DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Construction, Forestry, Maritime, Mining and Energy Union and others
v
Specialist People Pty Ltd
(C2019/3597, C2019/3600, C2019/3601)

Application for approval of an enterprise agreement under s 185 on rehearing

Introduction

[1] This decision concerns an application made by Specialist People Pty Ltd (Specialist People) under s 185 of the Fair Work Act 2009 (FW Act) for the Commission to approve the Specialist People Enterprise Agreement 2018 (Agreement) upon rehearing of the application. The background is as follows.

[2] The application was initially approved by Deputy President Beaumont in a decision issued on 22 May 2019. 1 The Deputy President concluded that the Agreement met the various approval requirements in the FW Act, including that it passed the “better off overall test” (BOOT), and approved the Agreement subject to twelve undertakings.

[3] Appeals from this decision were brought by the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), the Australian Workers’ Union (AWU), the Australian Manufacturing Workers’ Union (AMWU) and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU).

[4] The appellant unions contended that the Deputy President did not properly assess whether the Agreement passed the BOOT because she compared its terms only with the Manufacturing and Associated Industries and Occupations Award 2010 (Manufacturing Award), which the company had contended was the only relevant award. The unions submitted that the Deputy President failed to consider whether the Agreement passed the BOOT against other relevant awards, namely the Building and Construction General On-Site Award 2010 (Building and Construction Award), the Hydrocarbons Industry (Upstream) Award 2010 (Hydrocarbons Award), and the Electrical, Electronic and Communications Contracting Award 2010 (Electrical Contracting Award) (the additional awards). This appeal ground proceeded on the basis of the unions’ interpretation of the scope of the Agreement, which they said was not confined to work covered by the Manufacturing Award, as the company had contended, but extended to work covered by the additional awards.

[5] A second appeal ground was that the Deputy President could not have been satisfied that Specialist People took all reasonable steps to explain the terms of the Agreement and their effect as required by s 180(5), with the result that the Agreement was not genuinely agreed to as required by s 186(2)(a). In this respect, the appellant unions submitted that the company’s explanation of the terms was contained in a single table summarising the import of some clauses, and that it did not address the range of classifications that the Agreement covers, the roster patterns that would be worked, or the range of modern awards that would otherwise cover the work in question and the relevant benefits that would be provided under the Agreement.

[6] The competing contentions concerning the scope of the Agreement focused on clause 2, which states that the Agreement applies to employees of the company employed to perform work in Australia, onshore or offshore, “including but not limited to” twenty-nine listed types or areas of work, among which are civil and concrete works, fabrication, construction, maintenance, assembly, repairs and associated work. The company contended that the only award that was relevant for the purposes of the BOOT was the Manufacturing Award because the company’s business is “in the manufacturing industry”, and it is therefore covered by the Manufacturing Award and not the additional awards, including by virtue of various “carve out” provisions in those awards. The unions submitted that the work covered by the Agreement falls within the coverage of the other awards and is not excluded by any “carve out” provisions or otherwise.

[7] On 11 September 2019, we granted permission to appeal, upheld the appeal and quashed the decision (appeal decision). 2 We considered that the plain words of clause 2 of the Agreement gave it the broader scope contended for by the unions, rather than one confined to work covered by the Manufacturing Award, and that each of the additional awards was a relevant modern award for the purpose of assessing whether the Agreement passed the BOOT. We concluded that the Agreement was therefore, in the terms in which it was made, incapable of satisfying the approval requirement in s 186(2)(d), because it was not in dispute that the Agreement did not pass the better off overall test against the additional awards.

[8] We were not able to form a concluded view in the appeal decision as to whether the company’s explanation of the terms of the Agreement and its effects had complied with s 180(5) having regard to the conclusion we had reached concerning the coverage issue. We said:

“[53] We note that the three employees who voted on the Agreement were provided with an information sheet on 19 November 2018 summarising key terms of the Agreement. Based on the information in the F17s, it appears evident that the employees were actively engaged in bargaining. They were also provided with copies of enterprise agreements of various competitors, to enable them to understand the conditions in the Agreement in a market context. That would normally provide a substantial basis to conclude that the requirement in s 180(5) had been complied with.

