Fair Work Act 2009

s.604 - Appeal of decisions

Construction, Forestry, Maritime, Mining and Energy Union

Appeal against decision [2017] FWCA 6595 of Commissioner McKinnon at Melbourne on 11 December 2017 in matter number AG2017/3489.

[1] The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) has lodged an appeal, for which permission to appeal is required, against a decision issued by Commissioner McKinnon on 11 December 2017[1] (Decision). In the Decision, the Commissioner approved the Allstyle Concrete Pumping Pty Ltd Enterprise Agreement 2017 (Agreement). The CFMMEU contends that the Commissioner erred in approving the Agreement because it did not pass the better off overall test (BOOT) as required by s 186(2)(d) of the Fair Work Act 2009 (FW Act), and because the Commissioner approved the Agreement with undertakings that resulted in substantial changes to the Agreement contrary to s 190(3)(b) of the FW Act.

[2] The relevant features of the Agreement are as follows:

(1) The Agreement is expressed as applying to Allstyle Concrete Pumping Pty Ltd (Allstyle) and its employees in the classifications described in Appendix A, and to apply to "all works undertaken by the Employer on Commercial, Industrial and Civil Construction Projects on which the Employees are engaged" (cl 3).

(2) The nominal term is a period of 4 years (cl 4.3).

(3) The Agreement is to operate throughout Western Australia (cl 5.1).

(4) The Agreement is to be read in conjunction with, and apply the terms and conditions of the Building and Construction General On-site Award 2010 (Award), provided that the Agreement would prevail to the extent of any inconsistency (cls 5.2, 5.3).

(5) The modes of employment are daily hire and casual employment (cl 6).

(6) The span of ordinary hours is 8 hours to be worked between 5.00am to 6.00pm Monday to Friday, with the "usual starting time" to be 7.00am and the "usual finishing time" to be 3.30pm but alterable by agreement between the parties to suit operational and client site requirements from time to time (cl 7.1).

(7) Employees would generally be required to work up to 45 hours per week Monday to Saturday to meet the business requirements of the employer, and would be paid the base rate set out in Appendix A, Wages & Classification Structure in this Agreement (cl 7.2), but special consideration would be given to employees who would be personally disadvantaged through family responsibilities or other extenuating circumstances as agreed by the employer by a change to the usual start and finish times (cl 7.3).

(8) Employees are required to work reasonable overtime, and work in excess of the spread of hours in cl 7.2 would be paid at the rate of "time + 50%" of the base rate in Appendix A (cls 8.2, 8.3).

(9) Employees are entitled to an unpaid meal break of not less than 30 minutes, and a morning paid rest period of 10 minutes (cl 9).

(10) Daily hire employees would be paid the base wage rate in Appendix A for all hours worked up to 45 hours per week Monday to Saturday, and casual employees would be paid the base rate plus casual loading. The wage rates in Appendix A were to compensate employees for all site disabilities and included allowances set out in cls 20 and 21 of the Award as well as the annual leave loading in cl 38 of the award (cl 10.3).

(11) In respect of redundancy, clause 19 provides that "The parties agree to apply the provisions of Subdivision B - Redundancy Pay of the FW Act 2009 in circumstances where an Employee is to be made redundant for the purposes of eligibility for redundancy pay as prescribed by the Act, and Subdivision C - Limits on the scope of that Division".

(12) Appendix A provides for the following rates of pay (by reference to the Award classification designations:

[3] The Decision does not give detailed reasons for the approval of the Agreement, noting that the CFMMEU was not involved in the proceedings at first instance and there was no other contradictor. In its entirety the Decision was as follows:

"[1] An application has been made for approval of an enterprise agreement known as the Allstyle Concrete Pumping Pty Ltd Enterprise Agreement 2017 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Allstyle Concrete Pumping Pty Ltd. The Agreement is a single enterprise agreement.

[2] The Applicant has provided written undertakings. A copy of the undertakings is attached in Annexure A. I am satisfied that the undertakings will not cause financial detriment to any employee covered by the Agreement and that the undertakings will not result in substantial changes to the Agreement.

[3] Subject to the undertakings referred to above, I am satisfied that each of the requirements of ss.186, 187, 188 and 190 as are relevant to this application for approval have been met.

[4] Pursuant to s.202(4) of the Act, the model flexibility term prescribed by the Fair Work Regulations 2009 is taken to be a term of the Agreement.

[5] The Agreement is approved and, in accordance with s.54 of the Act, will operate from 18 December 2017. The nominal expiry date of the Agreement is 10 December 2021."

[4] The undertakings accepted by the Commissioner were to the following effect:

• "For reasons of clarity" casual employees would work an average of 38 ordinary hours per week, and might be required to work additional overtime to meet the operational requirements of the employer.

• Employees other than casual employees would be entitled to annual leave as per s 88 of the FW Act consistent with the employer's current practice.

