreement undertaking cannot be used to circumvent the clear pre-approval requirements set out in the Act.

[30] BGC contends that the Commission’s acceptance of an undertaking is predicated upon an analysis under s.190(3) of the undertaking’s practical effect. It says that only once that practical effect of an undertaking is ascertained can the Commission determine whether it is satisfied that the accepted undertaking meets its concern and thus allow it to approve the agreement. It contends that the Act does not impose the requirements set out in ss.186 and 187 for their own sake, rather each requirement seeks to avoid particular negative effects or consequences that might otherwise arise from the application of an enterprise agreement.

[31] BGC contends that whilst the application of this process is clear in respect of concerns about the BOOT, the process with respect to other requirements such as compliance with s.186(2)(a), which is the subject of the genuine agreement undertaking, is perhaps less clear. BGC asks rhetorically, how can the Commission be satisfied that an undertaking accepted under s.190(3) meets a concern about genuine agreement in circumstances where that concern relates to events prior to the vote? In an effort to answer its rhetorical question, BGC contends that it is no answer to suggest, as the Unions do, that such concerns are incapable per se of being met by an undertaking. A literal and contextual reading of s.190(1)(b) shows that Part 2-4 comprehends that concerns about each of the approval requirements set out in ss.186 and 187 are at least capable in-principle of being addressed by an undertaking. The section carves out none of those requirements. Were s.186(2)(a) intended to have been immune from s.190, Parliament would have dealt with it as a standalone approval requirement (as is the case with s.181(2)).

[32] With this proposition I am in heated agreement. One can readily conceive of circumstances which might cause concern about whether an agreement has been genuinely agreed to by the relevant employees but be amenable to an undertaking capable of acceptance and meeting the concern, thus enabling the agreement to be approved. Whether an undertaking can meet a concern about genuine agreement must, it seems to me, depend on the reason for the concern. A simple example will suffice. Consider the position of an enterprise agreement the subject of an approval application which makes provision for employees working on a Sunday to receive penalty payments in accordance with the employer’s “policy on working on Sundays”. The agreement makes provision for the employer’s “policy on working on Sundays” to be incorporated by reference. The policy sets out that ordinary time work on a Sunday will be payable at double time and overtime work on a Sunday will be on a voluntary basis but, if worked, employees will be paid at treble time. Consider that the employer did not comply with s.180(2) in relation to the policy incorporated by reference. Consider also that the employer, in discharging its obligation under s.180(5), provided an explanation to relevant employees that the agreement made provision for the employer’s “policy on working on Sundays” to be incorporated into the agreement by reference, that the effect of that term would be that the policy bound the employer and the employees covered by the agreement and that as a consequence ordinary hours worked on a Sunday by employees would be paid at double time, that overtime work on a Sunday would be voluntary and if such overtime is worked, employees so working would be paid at treble time.

[33] On its face, the failure to provide a copy to relevant employees of the employer’s policy raises a concern that the employees did not genuinely agree to the agreement because of the employer’s failure to comply with s.180(2). Does it follow that the agreement cannot be approved if an appropriate undertaking is proffered and accepted by the Commission? It seems to me the answer is likely to be no. One can readily envisage an undertaking being proffered to meet the concern. The employer could proffer an undertaking that the employer’s “policy on working on Sundays” will not be incorporated as a term of the agreement. In addition, the employer could undertake that overtime work on a Sunday will be voluntary, and that it will pay any employee working ordinary hours on a Sunday at double time and will pay any employee working overtime on a Sunday at treble time.

[34] The effect of the undertaking is that the document which was incorporated by reference but not supplied to relevant employees, does not form part of the agreement. The effect of the undertaking is also to confirm the terms of the agreement about which the relevant employees received an explanation as required by s.180(5), and upon which the relevant employees voted to approve the agreement. The effect of the undertaking seems to me not likely to cause financial detriment to any employee covered by the agreement, nor likely to result in substantial changes to the agreement. It otherwise appears to meet the concern namely, that employees may not have genuinely agreed to the agreement by reason of the employer’s failure to comply with s.180(2) of the Act. There has been compliance with that subsection because the relevant material is not to be incorporated. But the terms as to Sunday work in the Agreement are the same, both before and after the undertaking is accepted, there can thus be satisfaction as to s.186(2)(a) of the Act.

[35] Returning to BGC’s rhetorical question, BGC says the answer lies in understanding the issue to which s.186(2)(a) is directed. It contends that s.186(2)(a) serves a policy purpose, namely that it aims to ensure that employees provide their informed consent to a proposed agreement that will apply to their employment once approved – that is, ensuring that those employees are not subjected to the operation of an agreement where they have not provided that consent. The absence of informed consent forms the substantive foundation of a s.186(2)(a) concern. It contends that an undertaking which effectively meets that concern is capable of acceptance and subsequent approval.

[36] BGC accepts, properly in my view, that not every defect which has the effect of not satisfying the Commission as to the matter in s.186(2)(a) is capable of being rectified by way of undertaking. Each case will turn on the nature of the defect in compliance, the Commission’s consequent concern, and the nature of the undertaking proposed. It further accepts that in most cases, a concern that an agreement does not meet the requirement in s.186(2)(a) will be incapable of being met by an undertaking, however this is not because such concerns are incapable in principle of being the subject of an appropriate undertaking, rather it is because the policy purpose to which s.186(2)(a) is directed is unable to be met by the undertaking proposed in all of the circumstances.