[54] However, a question arises as to how the explanation of the terms of the Agreement could have been adequate if the employer proceeded on the basis that there was only one relevant award, namely the Manufacturing Award. Mr Prendergast’s affidavit indicates that the employees who voted on the Agreement were employed in work that was covered by that award, but it does not appear to have been explained to employees that they might undertake work covered by the other awards. This issue was not explored in an evidentiary sense at first instance, nor did the company address us on the significance of this matter in the appeal as its primary contention was that the other awards did not apply. Further, had the issue been raised at first instance, the company would have had the opportunity to advance a case that any deficiency in its explanation of the Agreement in this respect was a minor technical or procedural error to which s 188(2) applied. For these reasons, we do not consider that we are in a position to simply uphold this appeal ground and dismiss the application for the approval of the Agreement. It is a matter which the company may (and will need to) address at a re-hearing of the application.”

[9] As to the remaining appeal grounds, a third, which had concerned s 180(2)(b), was abandoned, and we rejected a fourth ground, which had contended that the undertakings accepted by the Deputy President constituted “substantial change” contrary to s 190(3).

[10] We now address the further written submissions of the parties and the rehearing of the application for approval of the Agreement.

Specialist People’s further submissions

[11] Specialist People’s further written submissions attached an undertaking which the company said would ensure that the Agreement passed the BOOT against the additional awards. The proposed undertaking, which is attached to this decision, states that “…where the company engages or directs an employee to perform work which would otherwise be covered by [the additional awards] the company will pay the employee, for the performance of such work, the greater of the following amounts: the rates of pay in clause 5.2 of the Agreement; or an amount comprising the base rate of pay in the relevant award plus 20%, and any applicable allowances and penalties as provided for in [the relevant award].”

[12] Specialist People contended that this undertaking, if accepted, would remove any concern that the Agreement did not pass the BOOT. There would be no circumstance under which an employee covered by the Agreement would not be better off overall under the Agreement than under the relevant award. It further contended that the undertaking was compliant with s 190(3), as it seeks only to increase rates of pay for certain types of work and therefore does not involve financial detriment to employees or ‘substantial change’.

[13] In relation to the question of whether the company had complied with s 180(5), Specialist People submitted the following:

•  Although the company did not explain to the three employees who voted on the Agreement that it covered work falling within the coverage of the additional awards, or that the Agreement displaced the operation of those awards, this was an unintentional and innocent omission, and did not mean that the company had not complied with s 180(5).

•  The purpose of s 180(5) is to ensure that employees cast an informed vote and that occurred in this case. The section does not require a detailed explanation of every term of an agreement. An explanation may not be perfect, but still satisfy the requirement in section 180(5). Employers cannot be expected to be totally objective and knowledgeable, and mistakes and omissions will occur.

•  The omission concerned a single theoretical aspect of the additional scope of the Agreement, and there was nothing to suggest that the company would transfer employees into these additional areas.

•  The company took all reasonable steps to explain the terms and effect of the Agreement. Each employee engaged in interactive discussions about the terms and effect of the Agreement and was invited to ask further questions about their operation. In this context the omission did not have any operative significance or effect.

•  The questions asked by each of the employees during the explanation process reveal the aspects of the Agreement’s effect with which they were principally concerned, namely how the rates of pay compared with those of the company’s key competitors. The explanation of the Agreement dealt with that issue.

•  All employees were involved in bargaining for the Agreement, having appointed themselves as bargaining representatives, and therefore had a deeper understanding of the Agreement than would otherwise have been the case.

•  An explanation concerning the theoretical displacement of the additional awards – whilst a conceivable step in hindsight – was not a “reasonable step” in the relevant context. The employees gave informed and genuine consent to the Agreement’s terms and effect, and the Full Bench’s ‘subsequent identification’ of possible coverage of other awards to the work covered by the agreement did not affect that consent, especially as the company has no intention of engaging in such work.

