Fair Work Act 2009

s.185 - Enterprise agreement

Application for approval of an enterprise agreement - undertakings do not resolve concern - application dismissed.

• [1] On 19 August 2022, I issued a decision in which I concluded that Ausdrill had not complied with the requirements of s 180(5) of the Act in relation to the Enterprise Agreement, with the result that the Enterprise Agreement had not been genuinely agreed to by Ausdrill's employees within the meaning of s 188(1)(a)(i) of the Act.[1]

• [2] Ausdrill has offered undertakings in an attempt to overcome my concern in relation to ss 180(5) and 188(1)(a)(i) of the Act. This decision concerns those undertakings.

• [3] I use the same abbreviations and defined expressions in this decision as I did in my previous decision.

• [4] I set out my concern in relation to ss 180(5) and 188(1)(a)(i) of the Act in the following parts of my previous decision (references omitted):[2]

"Consideration of particular issue raised concerning all reasonable steps and genuine agreement

[55] It is apparent from the evidence to which I have referred above that the consistent message given by Ausdrill to employees covered by the Enterprise Agreement was that their current terms and conditions were sourced from either the BC Award or the Brandrill EA. That was incorrect. Employees in category two had their current terms and conditions of employment sourced from both the BC Award and the Brandrill EA.

[56] The employees in category two were told that the Enterprise Agreement would apply to the exclusion of the Brandrill EA and the BC Award, but they were not told that the BC Award applied to them at the time of the vote and would continue to apply to them if the Enterprise Agreement was not approved by a majority of employees who voted on it. I do not accept Ausdrill's submission that all employees covered by the Enterprise Agreement, including those in category two, were informed, or would be capable of understanding from the information provided by Ausdrill, that the BC Award applied to them at the time of the vote.

[61] In my view, it would have been a reasonable step, in the period leading up to the vote on the Enterprise Agreement, for Ausdrill to accurately explain to employees the source of their current terms and conditions of employment. Absent a correct understanding about the source and therefore the content of their current entitlements (and obligations), employees were not in a position to understand how their terms and conditions of employment might be affected by voting in favour of the Enterprise Agreement.

[62] ...In the present case, unless and until the second category of employees understood that they were entitled to the benefits of the Brandrill EA and the BC Award, they were not in a position to make an informed choice about the Enterprise Agreement. Contrary to Ausdrill's submissions, it does not matter that Ausdrill applied the terms and conditions of the Brandrill EA to the second category of employees as that were the sole source of their entitlements. They were entitled to the benefits of the Brandrill EA and the BC Award. The additional benefits to which the second category of employees were entitled under the BC Award, over and above the Brandrill EA, were significant. By way of example:

(a) under clause 16.1 of the Brandrill EA, employees are entitled to "four weeks' (the equivalent of 152 hours) annual leave" and, in the case of shift workers, "an additional weeks' leave (in total 240 hours)". Under clause 24.2(a) of the BC Award, "An employee is entitled to annual leave, in addition to the amount provided for in the NES, such that the employee's total entitlement to annual leave pursuant to the NES and this award for each year of employment is a cumulative total of 175 ordinary hours (5 weeks)". Further, shift workers who meet certain requirements are entitled to "an additional 35 ordinary hours (one week) of annual leave" pursuant to clause 24.2(b) of the BC Award; and

(b) clause 25 of the Brandrill EA confines redundancy entitlements to the payment of retrenchment pay (two weeks' pay per year of service) under the Coal Mining Industry (Production and Engineering) Consolidated Award. Pursuant to clause 34 of the BC Award, an employee who has been made redundant is entitled to one week's severance pay per year of service and two weeks' retrenchment pay per year of service up to a maximum of 30 weeks' retrenchment pay.

Finding as to s 180(5)

[72] By informing employees covered by the Enterprise Agreement that their current terms and conditions were sourced from either the BC Award or the Brandrill EA and not informing employees in category two that their current terms and conditions of employment were sourced from both the BC Award and the Brandrill EA, Ausdrill failed, in my assessment and having regard to all the circumstances, to take all reasonable steps to ensure that the terms and conditions of the Enterprise Agreement, and the effect of those terms, were explained to the relevant employees in accordance with s 180(5) of the Act.

[74] For the reasons given, I am not satisfied that Ausdrill complied with the requirements of s 180(5) in relation to the Enterprise Agreement. It follows that I am not satisfied that the Enterprise Agreement has been genuinely agreed to by Ausdrill's employees within the meaning of s 188(1)(a)(i) of the Act."

