Fair Work Act 2009

s.185 - Enterprise agreement

Application for approval of the C&H Gencon Enterprise Agreement 2020.

[1] An application has been made for approval of an enterprise agreement known as the C&H Gencon Enterprise Agreement 2020 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by C&H Acquisition Pty Ltd with that name being used interchangeably by the Applicant with "Gencon". The Agreement is a single enterprise agreement.

[2] Shortly after the application commenced, the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) requested they be provided with a copy of the Form F16 initiating application, the Form F17 Employer's Statutory Declaration and the Notice of Employee Representative Rights (NERR). The Commission provided redacted copies of the requested documents to the union on the same day. The CFMMEU was not a bargaining representative for the Agreement. The CFMMEU also requested access to the redacted voting information contained in the Form F17 Employer's Statutory Declaration. After a review of the material provided by the CFMMEU and the Applicant on the subject I was satisfied the CFMMEU had demonstrated a material interest in the matter and the unredacted voting information was provided to the CFMMEU. In providing the redacted voting information I also notified parties that the views of the CFMMEU would be sought prior to the application for approval being determined.

[3] Following this preliminary process, and in the usual course, my Chambers sent correspondence to the parties named in the initiating application setting out the concerns I held in relation to the Agreement in respect of pre-approval matters, the National Employment Standards and the Better Off Overall Test (BOOT).

[4] The employer provided a response to the matters set out in the correspondence of 22 November 2019 on 27 November 2019. The individual bargaining representative confirmed his support of the proposed Undertakings. On reviewing the material provided by the employer, I was not satisfied that all of the matters raised by me had been adequately addressed. I therefore caused further correspondence to be issued to the named parties laying out those matters that remained unresolved. Amended Undertakings were proffered by the Applicant in response to the indicated outstanding concerns. The individual bargaining representative again confirmed his support of the proposed Undertakings.

[5] After these initial consideration stages, communication was sent in order to ascertain whether the CFMMEU maintained its objections, which it did. Directions were issued for the union's concerns to be fully articulated and responded to by the Applicant.

[6] Once filed, the CFMMEU submissions canvassed matters of non-compliance with s.180(5) of the Act and whether the Better Off Overall Test (BOOT) had been met in relation to employees covered by the Agreement.

[7] I have received written submissions from both the Applicant and the CFMMEU, each of whom agreed the application and the union's objections should be decided by me on the papers, with me being satisfied that it is appropriate to do so.

[8] This is a decision relating to provisions within the Act's Part 2 - 4, Enterprise Agreements.

[9] Part 2 - 4, Division 3 (Bargaining and representation during bargaining) sets out certain procedural steps for the commencement of bargaining and bargaining itself. I am satisfied that the Applicant has complied with its obligations to notify employees it intended to initiate bargaining and to provide employees with a compliant NERR, and that it acknowledged those persons appointed as a bargaining representative (ss.173 - 176).

[10] Part 2 - 4, Division 4 (Approval of enterprise agreements) contains requirements to be satisfied for the Commission to approve an Enterprise Agreement.

[11] In relation to the matters set out within Subdivision B (Approval of enterprise agreements by the FWC), whether s.186(3) has been satisfied (on the subject of "fairly chosen") requires determination. No matters within s.187 arise for determination.

[12] The Commission is also required to consider whether any concerns it holds in relation to s.186 may be remedied through an Undertaking given under s.190.

[13] The provisions of Subdivision D (Unlawful terms) require consideration.

[14] The provisions of Subdivision E (Approval requirements relating to particular kinds of employees) does not require consideration.

[15] No matters within Subdivision F (Other matters) arise for determination (dealing with the model flexibility and consultation terms).

[16] The CFMMEU argued that several matters of the BOOT would cause the Commission not to be satisfied the test had been passed. In particular, it submitted that several clauses of the Agreement are less beneficial to employees than the comparable Award provisions (with Clauses 16 and 18 being declared by the Applicant as less beneficial terms in the Form F17 and the CFMMEU having not provided submissions on the clauses):

