[2017] FWCFB 5826

The attached document replaces the document previously issued with the above code on 27 November 2017.

[2017] FWCFB 5826

Fair Work Act 2009

s.604 - Appeal of decisions

Aerocare Flight Support Pty Ltd t/a Aerocare Flight Support

Australian Municipal, Administrative, Clerical and Services Union

Appeal against decision [2017] FWC 4311 of Commissioner Wilson at Melbourne on 31 August 2017 in matter number AG2017/1424.

[1] Aerocare Flight Support Pty Ltd (Aerocare), a provider of aviation ground handling services, has applied for permission to appeal and appealed a decision of Commissioner Wilson issued on 31 August 2017[1] (Decision). In the Decision, the Commissioner dismissed an application made by Aerocare for the approval of the Aerocare Collective Agreement 2017 (2017 Agreement) on two bases: first, he was not satisfied for the purpose of s 186(3) of the Fair Work Act 2009 (FW Act) that the group of employees covered by the 2017 Agreement was "fairly chosen" and, second, he was also not satisfied for the purpose of s 186(2)(d) that the Agreement passed the "better off overall test" (BOOT). In respect of both of these grounds of rejection, the Commissioner found that it was not appropriate to ask Aerocare for undertakings to address these matters as any undertakings would lead to substantial changes to the 2017 Agreement.

[2] Aerocare's notice of appeal contained three grounds of appeal, the first two of which were supported by detailed sub-grounds or particulars. The first ground contended that the Commissioner erred in finding that the employees covered by the 2017 Agreement were not fairly chosen, the second that he erred in finding that the 2017 Agreement did not pass the BOOT, and the third that he erred in concluding that any undertakings about his BOOT concerns would amount to substantial changes to the 2017 Agreement without first identifying the content of those undertakings or giving Aerocare an opportunity to be heard on the issue.

[3] On 12 October 2017, prior to the hearing of the appeal, lawyers acting for Aerocare sent correspondence to the Commission which advised that Aerocare had that day instituted proceedings in the Federal Court of Australia seeking declarations concerning the proper construction of the Airline Operations - Ground Staff Award 2010 (Award) in connection with its use of "split shifts". The correspondence contended that proper interpretation of the Award in this respect was fundamental to whether the Agreement passed the BOOT and the disposition of grounds 2 and 3 of Aerocare's appeal. On that basis it was requested that the determination of those grounds of the appeal be adjourned pending the Federal Court's determination of Aerocare's application, and that the appeal hearing should proceed in relation to ground 1 only.

[4] The application was opposed by the respondents to the appeal, the Transport Workers' Union of Australia (TWU) and the Australian Municipal, Administrative, Clerical and Services Union (ASU). On 13 October 2017 the parties were advised that the Commission would not at that stage grant Aerocare's adjournment request in relation to grounds 2 and 3 of its appeal, but that the issue could be re-agitated at the hearing of the appeal on 20 October 2017. When the appeal hearing commenced on that day, Aerocare again pressed its application for the adjournment of the hearing of grounds 2 and 3 pending the determination of its Federal Court application, and this was again opposed by the TWU and the ASU. After hearing the parties' submissions concerning Aerocare's adjournment application, we determined that we would proceed to hear the parties' submissions concerning ground 1 of the appeal, issue a decision in relation to that ground, and then give the parties an opportunity to be heard further in relation to how the rest of the appeal should be determined. The appeal proceeded on that basis, and this decision is accordingly concerned with ground 1 of Aerocare's appeal only.

[5] Clause 2, Parties of the 2017 Agreement identifies that it was made between Aerocare and "Collectively, the Company Employees who perform the work in one of the classifications contained in this Agreement (referred to as the employee or employees)". Clause 3, Coverage, Scope and Recognition provides, in subclause 3.3, that "The parties to the Agreement will be the Company and the employees employed by it throughout Australia and deployed in Australia and temporarily overseas in the classifications contained in this Agreement". There is no special definition given to the term "employee" as used in these two provisions. Clause 7, Classifications/Grading Structure, requires in subclause 7.2 that employees upon engagement be graded into one of the classifications in Schedule A, and subclause 7.3 and 7.4 set out processes by which such a grading may be reviewed and an employee may progress into a higher classification. Schedule A sets out the appointment criteria and duties of the classifications in the 2017 Agreement, namely "Airline Service Trainee", "Airline Service Agent", "Advanced Airline Service Agent", employees performing various identified categories of "Special Duties", "Supervisor" and "Senior Supervisor".