• "For the purposes of certainty", employees could access paid personal/carer's leave as per s 97(a) of the FW Act.

• Employees would be entitled to have access to unpaid carer's leave as prescribed under ss 102 and 103 of the FW Act.

• It was confirmed that the industry-specific redundancy scheme in cl 17 of the Award applied to employees covered by the Award.

• Employees would be entitled to the Towers Allowance in cl 22.3(a) of the Award if and when they were directed to work on a site which met the criteria set out in that provision.

• Employees who worked beyond noon on Saturday would be paid double time for all hours worked at the rates in Appendix A as per cl 37 of the Award.

[5] In its appeal submissions the CFMMEU modelled a work scenario to demonstrate that the Agreement did not pass the BOOT. The first was for a daily hire employee classified as CW1(a) who worked a 50 hour week between 5.00am and 3.00pm Monday to Friday on a project with a multi-story building of between 16 and 30 storeys. The second was a daily hire employee classified as CW4 employed to work the same pattern of hours on the same project. The CFMMEU's modelling (which is attached to this decision) showed that the employee classified as CWI(a) would be $462.32 per week worse off under the Agreement than under the Award, and the employee classified as CW4 would be $574.68 per week worse off. The CFMMEU also compared the terms of the Agreement and those of the Award, and identified that there were 40 provisions in the Agreement that were less beneficial than under the Award.

[6] In relation to the undertakings, the CFMMEU submitted that the fifth undertaking replaced the redundancy provision in the Agreement, which was aligned to the NES general redundancy standard in s 119 of the FW Act, with the industry-specific scheme contained in cl 17 of the Award. It submitted that this altered the redundancy entitlements which had been voted upon and constituted a substantial change to the Agreement for the purpose of s 190(3)(b).

[7] On these bases the CFMMEU submitted that the Commissioner erred in approving the Agreement.

[8] Allstyle submitted in response that the CFMMEU's BOOT analysis was flawed because it was based on patterns of work which were not applicable to its business. In this respect it submitted that:

• it was a small employer which had four employees covered by the Agreement, two of whom were concrete pump operators and the other two line hands for each truck, with all of them sharing the truck driving duties;

• it provided concrete pumping services to new single residential home construction and lower tier commercial construction projects;

• the scenario of working 10 hours per day was applicable to specialist sub-contractors on major commercial construction sites but not to Allstyle's business;

• the wages comparison which accompanied the application for approval of the Agreement was based upon 40 working hours per week, Monday-Friday, was consistent with the hours provision of the Agreement and showed that employees were better off overall;

• the Western Australian building and construction sector had suffered a serious downturn in recent years, and in the lower tier residential sector work levels were reduced and margins were tight;

• the issue of working hours had been resolved at first instance when concerns raised by the Commissioner had been answered by the provision of an undertaking concerning overtime on Saturdays;

• the modelling done by the CFMMEU was in error, in that it wrongly applied the tools allowance to employees below the CW3 tradesperson classification; applied the meal allowance when the prerequisite for 1½ hours overtime would not be met under the Agreement; and the fares allowance was also applied in circumstances where employees attended Allstyle's yard to commence work and travelled to and from sites in the concrete pumping trucks in working time;

• the undertaking concerning redundancy was to clarify a concern that clause 17 of the Award was intended to apply in lieu of the NES provisions consistent with s 121(3) of the FW Act, and did not add any new obligation; and

• likewise the undertakings concerning annual leave, personal leave and unpaid carer's leave were merely intended to clarify the existing provisions.

[9] We consider that the Decision was attended by appealable error in respect of the conclusion that the Agreement passed the BOOT approval requirement in s 186(2)(d) of the FW Act. The wages structure of the Agreement involves loaded rates which "roll up" award allowances which would otherwise be payable and also partially incorporates overtime rates. The undertakings ameliorate this position to some degree by restoring the Award towers allowance and requiring the full overtime rate to be paid for work on Saturday afternoons, but the basic concept remains the same. The issues involved in applying the BOOT, the requirements of which are set out in s 193 of the FW Act, to an enterprise agreement containing a rate structure such as the Agreement does, were discussed extensively in the recent Full Bench Loaded Rates Decision.[2] That decision pointed to the necessity, in applying the BOOT, to start with an examination of the terms of the agreement in order to ascertain the nature and characteristics of the employment which the agreement provides for or permits. In the case of a loaded rates agreement, this will require a focus on the practices and arrangements concerning the working of ordinary and overtime hours by existing and prospective employees that flow from the terms of the agreement. However the Commission may take into account objective evidence that a particular pattern of working hours or roster pattern permitted by an enterprise agreement is not practicable, or cannot or is unlikely to be worked.[3]

[10] In this appeal, the CFMMEU as earlier stated modelled a pattern of working hours involving a 5.00am start and 50 hours worked Monday to Friday. There is no doubt that this pattern of work is one permitted by the Agreement. Clause 7.1 provides for a span of hours of 5.00am to 6.00pm Monday to Friday, although the reference to there being a "usual" start time of 7.00am alterable by agreement leaves it somewhat unclear whether a 5.00am start can be directed by the employer or may only occur with the agreement of the employee. In either case, we do not consider that we should simply ignore the fact that a 5.00am start is provided for in the Agreement, and the proper inference is that it was intended to have operative effect in some circumstances.