• [5] Ausdrill has informed the Commission that it is prepared to offer an undertaking to the effect of option 1 or 2 set out below, or some amendment thereto if requested by the Commission.[3] The difference between the options is that the first option applies a general statement of effect to remedy the concern, whereas the second option identifies those clauses that Ausdrill contends are reflected in the BC Award and which are more beneficial than the terms of the Enterprise Agreement:

The Company will continue to apply to any Employee, any more beneficial term of the Black Coal Mining Industry Award 2020, than a term of this Agreement, as it applied at the date of approval of this Agreement.

The Company will continue to apply to any Employee, the following more beneficial terms of the Black Coal Mining Industry Award 2020, to the extent that they provide [sic] are more beneficial than a term of this Agreement, as it applied at the date of approval of this Agreement:

(a) Clause 15.1, 15.2 and 15.4 - Hours of Work

(b) Clause 15.5 - Change to Rosters (less than 1 week's notice)

(c) Clause 29.2, 29.5 and 29.6 - Public Holidays

(d) Clause 29.3 - Public Holiday Payment."

• [6] Ausdrill filed and served submissions in chief dated 26 August 2022 and submissions in reply dated 19 September 2022 in relation to its proposed undertakings. The CFMMEU filed and served submissions dated 12 September 2022. I have read and considered all submissions filed by Ausdrill and the CFMMEU.

• [7] Ausdrill submits that both undertakings it has offered address the concern identified in my previous decision regarding explanations given to the second category of employees. Ausdrill contends that the undertakings effectively neutralise any detriment that an employee in the second category may experience through an absence of explanation that the BC Award also applied to their employment and therefore that there might have been more beneficial terms in the BC Award. Ausdrill submits that the BC Award conditions which are of greater benefit to the second category of employees than the terms of the Enterprise Agreement will be maintained and applied to the second category of employees as a term of the Enterprise Agreement.

• [8] Ausdrill submits that its undertakings will not result in any financial detriment to employees, nor will they result in substantial changes to the Enterprise Agreement.

• [9] In the alternative, Ausdrill submits that it is open to the Commission to approve the Enterprise Agreement on the basis that the matters which concern it constitute minor procedural or technical errors made in relation to the requirements of s 180(5) and that the terms of s 188(2) permit an enterprise agreement to be regarded as genuinely agreed in such circumstances provided the employees covered by the agreement were not likely to have been disadvantaged by the errors.

• [10] Ausdrill submits that its error in failing to explain the continued application of the terms of the BC Award to the second category of employees was an error that was both procedural and technical in nature. It contends that the error was procedural because there is a procedural requirement to take all reasonable steps to explain the terms of the Enterprise Agreement and the effect of those terms. Ausdrill submits that its error was technical because whilst an explanation was provided it was not correctly provided such that a technical error was made concerning the application of the BC Award to the second category of employees.

• [11] Ausdrill submits that its error was minor for the following reasons:

(a) First, the error relates to a single issue regarding the application of the BC Award to the second category of employees. Beyond this singular issue, the explanation of the terms of the Enterprise Agreement and the effect of those terms on the second category of employees (relative to their current terms and conditions) was expansive and detailed;

(b) Second, the circumstances under which the error was committed must be considered. Both the employees and Ausdrill operated on the understanding that the second category of employees had their entitlements exclusively sourced from the Brandrill Agreement;

(c) Third, whilst it has been found that the absence of explaining the terms of the BC Award was an omission of a reasonable step and therefore a failure to meet the obligations of s 180(5), the degree to which Ausdrill discharged all other reasonable steps assist in concluding that the omission in explanation was only of minor effect;

(d) Fourth, the circumstances of the explanation of the Enterprise Agreement should be considered over a broader context which includes the process of explanation that was applied in relation to an earlier agreement considered by Deputy President Masson in Re Ausdrill Pty Ltd Black Coal Agreement 2020 [2021] FWC 6348. In that regard Ausdrill submits:

1. All employees in the second category were employed by Ausdrill from at the latest 4 September 2020. As a result they were all engaged throughout the process of explanation which was subject to the process described in Deputy President Masson's decision;

1. The process which was applied in the context of Deputy President Masson's decision was one which involved all employees, including those in the second category, receiving a copy of the BC Award as it then stood, a BC Award pay guide, a comparison between the proposed 2020 enterprise agreement and the BC Award, and a comparison between the proposed 2020 enterprise agreement and the Brandrill Agreement;

1. The NERR for the Enterprise Agreement stated that it would cover "Employees that were employed on-site in the black coal mining industry and who perform work defined in Schedule A of the Black Coal Industry Award 2010." This was relevantly the same as the NERR that was issued in relation to the agreement considered in Deputy President Masson's decision; and

1. Whilst these matters may not be capable of being taken into account for the purpose of the reasonable steps taken by Ausdrill during the access period for the Enterprise Agreement, they are relevant in seeking to assess whether the error made by Ausdrill was minor in the circumstances.