[6] Clause 9 of the Agreement provides "Employees will be engaged in the PSE category of employment and work may be performed in one or more shifts per day". "PSE" is an acronym for "Permanent Secure Employee", although incongruously clause 5, Explanation of terms used in this Agreement, contains the following definition:

"Permanent Secure Workers (PSE), for purposes of this Agreement means an employee who is available for shifts at any time of the day over 7 days of the week, who may be permanent part-time or full time (see clause 9.5.2)."

[7] Clause 9, Engagement, provides in subclause 9.1 that "Employees will be engaged in the PSE category of employment and work may be performed in one or more shifts per day". Subclause 9.2 contains a commitment by Aerocare to "long term sustainable and permanent jobs and ongoing career development opportunities". Clause 9 otherwise sets out the terms and conditions of engagement for PSEs, including that they are entitled to a minimum of 60 hours pay for each roster period of four weeks (except in specified circumstances) and to be rostered for four consecutive hours on any shift. The 2017 Agreement contains no provisions pertaining to casual employment.

[8] Item 2.1 of Schedule A sets out the rates of pay for PSEs only. The rates are expressed as "all-inclusive" hourly rates of pay for Monday-Friday, Saturday, Sunday and Public Holidays. No provision is made for any increase in pay during the operation of the 2017 Agreement, although all classifications except that of Airline Service Trainee have additional pay increments for each year of service in the classification up to 7 years. The rates appearing in the 2017 Agreement are, according to the submissions made, 5% higher than the existing rates in the currently applicable agreement, the Aero-Care Collective Agreement 2012 (2012 Agreement).

[9] Subdivision B of Div 4 of Pt 2-4 of the FW Act is concerned with the approval of enterprise agreements by the Commission. The general requirements for approval of enterprise agreements are set out in s 186, and additional requirements are set out in s 187. Section 186(1) provides for the following "Basic rule" concerning approval:

(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.

[10] The "fairly chosen" approval requirement is set out in s186(3) and (3A) as follows:

Requirement that the group of employees covered by the agreement is fairly chosen

(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.

(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.

[11] Section 186(2)(a) requires that the Commission be satisfied that, if an enterprise agreement is not a greenfields agreement, it was "genuinely agreed" to by the employees covered by it, and s 188 sets out when employees can be said to have genuinely agreed to an agreement. The requirement that the Commission be satisfied that an agreement passes the BOOT is set out in s 186(2)(d), and the operation of the BOOT is explicated in s 193. The capacity to address concerns that an enterprise agreement does not meet the requirement of ss 186 and 187 by the provision of undertakings is dealt with in s 190. It is not necessary to set out these provisions since they do not arise directly for consideration in relation to ground 1 of the appeal.

[12] It is only necessary to refer to those parts of the Decision which are relevant to the Commissioner's conclusion concerning the "fairly chosen" requirement. At the hearing, the TWU and the ASU mounted an argument that the Agreement was not genuinely agreed because casual employees employed by Aerocare, who it was contended were covered by the Agreement, had not been given the opportunity to vote upon it. In his consideration of this argument, the Commissioner firstly found that the Notices of Employee Representational Rights issued by Aerocare on 27 January and 3 March 2017, because they indicated that the scope of coverage of the proposed new agreement would be the same as for the 2012 Agreement then in operation, included casual employees, except for "Leader 3" employees.[2] However on 15 March 2017 Aerocare sent to "relevant employees" a draft agreement which would cover only PSEs (below the level of Leader 3) and not casual employees. The Commissioner said in this respect (footnote omitted):

"[85] Why the second NOERR [Notice of Employee Representational Rights] was sent to all employees, but within 2 weeks Aerocare decided to narrow the scope of its bargaining to only part-time employees, deliberately excluding more than 500 employees from the bargaining process has been inadequately explained. At best, its evidence about this change is thin - it wanted to incentivise casual employees to shift to part-time status. There is no evidence before the Commission to the effect that Aerocare notified those covered by the 2012 Agreement that it proposed to restrict the 2017 Agreement to a class of employees narrower than that notified in the NOERRs."

[13] The Commissioner ultimately rejected the unions' "genuinely agreed" argument on the basis that, upon an analysis of the coverage terms of the 2017 Agreement, whilst it was poorly drafted it was to be understood as not covering casual employees.[3] There is no challenge to that conclusion in the appeal.