[11] In respect of overtime, clause 8.2 requires employees to work reasonable overtime, and clauses 8.3-8.4 provide for a rate of overtime. The Agreement therefore (and not surprisingly) specifically contemplates that overtime will be worked. We also note that clause 7.2 of the Agreement provides for a standard working week of 45 hours per week (albeit with five hours worked on a Saturday), so a working week of 50 hours can hardly be said to be outside the bounds of what was intended by the Agreement, and is consistent with building and construction industry practices.

[12] There are some defects in the CFMMEU's modelling. We accept that the fares allowance would not be payable in circumstances where Allstyle's employees start and finish work at its yard and travel to and from worksites in Allstyle's vehicles in paid time. We also accept that the tools allowance would not be payable to employees performing concrete pumping work. However the exclusion of these allowances does not displace the conclusion that employees would not be better off overall under the Agreement than under the Award in respect of this particular pattern of working hours.

[13] We do not accept Allstyle's submissions that the nature of its work, and the conditions of the building and construction sector in Western Australia, render the CFMMEU's modelling as simply inapplicable to its business. Whilst it may be accepted that Allstyle's business, which is currently small, is focussed on the residential sector, that by itself does not preclude the conclusion that it may from time to time require its employees to work a 50 hour week to meet the requirements of particular projects. Even if the multi-storey allowance is excluded from the CFMMEU's calculation of wages that would be owing under the Award, that is not sufficient to render employees better off overall under the Agreement. Further, the coverage of the Agreement as earlier noted encompasses work on commercial, industrial and civil construction projects. This feature of the Agreement cannot simply be ignored and demonstrates that it was intended to apply to work on larger-scale projects. Finally, while it may be accepted that the Western Australian building and construction industry has suffered a downturn after the end of the mining construction boom, the BOOT cannot be applied on the basis that this will necessarily continue during the whole period of the Agreement's operation (which has a four-year nominal term) or limit the work opportunities of every small business in the sector.

[14] We reject the CFMMEU's other submission that the Agreement did not pass the BOOT because the Agreement did not contain various beneficial provisions of the Award. That submission is answered by clauses 5.2 and 5.3 of the Agreement, which provide in effect that the Agreement incorporates the terms and conditions of the Award provided that the Agreement prevails to the extent of any inconsistency.

[15] We also reject the CFMMEU's submission that the Commissioner erred in accepting the undertaking concerning redundancy entitlements under the Agreement. The submission was premised upon the contention that clause 19 of the Agreement incorporates the definition of redundancy and the severance pay scale contained in s 119 of the FW Act. We do not accept that premise. Although clause 19 is very poorly drafted, it appears that it attempts to articulate the proposition that s 119 does not apply on the basis of the exemption from that provision in s 123(4)(b) in respect of employees to whom an industry-specific redundancy scheme in a modern award applies, and therefore that the industry-specific scheme in clause 17 of the Award applies. The undertaking accepted by the Commissioner clarifies that clause 17 of the Award is to apply, and therefore does not amount to a substantial change to the Agreement. It was open to the Commissioner to accept the undertaking in those circumstances.

[16] Permission to appeal should, we consider, be granted in the public interest. The approval of the Agreement in circumstances where it did not pass the BOOT amounted to a significant jurisdictional error which has the potential to disadvantage employees to whom the Agreement applies. The appeal should be upheld on the basis of the error identified. However, it does not follow that the application for approval of the Agreement should be dismissed, since it appears to us that it would be open for Allstyle to propose undertakings to rectify the BOOT deficiency which has been identified. Such undertakings might, subject to the overriding limitations in s 190(3), involve a number of things including an enhanced overtime rate, the introduction of an early morning shift allowance, a prohibition upon early starts, or an increase to the base rate. We consider that Allstyle should be given an opportunity to advance appropriate undertakings in a re-determination of its application for approval of the Agreement.

[17] We also note that there appears to be a defect in the way in which casual loadings are expressed in Appendix A to the Agreement for certain classifications. This may also be rectified in undertakings at the re-hearing of the matter.

(3) The Decision ( [2017] FWCA 6595) is quashed.

(4) The application for approval of the Agreement (AG2017/3489) is remitted to Commissioner McKinnon for re-determination in accordance with our reasons for decision.

Printed by authority of the Commonwealth Government Printer

K. Singh on behalf of the Construction, Forestry, Maritime, Mining and Energy Union.

[1] [2017] FWCA 6595

[2] [2018] FWCFB 3610

Printed by authority of the Commonwealth Government Printer