(a) Fifth, that the "additional benefits" identified in my earlier decision concerning the greater benefit of annual leave provided for by the BC Award as compared to the Brandrill Agreement were not relevant to the second category of employees in the terms contemplated by my earlier decision. All of the employees in the second category are shift workers in accordance with the terms of the Brandrill Agreement and therefore are in receipt of 240 hours of annual leave per year. This benefit is significantly greater than the benefits under the BC Award for annual leave;

(b) Sixth, the confined benefit to redundancy payments which were provided by incorporation of the Coal Mining Industry (Production and Engineering) Consolidated Award were not presented to the employees in the second category and they are not evident from the terms of the Brandrill Agreement. Whilst my earlier decision correctly identifies the effect of the incorporation of that term on the operation of the Brandrill Agreement, it is unlikely (and there is no evidence to indicate) that any of the employees in the second category could have considered that their redundancy entitlements were limited by the Coal Mining Industry (Production and Engineering) Consolidated Award;

(c) Seventh, all of the employees in the second category were, prior to the making of the Enterprise Agreement and on approval of the Enterprise Agreement, going to be paid in accordance with project entitlement letters which provided for a rolled up "composite hourly rate" of pay. These rates were not derived from the terms of the Brandrill Agreement. They were framed in terms of a calculation derived from the BC Award inclusive of the vast majority of substantive terms in the BC Award (including base hourly rate, loadings and penalties for hours worked, and allowances for the nature of the work performed). The second category of employees received an explanation of the benefits of the Enterprise Agreement in those terms (as reflected in the composite hourly rate calculation sheet); and

(d) Eighth, the terms of the Enterprise Agreement are effectively modelled on the BC Award with a number of enhancements. Ausdrill has only identified a limited number of areas where there are minor deviations to the terms of the BC Award, and it is prepared to offer undertakings to preserve those terms to the benefit of employees.

• [12] The CFMMEU submits that the undertakings offered by Ausdrill do not meet the concern identified in my earlier decision. It is submitted that while Ausdrill's undertakings may remedy any identified detriment in respect of the conditions to be experienced by employees under the Enterprise Agreement in the event of its approval, the undertakings do nothing to address the core of the concern - that employees were not properly informed as to how the terms and conditions of their employment would change in the event of the approval of the Enterprise Agreement. A fundamental difference between that point and now, when there is an attempt to remedy that situation, is that the second category of employees have been deprived of the ability to make an informed assessment as to the terms and conditions available under the Enterprise Agreement as compared to their existing terms and conditions of employment. A concomitant disadvantage, so the CFMMEU submits, is that they have been deprived of the capacity to make a decision to reject the Enterprise Agreement in favour of bargaining for better terms and conditions of employment based on a proper understanding of the terms and conditions of their employment.

• [13] The CFMMEU submits that the examples at paragraph [62] of my earlier decision illustrate this point. It matters not that the relevant employees were all apparently shiftworkers under the Brandrill Agreement (about which there is no evidence), or that it was apparently unlikely that the second category of employees would have considered the limitations of their redundancy entitlements under the Brandrill Agreement. It is submitted that on these two important points the employees in the second category were not in a position to understand the impact of a vote in favour of the approval of the Enterprise Agreement would have on their conditions of employment because those conditions were opaque to them.

• [14] The CFMMEU contends that another example is evidenced in the information the second category of employees received in relation to their remuneration. It was identified in the Brandrill Explanation Pack that under the Enterprise Agreement employees would receive annual increases in pay, whereas under the Brandrill Agreement there was no provision for any fixed remuneration increases. In contrast to this, the employees who received the Black Coal Explanation Pack were advised that the BC Award rates of pay were increased by virtue of the Commission's Annual Wage Review. Notwithstanding the CFMMEU's earlier submissions on the inadequacy of this explanation, it is submitted that it was essential that employees understood that their remuneration would not remain static if the Enterprise Agreement was not approved, but that it would instead be subject to increases under the BC Award in certain (and likely) circumstances. The explanation provided to the second category of employees would likely have led them to understand that they would get regular annual increases to their remuneration, and that this was a benefit that was uniquely available to them under the Enterprise Agreement. This was not correct, and it is submitted that the proposed undertakings do nothing to remedy this state of affairs.