[14] In his consideration of the "fairly chosen" issue, the Commissioner began by referring in detail to Aerocare's submission that the exclusion of casual employees was justifiable by reference to its "strategic decision" to phase out casual employment, and in this respect quoted Aerocare's written submissions to the following effect:

A There has been no unfairness to casuals employed by Aerocare; and

B There is no unfairness to the employees who are covered by CA17 [the Agreement], namely the PSEs; because:

(a) Casual employment is being phased out of Aerocare;

(b) Significant numbers of Aerocare casuals have already converted to PSE (currently 387 casuals - down from 1014 at the time of making CA12 [2012 Agreement]);

(c) More conversions to PSE are expected after CA17 is approved.

(d) The casuals who remain will administratively receive enhanced pay upon approval of CA17;

(e) Secure permanent employment has long been advocated by the union movement in Australia; and

(f) The Aerocare business model no longer accommodates the hiring of further casuals."[4]

[15] The Commissioner also referred to the evidence of Mr Gregory Shelley, Aerocare's General Manager Employee Operations, to the effect that at the commencement of the access period for the Agreement Aerocare had 1370 PSEs and 597 casual employees but this had reduced to 389 by 5 July 2017, and that this was part of a deliberate strategy to move employees from one category of employment to another and the shift was expected to continue.[5]

[16] In relation to the matters required to be taken into account under s 186(3A), the Commissioner made the following findings:

"[112] In this regard there is no geographic distinction between the group chosen to be covered by the 2017 Agreement and casual employees. The evidence does not support a finding that casual employees and PSEs do not physically work alongside one another. There is no evidence that some ports employ only casual employees and others only PSEs. There is no evidence that certain positions or classifications or jobs are performed by casual employees and others only by PSEs.

[113] It is also the case that there is insufficient evidence for the Commission to find that there is an operational distinction between the group as chosen to be covered by the 2017 Agreement and casual employees.

[114] Finally it is the case that there is insufficient evidence that there is an organisational distinction between the group to be covered by the 2017 Agreement and those who are not. While the argument may be put forward that, by the very nature of their contract of employment, there is an organisational distinction between persons employed on a casual basis and those employed on a part-time or full-time basis, there is insufficient evidence that this goes beyond the nature of the contract of employment and into the work which is undertaken for Aerocare by the employees in the different contractual categories of employment."

[17] The Commissioner then expressed the following conclusions about the "fairly chosen" requirement:

"[115] On the basis of the material before the Commission, I am not persuaded that the group of employees covered by the 2017 Agreement was fairly chosen. There is no evidence before the Commission of a sufficient nature that would cause me to be of the view that the restriction of the 2017 Agreement to PSEs beneath the Leader 3 level allows a finding that the group of employees to be covered by the Agreement was fairly chosen, taking into account whether it is geographically, operationally or organisationally distinct. Instead the finding is available to the Commission that the selection of the group was arbitrary and discriminatory.

[116] Cimeco, referred to above, held that it is appropriate to have regard to the interests of the employer, such as enhancing productivity. In this matter, Aerocare's case included the proposition that it desired to incentivise the shift from casual employment to part-time, PSE employment, and that approval of the 2017 Agreement would do that. I accept that it might. However, incentivisation in the form put forward by Aerocare comes at the price of excluding casual employees from bargaining for a new agreement and ultimately excluding them from the benefits, such as they may be, of the 2017 Agreement. The only basis of their exclusion from the 2017 Agreement is that they are employed as casual employees. By all accounts they work in the same locations as PSE employees and they perform the same work, for the same supervisors.

[117] On no objective analysis of the evidence before the Commission can it be found that the work of Aerocare's PSE employees is either geographically, operationally or organisationally distinct to its casual employees.

[118] As a result the Commission is not satisfied that the group of employees covered by the 2017 Agreement was fairly chosen."

[18] The Commissioner then addressed the question of whether his lack of satisfaction that the "fairly chosen" requirement was met could be addressed by the provision of undertakings pursuant to s 190:

"[121] I do not consider it appropriate in the circumstances to ask for an undertaking in respect of my finding that the group of employees covered by the 2017 Agreement was not fairly chosen because the result of seeking such an undertaking would, in my view, lead to substantial changes to the 2017 Agreement. Many hundreds more employees would be brought into the Agreement and its contents would need to be modified in substantial regards to provide for casual rates of pay and other provisions specific to the employment of casual employees. Further, it is a matter of fact that none of the employees in question were afforded an opportunity to vote on the Proposed Agreement."