• Clause 16 - Additional claims

• Clause 18 - Stand down

• Clause 46 - Consultation

• Clause 45 - Dispute Resolution; and

• Appendix D - Allowances

• Clause 29 - Safety and Fitness

[17] In its submissions the CFMMEU raised the decision of Deputy President Lake in Trustee for LCR Mining Group Trust T/A LCR Mining Group Trust[1] submitting that "the Decision is relevant to the application currently before the Commissioner as the proposed agreement in the Decision contained a similar application clause which sought to exclude employees in receipt of earnings in excess of the high-income threshold. Deputy President Lake dismissed the application for approval on the basis that in the absence of evidence with regards to how employees who receive in excess of the high-income threshold were geographically, organisationally or operationally dismissed, he could not be satisfied that the group was fairly chosen."[2]

[18] The "fairly chosen" argument arises because the Agreement excludes certain employees from coverage. Clause 2 of the Agreement provides:

1. C&H Acquisition Pty Ltd (ABN 48 600 205 909) ("the Company"); and

2. All Employees who are employed by the Company pursuant to clause 4 of this Agreement."

"a) This Agreement applies to and is binding on the Company in relation to all of its Employees, engaged across Australia, who are covered by the Building and Construction General On-Site Award 2010.

b) For the avoidance of doubt, this Agreement will not apply to:

1. Management;
2. Professional Staff;
3. Administrative Staff;
4. Employees who exceed the high-income threshold as defined by the Fair Work Act 2009 (Cth) ('Act'); or
5. Office based Staff" (emphasis added)

[20] I am satisfied that with the exception of the "fairly chosen" issue, all of the matters raised by me concerning pre-approval requirements, the National Employment Standards and the BOOT have been satisfactorily addressed through Undertakings or submissions on the subjects.

[21] The concerns raised by the Commission covered numerous matters including concerns about the clauses dealing with scope and coverage, and the capacity to pay market arrangements to employees if need be; the rates of payment for trainees and adult apprentices; the mechanisms regarding provision of work assignments to employees; arrangements for the reconciliation of above agreement wage arrangements; restrictions on the use of social media channels during working hours, or to make social media posts which may be detrimental to the company, its employees and others; the giving of directions; and several cross-reference errors.

[22] These concerns were responded to with Undertakings which I accept, or as a result of what the Applicant has said in their reply, I no longer identify the matter as a concern.

[23] The Applicant in the Form F17 Employer's Statutory Declaration at item 3.5 identifies Clauses 16 and 18 as being less beneficial when compared to the Award. The CFMMEU submit that the Applicant has omitted to include several other clauses which they deem to be less beneficial that the Award. The Applicant on the whole disagrees with this proposition.

[24] Clause 46 the Agreements Consultation Clause is viewed by the CFMMEU as having a narrower construction of the "significant effects" definition than the Award provision, as it does not require the Applicant to provide affected employees all relevant information regarding the change in writing, it does not require the Applicant to genuinely consider any matters raised by employees and/or their representatives throughout a consultation process; and for roster changes there is no requirement contained in the Agreement for the Applicant to consult with a single employee.[3] The Applicant disagrees with this view of the Clause asserting "[t]he argument put forward by the Union is overly dogmatic, this highly literal interpretation of the term should not be adopted by the Fair Work Commission."[4]

[25] The CFMMEU submits Clause 45 the Dispute Resolution Clause limits, when compared to the Award, the ability of employees to escalate and resolve disputes beyond the workplace level.[5] The Applicant also disagrees with the CFMMEU's construction of this Clause. They submit that "the use of the phrase "may agree" suggests that both the Employer and Employee must consent to the method adopted by the Commission. The Enterprise Agreement reflects an agreement between the employer and employee. This agreement is permitted under the Award. An Employer and Employee may agree for mediation to occur before the Commission. Employees do not suffer any detriment as a result of this provision being included."[6]

[26] The allowances in Appendix D the CFMMEU submit limits the ability of employees to claim compensation for loss of tools & clothing.[7] The Applicant submits that this is a specific circumstance which would be unlikely to impact significantly on employees.[8]

[27] The CFMMEU also raise Clause 19's inclusion into the Agreement as a detriment, as it confers a power on the Applicant to compel an employee to undertake an Independent Medical Examination before and during an assignment.[9] The Applicant relies upon the argument that Common Law permits an employer to direct an employee to undertake an Independent Medical Examination and as such the Agreement is not detrimental to employees.[10]

[28] Overall the Applicant in reply disagrees with the assertions of the CFMMEU that employees are not better off overall under the Agreement compared to the Award. On the subject the Applicant says:

"the benefits set out in the Enterprise Agreement exceed what is set out under the Award. Additionally, the Union has failed to provide any modelling that indicates that Employees are worse off under the Agreement than they would otherwise be under the Award."[11]

[29] I am not persuaded that any of the foregoing matters would either leave me not satisfied the BOOT has been passed, or would require seeking further undertakings. The CFMMEU has provided submissions on the subject matter, but not evidence, and to the extent the Union's concerns have validity or may have operation beyond the hypothetical, I am satisfied that the benefits provided by the Agreement are not eroded to such an extent as to leave employees other than better off overall.