• [15] A further example relied on by the CFMMEU is the way in which the introduction of casual employment brought in by the Enterprise Agreement was treated by Ausdrill in its explanation. It is submitted that the introduction of casual employment brings with it a number of significant issues for consideration. In circumstances where the approval of an enterprise agreement will introduce casual employment to a workforce where it is has not otherwise been a lawful component of that workforce, it is submitted that an employee is entitled to an explanation which enables them to consider the issues arising as a result of the introduction of casual employment to the workforce, and make that assessment themselves. Instead, the second category of employees were told that there was no relevant change to the types of employment available under the Brandrill Agreement and the Enterprise Agreement. In failing to explain this difference, the second category of employees were prevented from considering the issue for themselves.

• [16] The CFMMEU submits that this is not a case of the kind contemplated by the Full Bench in CFMMEU v Mechanical Maintenance Solutions Pty Ltd,[4] where there was a failure by the employer to explain that a small number of more beneficial terms had been excluded by the enterprise agreement, with the undertakings restoring the more beneficial terms.

• [17] The CFMMEU contends that in this case the omission was not confined to the exclusion of beneficial terms that might be rendered moot by their subsequent inclusion by undertakings. Instead, the omission extended to the entirety of the terms and conditions of employment on which the relevant cohort of employees were engaged, to the extent that there was no clarity as to the terms and conditions of employment and the second category of employees were not in a position to understand the effect of voting in favour of the Enterprise Agreement absent that clarity. It is submitted that the concomitant concerns are not met by continuing to apply the BC Award from a point in time, either entirely or partially, as the concern arises as a result of the relevant employees being deprived of the opportunity to make an informed choice about the Enterprise Agreement. The CFMMEU submits that an undertaking of any kind is unable to retrospectively revive that opportunity.

• [18] The CFMMEU submits that option 1 of the undertakings offered by Ausdrill lacks the clarity required to enable an employee to determine their terms and conditions of employment because the benefit of a term may be dependent on the views of the person making that assessment. The inclusion of a term permitting the casual employment of production and engineering employees is an example of such a term.

• [19] The CFMMEU submits that undertaking option2 proceeds on the fundamental understanding that the concern relates only to the four identified matters, being hours of work, changes to rosters, and public holidays and their payment. It is submitted that the limited matters identified do not in any way meet the full extent of the concern, including in relation to casual employment, fixed and maximum term employment, and remuneration increases available under the BC Award.

• [20] The CFMMEU submits that the error cannot be described as minor, nor is it a procedural error or a technical error. The CFMMEU contends that Ausdrill's error pertained to a substantive requirement imposed by the Act.

• [21] Finally, the CFMMEU contends that employees were likely to have been disadvantaged by Ausdrill's error because they cast their votes on the Enterprise Agreement on the basis of a misunderstanding as to the terms and conditions of their employment.

• [22] The Commission has a discretion to accept an undertaking to resolve a concern that an employer did not take all reasonable steps to ensure that the terms of an enterprise agreement or the effect of those terms were explained as required by s 180(5) of the Act.[5] The Commission must be satisfied that the undertaking meets the concern.[6] In that regard, it is important to recognise that each case will turn on its own facts and caution must be exercised in considering undertakings given in other cases with different facts and concerns.[7] Further, the Commission must be satisfied that the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement.[8]

• [23] I have set out in paragraph [4] above the relevant parts from my earlier decision in which I explain my concern in relation to ss 180(5) and 188 of the Act. Without repeating those paragraphs in full, the essence of my concern is that Ausdrill failed to provide information to the second category of employees to enable them to make an informed choice as to whether to vote in favour of or against the Enterprise Agreement. The missing information was the fact that the second category of employees were entitled to the benefits of the BC Award (because it applied to them) and would remain so entitled if the Enterprise Agreement was voted down. In the result, 52 of the 56 employees covered by the Enterprise Agreement cast a valid vote and 28 voted in favour of the Enterprise Agreement. The result was 'tight'.

• [24] If either of the undertakings offered by Ausdrill were accepted, the employees covered by the Enterprise Agreement would continue to enjoy the benefits of the BC Award where they are more beneficial to employees than terms of the Enterprise Agreement. However, providing such benefits to the employees would not overcome the fact that the second category of employees were not put in a position by their employer where they could make an informed choice about the Enterprise Agreement because they were not given accurate information about their current terms and conditions of employment. Had the second category of employees been told that they were entitled to the benefits of the BC Award, together with their contractual entitlement to the benefits of the Brandrill Agreement, some of them may well have decided to vote against the Enterprise Agreement so they could either (i) remain in a position where the BC Award applied to them and an enterprise agreement did not apply to their employment with Ausdrill or (ii) bargain for terms and conditions which were better than the BC Award. This is particularly the case in circumstances where the BC Award is a complex and generous award in a number of respects. By way of example:

• (a) the redundancy benefits under the BC Award are far superior to the Brandrill Agreement, the Enterprise Agreement and the NES;[9]

(b) the BC Award does not permit the employment of casual employees in production and engineering roles. The Enterprise Agreement does. Because the second category of employees were not told that they were entitled to the benefits of the BC Award, they were not given the opportunity to assess and consider, in an informed way, whether they should vote in favour of an industrial instrument which would permit the engagement of casual employees in production and engineering roles or against the instrument so that new production and engineering employees would not be able to be engaged as casual employees under the BC Award; and

(c) clause 15 of the BC Award provides that the employer and the majority of affected employees must agree to rostering arrangements that include shift lengths of greater than 10 hours, the starting time for shifts by agreement if greater than 10 ordinary hours, and the starting and finishing location of shifts by agreement. The Enterprise Agreement does not contain any such restraints. Although Ausdrill does not currently operate shifts of longer than 10 hours, it could do so in the future. I am aware from my experience dealing with disputes in the black coal mining industry that employees often have strong opinions in relation to the aspects of clause 15 of the BC Award which I have identified in the first sentence of this subparagraph.

• [25] Because the essence of my concern relates to a failure on the part of Ausdrill to provide accurate information as to the terms and conditions of employment that applied to the second category of employees such that they could make an informed choice about the Enterprise Agreement, an undertaking to provide the employees with the benefits of the BC Award does not meet my concern. Deputy President Masson reached a similar conclusion in Viridian Glass Pty Ltd.[10]

• [26] For the reasons given, I decline to exercise my discretion to accept either of the undertakings offered by Ausdrill.

• [27] I also reject Ausdrill's submission that its error in relation to s 180(5) was a minor procedural or technical error within the meaning of s 188(2) of the Act. Putting to one side whether the error was procedural or technical, I am not persuaded by Ausdrill's arguments summarised in paragraph [11] above that its error was "minor". The error meant that the second category of employees were not put in a position by their employer, as they should reasonably have been, to understand their current terms and conditions of employment and then assess and consider the offer which had been put to them in the form of the Enterprise Agreement. Such an outcome is inconsistent with the very purpose of the requirement in s 180(5), namely to "enable the relevant employees to cast an informed vote: to know what it is they are being asked to agree to and to enable them to understand how wages and working conditions might be affected by voting in favour of the agreement".[11] In my evaluative assessment,[12] Ausdrill's error was significant; it was not "minor".[13]

• [28] The undertakings offered by Ausdrill do not overcome my concern in relation to s 180(5) and, therefore, s 188(1)(a)(i) of the Act. I am not satisfied that any undertakings could resolve my concern. Further, Ausdrill's error was not a minor procedural or technical error within the meaning of s 188(2) of the Act. It follows that the Enterprise Agreement was not genuinely agreed to within the meaning of s 188 of the Act. Accordingly, the application for approval of the Enterprise Agreement is dismissed.

[1] Application by Ausdrill Pty Ltd [2022] FWC 2205

[3] Ausdrill's reply submissions dated 19 September 2022 at [63]

[4] [2020] FWCFB 1918 at [36]

[5] CFMMEU v Karijini Rail Pty Ltd [2020] FWCFB 958 at [99]- [107]; CFMMEU v Mechanical Maintenance Solutions Pty Ltd [2022] FCAFC 15 at [176]

[6] Section 190(2) of the Act; CFMMEU v Karijini Rail Pty Ltd [2020] FWCFB 958 at [99]- [107]

[7] For example, the cases referred to in Ausdrill's reply submissions dated 19 September 2022 at [8]-[17] must be considered in light of their own facts and concerns.

[8] Section 190(3) of the Act

[9] Application by Ausdrill Pty Ltd [2022] FWC 2205 at [62(b)]

[10] [2022] FWC 2384 at [67]

[11] CFMMEU v Ditchfield Mining Services Pty Ltd [2019] FWCFB 4022 at [69], applying One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77 at [115]

[12] Huntsman Chemical Company Australia Pty Ltd T/A RMAX Rigid Cellular Plastics & Ors [2019] FWCFB 318 at [55]

[13] Similar conclusions were reached in Ausdrill Pty Ltd [2021] FWC 6348 per Masson DP at [140]; Mechanical Maintenance Solutions Pty Ltd [2019] FWCA 8471 per McKinnon C at [38] (permission to appeal was refused against McKinnon C's decision at first instance: [2020] FWCFB 1918)

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