[19] Appeal ground 1 in its entirety was as follows:

"Ground 1- the erroneous "fairly chosen" finding at [115]-[118] and [193] of the Decision

In concluding that he was not satisfied that the group of employees to be covered by the Agreement (the chosen group) was fairly chosen for the purposes of s.186(3) of the FW Act, the Commissioner erred in the following respects:

1. in finding that the chosen group, being the permanent secure employees (PSEs), was not organisationally distinct from the casual employees:

1. the Commissioner imported an unnecessary requirement to provide evidence beyond the distinct nature of the engagement of PSEs versus casuals;

2. the Commissioner misapplied s 186(3A) and failed to take into account a mandatory consideration;

2. further, the Commissioner, having made the finding that the group of employees was not geographically, operationally or organisationally distinct, failed to give that matter due weight and then have regard to all other relevant considerations in deciding whether the group was fairly chosen.

1. the Commissioner failed to take into account the following relevant considerations:

the appellant had a logical business rationale for excluding casuals from the scope of the Agreement - it did not want to employ operational employees as casuals anymore and wanted to encourage the casual employees to join the PSE ranks;

the commitment to employees covered by the Agreement in clause 9.2 of "long term, sustainable and permanent jobs and ongoing career development opportunities".

the appellant was only going to employ operational employees as PSEs and was not going to employ any more of them as casuals;

the appellant gave casual employees the option of transferring to a PSE (including after approval of the Agreement) and being covered by the Agreement or remaining as casuals under the existing enterprise agreement;

casual employees were and were to continue to be paid a loading on their wages to compensate for the casual nature of their work and be engaged on an hourly basis;

the casual employees were to receive a 5% pay increase on approval of the enterprise agreement backdated to 19 February 2017;

the casual employees would no longer have to pay the car parking co-contribution on approval of the enterprise agreement.

1. the Commissioner's conclusion was based on the following erroneous findings and irrelevant considerations:

1. finding at Decision [115] that the selection of the chosen group was "arbitrary", despite the evidence of the appellant as to the logical business rationale;

2. finding at Decision [115] that the selection of the chosen group was "discriminatory" (presumably in an adverse sense), in the absence of evidence or consideration of any adverse impact on casuals caused by the selection of the chosen group that would render the selection of the chosen group unfair in respect of casual employees;

3. finding at Decision [116] that the selection of the chosen group meant that casual employees were "excluded from bargaining for a new agreement", when there was no evidence or available inference that the selection of the chosen group had any such effect on casuals."

[20] In support of this appeal ground, Aerocare submitted firstly that the Commissioner misunderstood and misapplied the concept of organisational distinctiveness in that, while acknowledging that PSEs and casual employees were engaged in different contractual categories, he proceeded on the basis that Aerocare had to prove that the work performed by the employees was organisationally distinct. This, it was submitted, imported an extraneous requirement not found in the natural meaning of the text and structure of s 186(3A). The requirement for organisational distinctiveness was concerned with whether the group of employees were distinct in an organisational sense, with "organisation" bearing the broad meaning of any process or act of organising, or anything which is organised and with one relevant definition being "a body of person organised for some end or work". Section 186(3A) required the Commission to consider whether the group chosen by the parties to be covered was based on a "legitimate business related characteristic" as opposed to arbitrary or extraneous criteria. Aerocare had traditionally organised its labour force by employing PSEs and casuals, and the two groups had distinct bases for engagement and were recognised as distinct types of employment under the relevant modern award and under the 2012 Agreement. Aerocare, it was submitted, made a legitimate business decision as to the choice of the scope of the 2017 Agreement, in that it no longer wanted its labour to be organised as comprising both PSEs and casuals, and wanted to encourage the existing casual employees to agree to become PSEs. By importing a requirement of distinctiveness as to work, the Commissioner misapplied s 186(3A), erroneously discarded Aerocare's legitimate business decision as to scope, and failed to take into account a mandatory consideration that the chosen group was organisationally distinct.

[21] Secondly, Aerocare submitted that, separate from s 186(3A), the Commissioner failed to take into account a range of relevant factors, including that it had a business rationale for excluding casuals, the commitment in subclause 9.2 of the 2017 Agreement, the intention not to employ any more operational employees as casuals, the option given to casuals to convert to PSEs or remain under the 2012 Agreement, the fact that casual employees were to continue to be paid a loading on their wages and in addition would receive a 5% pay increase back-dated to 19 February 2017 and would no longer have to pay the carparking contribution once the 2017 Agreement was approved, and that the number of casual employees had dropped significantly and was expected to continue to drop. The failure of the Commissioner to even advert to those matters in his reasons demonstrates that they were not taken into account.