[37] BGC contends that the particular concerns arising in relation to the Agreement can be met by the process BGC proposes in all of the circumstances.

[38] As to those circumstances, BGC contends that the Agreement covers two work streams, namely Mining Employees and Coal Mining Employees as defined in the Agreement. At the time the Agreement was made, BGC did not, and contends that it currently does not, employ any Coal Mining Employees that would be covered by the Agreement if approved. The Agreement incorporated certain provisions of the Black Coal Award in Schedule A of the Agreement.

[39] It points to the fact that in my earlier decision, I had concluded that BGC did not take all reasonable steps to ensure that employees had access to the incorporated Black Coal Award provisions during the access period and that BGC also took no steps to explain those incorporated terms.

[40] It says that these concerns were confined to the provision and explanation of the incorporated Black Coal Award terms. There was no concern over compliance with s.186(2)(a) with respect to any part of the Agreement which applied to employees employed at the time the Agreement was made.

[41] It contends that each of these concerns engages the same substantive mischief, namely, that a future cohort of employees not currently employed (and thus not currently represented in the voting group) could be subsequently engaged on terms to which the voting group did not provide informed consent. The mischief underpinning those concerns can be met by the process BGC proposes through the genuine agreement undertaking. That process requires BGC to undertake an explanation, voting, and approval process under Division 7 of Part 2-4 (a process which effectively mirrors that which applies at the approval stage under Division 4 of Part 2-4).

[42] BGC also contends that as the concerns were confined to the provision and explanation of certain incorporated (but relevantly inapplicable) Black Coal Award terms, no employee covered by the Agreement and employed at the time the Agreement was made can be subject to any residual mischief arising from BGC's non-compliance with ss.180(2) and (5) should the genuine agreement undertaking be accepted.

[43] The evident purpose of ss.180(2) and (5), as is clear from their inclusion in s.188 and thus s.186(2)(a), is to ensure so far as is practicable that employees who are asked to vote to approve an agreement make an informed choice as to whether or not they will vote to approve the agreement. That is, the choice that an employee makes in deciding whether to cast a vote to approve the agreement is to be informed by, relevantly, having access to the agreement and any material incorporated by reference during the relevant period, and importantly by having the terms of that agreement (including incorporated terms) and their effect explained. The failure to take all reasonable steps vis-a-vis the material incorporated and the explanation of the terms and their effect means that employees who voted to approve the agreement were deprived of the benefit of very important pre-approval steps designed to ensure that relevant employees genuinely agree to the agreement.

[44] The mischief underpinning the concern is not simply, as BGC contends, directed at a future cohort of employees not currently employed (and thus not currently represented in the voting group) who could subsequently be engaged on terms to which the voting group did not provide informed consent. Rather, the mischief is that relevant employees who voted for the Agreement did so without having particular terms of the agreement and the effect of those terms explained to them before they voted. When employees are asked to vote for an agreement they are asked to vote for the whole of the agreement. The cohort of voting employees is not separated into different categories so that different categories of employees are asked simply to vote for the particular terms of the agreement which might have application to them. As part of making an informed choice about whether to approve an enterprise agreement which is a collective agreement that will, if approved, apply to both current and prospective employees, an employee is entitled to have explained the whole of the terms of an agreement and the effect of those terms. This is so whether or not one or more of those terms, has or will have, any application to that employee. Section 180(5) is directed not just to giving voting employees information about terms that will have application to them. It is also concerned with giving information about terms that will have no application to them so that voting cohort can make an informed choice about whether to approve such an agreement as a whole.

[45] An employer cannot know which employees will and which will not vote in the agreement approval process, how employees will vote or the reason employees vote in a particular way. Voting is not compulsory. Thus the preapproval steps play an important role in providing information to employees so that the employees can each choose whether or not to participate in the voting process, and if so whether to vote to approve the agreement. The mischief sought to be overcome is to ensure that employees understand the terms of the agreement as a whole upon which they are asked to vote. This mischief and the concern that employees did not genuinely agree to the Agreement is not overcome or met by accepting the genuine agreement undertaking proffered by BGC, which in essence is about the ongoing application of the Agreement (through a self-imposed restraint on employment) in respect of certain classes of employees and not about the fundamental issue of whether the Agreement was genuinely agreed to by employees covered by it. That a future cohort of voting employees may make an informed choice about varying the Agreement (alone or coupled with a restraint on employment until any future variation takes effect) does not meet the concern that those employees asked to approve the Agreement in June 2016 did not have information designed to enable them to make an informed choice about whether to approve the Agreement.

[46] Ultimately, I am not persuaded that the genuine agreement undertaking, which seems capable of acceptance in the sense that the constraints in s.190(3) would not prevent its acceptance, meets the concern identified in my earlier decision.

[47] It is therefore unnecessary to consider the BOOT undertakings.

[48] In the circumstances, given the conclusions in my earlier decision, the Agreement cannot be approved and the application for its approval is dismissed.

DEPUTY PRESIDENT

Written submissions on Undertakings:

Undertakings provided on 20 September 2018.

Unions’ submissions, 8 October 2018.

BGC submissions, 19 October 2018.

Printed by authority of the Commonwealth Government Printer

<PR702238>

 1   [2018] FWC 1466 at [2]-[7]

 2   Ibid at [235]

 3   Ibid at [236]

 4   Email on behalf of BGC accompanying proposed undertakings dated 20 September 2018

 5   Applicant’s reply submissions on undertakings dated 19 October 2018 at [19]

 6   Section 190(1)

 7   Section 190(5)