[14] The company then submitted that, even if it had not complied with s 180(5), the Commission’s acceptance of the proposed undertaking would neutralise any notional harm done. Section 190(1)(b) is referrable to each of the approval requirements in ss 186 and 187, including s 186(2)(a), which requires the Commission to be satisfied that an agreement was genuinely agreed to by employees, which in turn brings into consideration the explanation requirement in s 180(5) – see s 188(a)(i).

[15] Alternatively, the company submitted that any non-compliance with s 180(5) should, particularly in light of the undertaking offered, be regarded as an error of a “minor procedural or technical” nature for the purpose of s 188(2) which did not prevent the Commission being satisfied that the Agreement was genuinely agreed to. It said that any harm connected to the omission would be comprehensively remedied if the proposed undertaking were accepted.

The unions’ further submissions

[16] The unions conceded that, if the proposed undertaking were accepted by the Commission, they would address and resolve the Full Bench’s finding that the Agreement failed the BOOT. They noted however that the Commission must, before accepting an undertaking, seek the views of persons who it knows are bargaining representatives for the agreement, in accordance with s 190(4) of the Act, and that to the best of the unions’ knowledge, this had not occurred.

[17] In relation to the question of whether the company had satisfied the requirement in s 180(5), the unions made the following submissions:

•  The Full Bench had in its appeal decision invited the company to adduce any further evidence in support of its contention that, despite the apparent failure to meet the requirement in s 180(5), the Agreement was capable of approval by the Commission. However, no further evidence was filed, and the Full Bench is entitled to infer that any further evidence would not have assisted the company’s position.

•  The omission in the company’s explanation of the terms of the Agreement to employees cannot be dismissed as theoretical, as it went to the capacity of the employees to ‘genuinely agree’ to an instrument that would exclude a number of otherwise applicable modern awards from operation in respect of their employment and that of prospective employees.

•  The ‘interactive discussions’ referred to by the company fall well short of demonstrating that appropriate explanations took place and establish no more than that there were various occasions during which relevant explanations might have taken place.

•  The company’s assertion as to what matters were of ‘principal concern’ to employees cannot be taken at face value and those matters would not in any event of themselves demonstrate that an objectively reasonable explanation of the terms of the Agreement and the effect of its terms had taken place.

•  The fact that employees were said to have been closely involved in bargaining and had appointed themselves as bargaining representatives does not mean that they received an adequate explanation of the Agreement and the effect of its terms, nor does it affect the analysis of whether the explanation was reasonable.

•  Further, the fact that the omission in the employer’s explanation of the terms of the Agreement and its relevant effect might have been unintentional is of no consequence and does not affect the question of whether an adequate explanation has been provided for the purpose of s 180(5).

[18] The unions contended that the Commission should reject the company’s alternative contention that any non-compliance with s 180(5) could be regarded as a “minor procedural error” for the purpose of s 188(2). They submitted that on any view the omission could not be regarded as minor, as it went to the coverage of the Agreement and whether employees would remain better off overall as against relevant reference instruments. The fact that the company had belatedly offered an undertaking addressing the Commission’s BOOT concern did not alter the fact the explanation was deficient and that the agreement of the employees at the time could not be regarded as genuine.

Consideration

[19] Specialist People’s concession that the Agreement does not pass the BOOT in respect of the Building and Construction Award, the Hydrocarbons Award and the Electrical Contracting Award obviously gives rise to a concern on our part as to compliance with the approval requirement in s 186 (2)(d). Its proposed undertaking would, if accepted, address our concern in that respect. It would ensure that at all relevant times, including when work is performed that falls within the coverage of the additional awards, each current and prospective award covered employee for the Agreement will be better off under the Agreement than if any of the awards applied to the employee’s employment.