[30] Section 186 of the Act sets out the requirements to be satisfied after which the Commission must approve an Enterprise Agreement. One of the requirements is that the Commission must be satisfied that the group of employees covered by the Agreement was "fairly chosen".

[31] Section 186 provides:

"186 When the FWC must approve an enterprise agreement - general requirements

(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."

[32] The issue for determination in this matter, as it pertains to the matter of "fairly chosen" is whether Clause 4 (Application) allows a finding that the group of employees covered by the agreement was "fairly chosen", given that it excludes the categories of employees set out above, and especially those who "exceed the high-income threshold".

[33] The CFMMEU have opposed approval of the Agreement on the issue of "fairly chosen". The Union notes that regard should be had to the statutory purpose of the requirement, highlighted by the Explanatory Memorandum to the Act, which draws attention to the way in which the employer has chosen to organise its enterprise as well as whether it is reasonable to exclude certain employees.[12] It also argued with respect to the provisions of s.186(3A) that "the receipt of a certain level of remuneration is not sufficient to demonstrate that employees are objectively, operationally distinct" [13] and that:

"10. The extent of the Applicant's evidence with regards to high-income earners being operationally distinct is that they not only receive remuneration in excess of the high-income threshold, but their level of qualifications and experience renders them operationally distinct from the rest of the workforce. In making these submissions, the Applicants fails to provide adequate detail or clarity regarding the level or type of qualifications or experience that would result in an employee falling outside agreement coverage.

11. In the absence of such evidence and consistent with the Deputy President's reasoning in the LCR Decision, "the distinction between what might be called high-income employees is... entirely arbitrary and subjective. It is dependent on the employer designating people as such"

12. Further, the Applicant has failed to adequately address why it is reasonable for high-income earners to be excluded from the agreement, having regard to factors such as the nature of the work they perform, the operational relationship between them and the employees who will be covered by the agreement, and the benefits of this group of employees being excluded for the enterprise and the employees themselves."[14]

[34] For its part, the Applicant argues in relation to the high-income threshold exclusion that no employees who met this criterion were employed either when the vote occurred, or at any point subsequently.[15] The company's General Manager, Mr Trent Henry, provided an unsworn witness statement providing this evidence:

"5. Since the Gencon EA was filed for approval, we have not hired additional construction employees.

6. The highest paid employees currently at C&H Acquisition who are not management or professional staff are paid at or around $50 per hour as a base rate, as heavy crane operators.

7. Under C&H Acquisition's current EA, pending approval of the Gencon Agreement, the highest level an employee can attain would be the equivalent of a CW9 under the Building and Construction General On-Site Award 2010.

8. Based on the work we undertake, C&H Acquisition would require formal qualifications and significant experience to justify hiring a construction employee at a rate that would exceed the high-income threshold.

9. This is because such an employee would be required to exercise Project Management and Leadership skills at a project or site based level."[16]

[35] Relevant to the provisions of ss.186(3) - (3A) C&H Acquisition Pty Ltd further submitted that:

"10. Employees who would exceed the high-income threshold are objectively distinct from other employees, due to their level of remuneration, their required level of qualifications and the minimum level of experience necessary to work in a high-income role.

11. For an employee to be considered for a position that would exceed the high-income threshold, they are required to hold formal qualifications in project-specific fields that far exceed the qualifications described under the Building and Construction General On-Site Award 2010 ('Award') or Gencon Agreement. Such is an objective distinction. The employee either holds these qualifications or they do not."[17]

[36] In determining whether a group of employees is "fairly chosen" Aerocare Flight Support Pty Ltd (t/as) (Aerocare Flight Support) v Transport Workers' Union[18] sets out the relevant considerations:

"[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;

● 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;

● 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;

● 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;

● 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;

● 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;

● 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;

● 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;

● 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; 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."[19] (references removed)

[37] The CFMMEU argue that it follows from the lack of coverage of high-income employees that the Commission cannot be satisfied of the requirements in ss.186(3) and (3A) of the Act which go to the matter of whether or not the Commission is satisfied that the group of employees covered by the Agreement was "fairly chosen" taking into account whether the group is geographically, operationally or organisationally distinct. They also submit that the employer's submission that there were no employees excluded from coverage because they receive in excess of the high-income threshold is an irrelevant consideration for the Commission.