[22] Thirdly, Aerocare submitted that the finding in paragraph [115] of the Decision that "...the finding is available to the Commission that the selection of the group was arbitrary and discriminatory" was contrary to the evidence, given that the selection was the result of a deliberate business strategy and there was no evidence that the casuals would be disadvantaged by their exclusion. Additionally, the Commissioner incorrectly found that Aerocare's decision as to scope had excluded casual employees from bargaining for a new agreement, when in fact the choice of scope of the 2017 Agreement did not exclude casuals form bargaining for a new agreement.

[23] Against this, the TWU submitted that:

• permission to appeal should be refused because Aerocare had not demonstrated a sufficiently arguable case of error to warrant reconsideration in the public interest, or in the alternative the appeal should be dismissed;

• the considerations required to be taken into account under s 186(3A) were not necessarily determinative, and were to be treated as neutral considerations absent something more;

• in referring to the work of casual employees not being distinct, the Commissioner did erect an extraneous requirement that the work had to be distinct in order for a finding that the chosen group was organisationally distinct;

• the evidence demonstrated that Aerocare's rationale for its choice about coverage was no more than that it no longer wanted casuals in its labour force and shut them out of the 2017 Agreement to give them an incentive to become PSEs;

• this business decision, including its effect on the existing casual employees, was taken into account by the Commissioner, and in doing so he was entitled to review its fairness;

• the determinative task undertaken by the Commissioner was of a discretionary character and involved the making of a broad evaluative judgment, and it is not enough that a different conclusion might have been reached if the matter had been heard at first instance by the Full Bench; and

• no appealable error had been demonstrated by Aerocare.

[24] The ASU supported and adopted the TWU's submissions, and additionally submitted that:

• permission to appeal should be refused because the appeal did not raise any important question about the meaning and application of organisational distinctiveness in s 186(3A), which had been the subject of consideration in a number of previous Full Bench decisions and by the Federal Court Full Court;

• the Commissioner, in determining whether he was satisfied as to the "fairly chosen" requirement, was making a discretionary decision, and accordingly it was necessary for Aerocare to demonstrate error of the House v The King[6] type;

• the expression "organisationally distinct" in s 186(3A) should be construed consistently with the accepted meaning of the same expression in ss 237(3A) and 238(4A), that is, it concerns the manner in which the employer has organised its enterprise;

• the mere fact that some employees were casual and others permanent was incapable of demonstrating organisational distinctiveness in accordance with that interpretation;

• the Commissioner did not actually find that Aerocare's choice of coverage was arbitrary and discriminatory, although if such a finding had been made, it would have been reasonably open to the Commissioner;

• the decision to exclude casuals from the agreement making process to aid a process where casuals have little choice but to change the status of their employment and thereby become covered by the Agreement could reasonably be characterised as arbitrary and discriminatory; and

• the selection of the group to be covered was entirely inconsistent with the FW Act's objects and undermined collective bargaining.

[25] Because ground 1 of Aerocare's appeal raises a question which is novel and of potentially wider application, namely whether the coverage of an enterprise agreement has been fairly chosen in circumstances where employees have been excluded from coverage based only on their casual status, we have decided to grant permission to appeal with respect to that ground.

[26] The following principles may be gleaned from earlier decisions concerning s 186(3)-(3A):

• the expression "the group of employees covered by the agreement" in s 186(3) refers to the whole class of employees to whom the agreement might in future apply, not the group of employees who actually voted on whether to make the agreement;[7]

• the references in s 186(3) and (3A) to whether "the group of employees covered by the agreement was fairly chosen" are, in the case of a non-greenfields agreement made with a group of employees, particularly a small group, references to a choice made by the employer;[8]

• a Member's decision as to whether or not they are satisfied that the group of employees covered by an agreement was "fairly chosen" involves a degree of subjectivity and the exercise of a very broad judgment or value judgment, and in a broad sense can be characterised as a discretionary decision;[9]

• in an appeal from a decision of that nature, it will be necessary for the appellant to demonstrate error in the decision-making process of the type identified in the House v The King in order for the Full Bench to set aside the decision;[10]

• once it has been determined that an agreement does not cover all of the employees of the employment, it is necessary for the Commission to make a finding as to whether the group of employees who are covered is geographically, operationally or organisationally distinct, and then take that matter into account and give it due weight, having regard to all other factors;[11]