[20] This brings us to the question of whether the company’s explanation to employees of the Agreement and the effect of its terms complied with s 180(5). The relevant principles applicable to s 180(5) were summarised in paragraphs [35]-[36] of the Full Bench decision in AWU v Rigforce Pty Ltd, 3 and we apply those principles here.

[21] The company’s revised F17 statutory declaration dated 30 April 2019 described the various steps it took to explain the Agreement (which we do not repeat here) and appended the explanatory document that the company provided to employees. The explanatory document, we consider, gave an adequate and accurate explanation of the relevant terms of the Agreement, including a description of the classes of work that the Agreement covered and a proper characterisation of the rate structure. The fact that the document did this in brief and summary terms does not, in our view, mean that s 180(5) was not complied with. The informed consent of employees, with which s 180(5) is evidently concerned, might be more readily achieved through a concise, relevant and readily comprehensible explanation than an excessively detailed one.

[22] We do nonetheless have a concern about compliance with s 180(5) arising from our conclusion about the coverage of the Agreement. Our concern is not that the explanatory document incorrectly described the coverage of the Agreement; as earlier stated we consider on the contrary that it accurately set out, albeit in a summary way, the classes of work that were covered. However what the document omitted to do was to explain the differences between the rates and conditions of employment provided for in the Agreement as compared to those under the four awards the Agreement was intended to displace in their application to Specialist People’s employees. That step was one reasonably necessary to be taken at least in respect of the Building and Construction Award, the Hydrocarbons Award and the Electrical Contracting Award because, as Specialist People has conceded, employees would not be better off overall under the Agreement than under those awards when applicable. That was something the employees obviously needed to know before they were asked to vote to approve the Agreement.

[23] The undertaking proposed by Specialist People to address our BOOT concern would also address our concern about compliance with s 180(5). That is because, by ensuring that employees are better off overall under the Agreement by a significant margin when performing work covered by the Building and Construction Award, the Hydrocarbons Award and the Electrical Contracting Award, it effectively renders moot the omission we have identified in that the detriment which required explanation would no longer exist. Acceptance of the undertaking would therefore allow us to be satisfied that s 180(5) was complied with.

[24] We do not consider that acceptance of the undertaking would be likely to cause financial detriment to any employee covered by the Agreement or result in substantial changes to the Agreement. Pursuant to s 190(4) we have sought the views of the bargaining representatives, but have received no response. In those circumstances we accept the proposed undertaking.

[25] Given our conclusion that the undertaking will address our concern about the requirement in s 186(2)(a), it is not necessary for us to consider the company’s submission that the omission in its explanation of the Agreement to employees was a minor procedural or technical error for the purpose of s 188(2).

[26] We have examined the other undertakings that were accepted by Deputy President Beaumont in her decision to approve the Agreement. We share the concerns that were raised by the Deputy President and consider that the undertakings offered by the company adequately address those concerns. We therefore accept the undertakings, which remain before the Commission in connection with the application for approval of the Agreement, as well as the new undertaking that has been offered in the redetermination of the application. None of the undertakings cause financial detriment to any employee covered by the Agreement, and the undertakings do not result, individually or collectively, in substantial changes to the agreement.

[27] The undertakings are attached to this decision as Annexure A.

Conclusion

[28] Subject to the undertakings referred to above, and on the basis of the material contained in the application and the accompanying statutory declaration, as well as the submissions of the company and the affidavit of Mr Kelly, we are satisfied that each of the requirements of ss 186, 187, 188 and 190 as are relevant to this application for approval have been met.

[29] The Agreement is approved as at the date of this decision and, in accordance with s 54, will operate from 27 November 2019. The nominal expiry date of the Agreement is 20 November 2023.

VICE PRESIDENT

Final written submissions:

Specialist People: 1 October 2019

CFMMEU and other: 28 October 2019

Printed by authority of the Commonwealth Government Printer

<AE506165  PR714460>

Annexure A

 1   [2019] FWCA 3535

 2   [2019] FWCFB 6307

 3   [2019] FWCFB 6960