[38] The Applicant submits that there were no employees excluded from coverage of the Agreement by receiving remuneration that exceeds the high-income threshold either at the time of the vote, or at any subsequent time. While the witness statement from Mr Trent Henry confirms there were no high-income threshold employees at the relevant time, the issue to be determined by me is not whether that was the case at the time of the vote or notification, but those who are or would be covered by the Agreement.

[39] Since the primary coverage of the Agreement is for those employees covered by the Building and Construction General On-Site Award 2010, I cannot be satisfied of the s.186(3A) criteria (geographic, operational or organisational distinctiveness) since it is foreseeable that people otherwise covered by the Award move beyond the high-income threshold on salary alone, whereas their duties remain within the scope of the Award. It needs to be borne in mind that the term high-income threshold is one defined by the Act (in s.12), with the definition itself in s.333, and the application of the threshold determined by s.332. Relevantly, overtime and allowances (other than reimbursements) are not excluded.

[40] I am of the view that the same problem does not arise for the exclusion of managerial, professional and administrative staff who would likely not fall under the Building and Construction General On-Site Award 2010.

[41] On an objective analysis of the evidence before the Commission it cannot be found that the work of the Applicant's high-income employees is either geographically, operationally or organisationally distinct to its casual employees.

[42] As a result of the forgoing consideration, the Commission is not satisfied that the group of employees covered by the Agreement was "fairly chosen".

[43] Because the question of whether a group of employees was "fairly chosen" is a matter arising under s.186(3) of the Act as well as the provisions of s.190, consideration must be given to whether an Undertaking could be sought and accepted by the Commission.

[44] Section 190(1) of the Act applies if the Commission has a concern that an agreement does not meet the requirements as set out in ss.186 and 187, with the requirements that the Commission be satisfied that the group of employees covered by the agreement was "fairly chosen" being dealt with by s.186(3) and (3A). Pursuant to s.190(2) the Commission may approve an agreement under s.186 if it is satisfied that an Undertaking under s.190(3) meets the concern. Section 190(3) provides that the Commission may only accept a written Undertaking from one or more employers covered by the agreement if satisfied that the effect of accepting the Undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the Agreement.

[45] I note that the CFMMEU does not object that the provision in Clause 4(b)(iv) is an unlawful term of the type contemplated by s.194(ba) of the Act, and I do not find that it is.

[46] Given that I hold a "fairly chosen" concern, which would otherwise cause me not to be satisfied of the matters in s.186, and that such concern may be removed through a suitable Undertaking, the Applicant is invited to provide an Undertaking which removes from effect the provisions of Clause 4(b)(iv) and all related or cross-referenced provisions.

[47] The Applicant has 7 days from the date of this decision to provide a suitable additional Undertaking as framed above, after which the CFMMEU and any other bargaining representative will have an opportunity to provide their views.

[48] The other Undertakings provided by the Applicant are in a form acceptable to the Commission and should be consolidated with the further Undertaking referred to above.

[49] Should the Applicant decline or fail to provide the further requested Undertaking, its application for approval of the Agreement will be dismissed.

[1] [2020] FWC 451.

[2] CFMMEU Submissions, 30 January 2020.

[3] CFMMEU Submissions, 14 January 2020.

[4] Applicant's Submissions, 20 January 2020.

[5] CFMMEU Submissions, 14 January 2020.

[6] Applicant's Submissions, 20 January 2020.

[7] CFMMEU Submissions, 14 January 2020.

[8] Applicant's Submissions, 20 January 2020.

[9] CFMMEU Submissions, 14 January 2020.

[10] Applicant's Submissions, 20 January 2020.

[12] Explanatory Memorandum to the Fair Work Bill 2008, [777].

[13] CFMMEU Submissions in Reply, 22 February 2020, [8].

[14] Ibid, with reference to [2020] FWC 451, [20].

[15] Applicant's Submissions, 10 February 2020, [9].

[16] Witness Statement of Trent Henry, 7 February 2020.

[17] Applicant's Submissions, 10 February 2020.

[18] [2017] FWCFB 5826; (2017) 270 IR 385.

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