• if the group of employees covered by the agreement is geographically, operationally or organisationally distinct then that would be a factor telling in favour of a finding that the group of employees was fairly chosen; conversely, if the group of employees covered by the agreement was not geographically, operationally or organisationally distinct then that would be a factor telling against a finding that the group was fairly chosen;[12]

• however while the question of whether the group of employees covered is geographically, operationally or organisationally distinct must be evaluated and given due weight having regard to all other relevant considerations, that is not a determinative consideration in that it is not necessary to make a finding that the group is geographically, operationally or organisationally distinct in order to be satisfied that it was fairly chosen;[13]

• the selection of the group of employees to be covered on some objective basis, as opposed to an arbitrary or subjective basis, is likely to favour a conclusion that the group was fairly chosen;[14]

• the relevant considerations will vary from case to case, but the word "fairly" suggests that the selection of the group covered was not arbitrary or discriminatory, so that for example selection based upon employee characteristics such as date of employment, age or gender would be likely to be unfair;[15] and

• it is appropriate to have regard to the interests of the employer, such as enhancing productivity, and the interests of both the employees included in the agreement's coverage and the employees excluded.[16]

[27] Additionally, guidance may be obtained as to how to interpret and apply the expression "organisationally distinct" in s 186(3A) from decisions concerning the use of the same expression in ss 237(3A) and 238(4A). The following propositions are relevant:

• the term "organisation" refers to the manner in which the employer has organised its enterprise in order to conduct its operations;[17]

• the performance by a group of employees of duties which are qualitatively different from duties performed by other employees may justify a conclusion that the group is organisationally distinct;[18]

• however the mere performance by a group of employees of different tasks or roles to others may not be sufficient to render it organisationally distinct where the employees work in an integrated way with the other employees to perform a particular business function;[19] and

• most businesses have organisation structures which will allow organisationally distinct groups to be identified.[20]

[28] Having regard to these principles and propositions, we do not consider that Aerocare has demonstrated any appealable error in the Commissioner's conclusion that the group of employees covered by the 2017 Agreement was not fairly chosen. We consider that the Commissioner's conclusion in this respect was reasonably open to him in the exercise of the broad value judgment he was required to make. Furthermore, we agree with the Commissioner's conclusion. Our reasons are as follows.

[29] First, there were a number of matters of significance that were not in dispute or not the subject of any challenge in the appeal:

(1) The pre-existing 2012 Agreement covered casual employees as well as PSEs.

(2) The Notices of Employee Representational Rights (NERRs) issued by Aerocare to initiate the bargaining process for the 2017 Agreement were sent to casual employees as well as PSEs, and identified the proposed coverage of the proposed new agreement to be the same as the 2012 Agreement except for the exclusion of the Leader 3 classification. That is, at the commencement of bargaining, it was intended by Aerocare that casual employees be covered by the same enterprise agreement covering PSEs as before.

(3) At some time between 3 March 2017, when the last NERRs were issued, and 15 March 2017, when a draft agreement was sent to PSEs below the Leader 3 classification only[21], Aerocare made a decision to exclude casual employees from the bargaining process and its proposed agreement.

(4) The casual employees performed the same duties at the same locations as the PSEs, worked alongside them, had in the past worked similar rosters as PSEs, reported to the same supervisors as PSEs, and were paid through the same payroll and human resources system.[22]

(5) The PSEs who constituted the group of employees covered by the 2017 Agreement were not geographically or operationally distinct (as the Commissioner found).[23]

[30] These were all matters which, we consider, the Commissioner was entitled to regard as weighing strongly in favour of the conclusion that the group of employees covered by the 2017 Agreement was not fairly chosen. The picture which emerges is of an abrupt decision to change from the pre-existing position whereby PSEs and casual employees were covered by the same agreement, without any apparent difficulty, and to exclude casuals in circumstances where they were functionally indistinguishable from PSEs. Absent any countervailing considerations, these matters would make reasonably available a conclusion that the group of employees covered was not fairly chosen.

[31] Second, we do not consider that, on a fair reading of the Decision, the Commissioner established and proceeded on the basis of a test or requirement for organisational distinctiveness that the work of the group of employees had to be distinct from that of other employees. We consider that what the Commissioner did in paragraph [114] of the Decision was to take into account as potentially relevant to organisational distinctiveness the difference in the contract of employment between casual employees and PSEs, but then to conclude that this was outweighed by the lack of any difference in the work performed by the two groups. That is, the Commissioner took into account, and gave determinative weight to, the fact that there was no difference in the work, but he did not treat this as the sole criterion for organisational distinctiveness.

[32] In substance, the first limb of Aerocare's appeal ground 1 sought that appealable error be found on the basis that the Commissioner did not find that the difference in employment contracts between PSEs and casual was sufficient by itself to demonstrate that the groups were organisationally distinct. That is in truth not a contention of appealable error, but rather a plea for us to re-decide the "organisationally distinct" issue ourselves and to give decisive weight to the different nature of the employment contracts as between the two groups. If the Commissioner had failed to take this matter into account at all, that arguably might have constituted appealable error, but it was not contended that the Commissioner failed to take it into account and, as earlier stated, he plainly did.

[33] As the authorities to which we have earlier referred demonstrate, there are a range of considerations which may be relevant to the issue of whether the group of employees covered by an agreement is organisationally distinct. This includes whether the duties of the group are different to that of employees who are excluded from coverage. In considering and giving significant weight to this, the Commissioner took into account what was clearly a relevant consideration. There was no error on this score. The conclusion reached by the Commissioner that the PSEs covered by the 2017 Agreement were not organisationally distinct from the casual employees we find to be completely unsurprising. There was no evidence that, in its organisation structure, PSEs and casuals performing the same work were placed into different organisational units, had different reporting lines or were managed differently. As earlier stated, for functional purposes they were, on the agreed facts, indistinguishable. That a different model of remuneration was used for groups of persons who had otherwise performed the same work on similar rosters in order to discharge the same business function could not by itself be sufficient to demonstrate that the groups were organisationally distinct.

[34] Third, we do not accept that the Commissioner, having found that the group of employees covered by the 2017 Agreement were not geographically, operationally or organisationally distinct from casual employees, then failed to take into account all other relevant considerations or the matters specifically referred to in appeal ground 1 relied upon by Aerocare. In paragraphs [108] and [109] of the Decision, as earlier set out, the Commissioner gave an accurate and comprehensive account of the matters advanced by Aerocare in order to demonstrate the fairness of its choice of coverage. Then, having taken into account and made findings concerning the s 186(3A) matters, the Commissioner dealt with Aerocare's case that its business decision to move away from casual employment informed its choice of coverage directly in paragraph [116] of the Decision. The conclusion reached by the Commissioner, in summary, was that while the exclusion of the casual employees might give them an incentive to shift to employment as PSEs (as desired by Aerocare), the result was that the casuals were excluded from bargaining for and the benefits of the 2017 Agreement merely because of their casual status, in circumstances where they performed the same work in the same locations under the same supervisors as the PSEs. That was the basis upon which the Commissioner concluded that the choice of coverage was not fair. In reaching this conclusion, the Commissioner properly engaged with the central argument advanced by Aerocare. That he did not, in paragraph [116], expressly respond to every strand of Aerocare's case does not mean that he did not take all relevant matters into account.[24]

[35] Fourth, contrary to the third limb of Aerocare's appeal ground 1, we do not consider that the Commissioner actually made a finding that the selection of the group covered by the 2017 Agreement was arbitrary and discriminatory, but merely made the observation that it would have been available for such a finding to be made. That conclusion is sufficient to dispose of this aspect of Aerocare's challenge to the Decision, but it may be added that had the Commissioner actually made such a finding, we consider it would have been reasonably available for him to make it. It is clear that the casual employees were excluded from coverage because of their status as such, and to that extent their exclusion can fairly be characterised as discriminatory. The circumstances we have earlier set out in paragraph [29] also tend to demonstrate that the exclusion of casual employees from the coverage of the 2017 Agreement was arbitrary - that is, capricious rather than based on reason. It is clear that Aerocare has made a business decision to phase out casual employment and move to PSE-only employment, and we accept that there may be a sound and rational basis for this decision and further that the implementation of this decision has to date resulted in a significant number of casual employees electing to transfer to employment as PSEs. However, as at the date of the access period (shortly before the vote upon the 2017 Agreement took place), Aerocare still had 597 casual employees engaged, apparently on a regular basis, who were excluded from bargaining for and voting upon the 2017 Agreement. Aerocare has not suggested that existing casual employees would not continue to be engaged after the 2017 Agreement took effect. While the evidence adduced by Aerocare - particularly the affidavit of Mr Shelley - explains the rationale for Aerocare's business decision, what is left unexplained is exactly how the exclusion of casual employees from the coverage of the 2017 Agreement was meant to advance the objective of phasing out casual employment. Aerocare's submissions characterised its approach as giving casual employees an incentive to transfer to employment as PSEs, but the better inference is that Aerocare intended to place casual employees in an inferior position as to their employment rights than PSEs in order to establish a disincentive to remain in casual employment. That casual employees were, by grace and favour of Aerocare, to be afforded the same level of pay increase and the same carparking benefits that the group of employees covered by the 2017 Agreement were to obtain as a matter of legal right merely highlights the arbitrary nature of their exclusion from coverage.

[36] Finally, we do not accept that the Commissioner erred in finding that Aerocare's decision as to scope had excluded casual employees from bargaining for a new agreement. While it may technically be correct to say that the exclusion of casuals for bargaining for the 2017 Agreement did not mean that they could not seek a new agreement applicable to themselves only, it is clear that Aerocare's business strategy meant that there was no prospect in reality of it agreeing to bargain for and enter into a separate new agreement for the casual employees. The practical consequence of Aerocare's choice of coverage was that casual employees were denied the only realistically available opportunity to participate in bargaining for and voting upon a new enterprise agreement.

[37] For the reasons given, permission to appeal is granted in respect of appeal ground 1, but the appeal ground is rejected.

[38] As earlier stated, the Commission's satisfaction under s 186(3) that the group of employees covered by an enterprise agreement was fairly chosen is a requirement for approval of the agreement. We have found that the Commissioner did not err in concluding that this approval requirement was not satisfied. There is no challenge in Aerocare's appeal to the Commissioner's further conclusion that this could not be remedied by the provision of an undertaking.

[39] That would appear to result in a position whereby the determination of Aerocare's other appeal grounds would have no utility because, even if Aerocare were to succeed on those appeal grounds, this could not lead to the 2017 Agreement being approved. However that is only a provisional view and we will give Aerocare and the two unions an opportunity to make submissions about the further disposition of the appeal in light of our conclusions with respect to appeal ground 1. We direct that such submissions be made in writing and filed on or before 5.00pm Monday 4 December 2017.

F. Parry QC and R. Dalton of counsel with L. Mumme on behalf of Aerocare Flight Support Pty Ltd.

A. Howell of counsel with W. Carr on behalf of the Transport Workers' Union of Australia.

Y. Bakri of counsel with J. Cooney on behalf of the Australian Municipal, Administrative, Clerical and Services Union.

[1] [2017] FWC 4311

[6] [1936] HCA 40; (1936) 55 CLR 499

[7] CFMEU v John Holland Pty Ltd [2015] FCAFC 16, 228 FCR 297 at [34]- [41]

[9] Ibid at [60]-62]; Cimeco Pty Ltd v CFMEU [2012] FWAFB 2206, 219 IR 139 at [8]

[10] Cimeco Pty Ltd v CFMEU [2012] FWAFB 2206, 219 IR 139 at [8]

[13] Ibid at [15], [20]; Australian Maritime Officers' Union v Harbour City Ferries Pty Ltd [2016] FWCFB 1151 at [31]

[14] Cimeco Pty Ltd v CFMEU [2012] FWAFB 2206, 219 IR 139 at [16]

[16] Ibid at [21]-[22]; CFMEU v Resco Labour & Training Pty Ltd [2012] FWAFB 8461, 228 IR 5 at [34]

[17] QGC Pty Ltd v Australian Workers' Union [2017] FWCFB 1165 at [44]

[18] United Firefighters' Union v Metropolitan Fire & Emergency Services Board [2010] FWAFB 3009, 193 IR 293 at [60]

[19] QGC Pty Ltd v Australian Workers' Union [2017] FWCFB 1165 at [44]- [45]

[20] Australian Workers' Union v BP Refinery (Kwinana) Pty Ltd [2014] FWCFB 1476, 242 IR 238 at [15]; see also National Union of Workers v Cotton On Group Services Pty Ltd [2014] FWC 6601 at [15]- [16] (permission to appeal refused in [2014] FWCFB 8899) and ASU v Shine Lawyers Pty Ltd [2017] FWC 4158 at [68]- [71] as examples of where the employer's organisational structure was used to determine organisational distinctiveness.

[21] See affidavit of Gregory Luke Shelley affirmed 5 July 2017, paragraphs [25]-[26]

[22] Agreed statement of facts, paragraph [14]

[24] See Soliman v University of Technology, Sydney [2012] FCAFC 146; 207 FWC 277; 226 IR 214 at [54]- [55]

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