Fair Work Act 2009

s.604 - Appeal of decisions

Construction, Forestry, Mining and Energy Union

Appeal against decision [2017] FWCA 2234 of Commissioner Wilson at Melbourne on 26 April 2017 in matter number AG2017/453.

[1] The Construction, Forestry, Mining and Energy Union (CFMEU) has pursuant to s.604 of the Fair Work Act 2009 (FW Act) lodged an appeal, for which permission to appeal is required, against a decision Commissioner Wilson issued on 26 April 2017[1] (Decision) in which he approved the Levent Painting Enterprise Agreement 2017 (Agreement). The Decision was as follows (not including the annexure):

"[1] An application has been made for approval of an enterprise agreement known as the Levent Painting 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 Levent Painting 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] The Agreement is approved and, in accordance with s.54 of the Act, will operate from 3 May 2017 The nominal expiry date of the Agreement is 25 April 2021."

[2] The CFMEU's notice of appeal contended that the Decision, in which the Agreement was approved, was in error because the Agreement was not approved in accordance with the FW Act for the following reasons:

(1) the Agreement was not genuinely agreed by the employees covered by it, because the employer, Levent Painting Pty Ltd (Levent), did not take all reasonable steps to explain the terms of the Agreement and the effect of those terms to the employees;

(2) the Agreement did not pass the better of overall test (BOOT);

(3) the undertaking provided by Levent, upon which the Commissioner relied in approving the Agreement, resulted in substantial changes to the Agreement; and

(4) there was false information in Levent's statutory declaration in support of the application for approval of the Agreement.

[3] Levent consented to orders being made to grant permission to appeal, uphold the appeal, quash the Decision and dismiss the application for approval of the Agreement. However we do not consider that an appeal against the approval of an enterprise agreement can simply be upheld by consent of the employer without the demonstration of error. Section 186(1) of the FW Act makes it clear that, once an application has been made for approval of an enterprise agreement, the Commission must approve the agreement if the requirements of ss.186 and 187 are met. We do not consider that this requirement can simply be evaded by having an appeal against the required approval upheld by consent. The position may be somewhat different where, as here, an agreement does not meet all the requirements of ss.186 and 187, and requires the provision of an undertaking to address a concern in that respect. Arguably, the approval of an agreement on the basis of an undertaking under s.190(2) is discretionary, not mandatory. However it cannot be forgotten that an enterprise agreement is, under s.182, "made" when a majority of employees who will be covered by it cast a valid vote to approve it. In an appeal from a decision to approve an agreement, the interests of the employees are at stake as well as the employer's, and the consent of the employer to the appeal being upheld is not to be taken as necessarily representative of employees' interests. For these reasons we consider that, notwithstanding the consent of Levent to the appeal being upheld, it remains necessary for the CFMEU to demonstrate appealable error in order for us to make the orders in the appeal that it seeks.

[4] In its appeal submissions, Levent (which was represented at first instance and in the appeal by the Chamber of Commerce and Industry of Western Australia) accepted the CFMEU's contention that the Agreement did not pass the BOOT and that this was an appropriate basis to uphold the appeal. That submission was advanced notwithstanding that Levent made detailed written submissions before the Commissioner seeking to persuade him that the Agreement did pass the BOOT and that the CFMEU was incorrect in contending to the contrary. We do not accept the proffered explanation that this reversal of position was due simply to further reflection on the question in light of the CFMEU's appeal submissions. In discharging its enterprise agreement approval functions, the Commission relies heavily upon the information and submissions provided by the employer in relation to the statutory approval requirements. It is not acceptable that in this case the employer and its representative have put a position concerning the BOOT to the Commissioner which they now so readily concede was wrong.

[5] In support of its submission that the Agreement did not pass the BOOT, the CFMEU provided analyses comparing payment under the reference instrument for the BOOT, the Building and Construction General On-site Award 2010 (Award) to that under the Agreement in three different scenarios. All the scenarios involved the employee working 50 hours per week Monday-Friday, which we accept is a common working pattern in the construction industry, at least outside the house-building sector. The first scenario involved a comparison of a CW3 graded daily hire worker under the Award and under the Agreement. We do not accept that this comparison is valid because the Agreement does not allow for daily hire.

[6] The second comparison was between a CW3 graded weekly employee under the Award and under the Agreement. The analysis is attached as annexure A to this decision. It shows a payment shortfall under the Agreement compared to the Award of $54.10. The shortfall in the analysis is produced by the lack of two payments provided for in the Award but said by the CFMEU not to be provided for in the Agreement, namely crib time payments and the benefits of the construction industry-specific redundancy scheme. Under the analysis, the alleged lack of these benefits monetarily outweighs the higher base pay rate provided for in the Agreement.

[7] We do not accept that the $38.50 per week shortfall said to be produced by the redundancy element is wholly legitimate. That is because, although clauses 24.1 and 25.2 reproduce the less beneficial redundancy payment scheme provided for in the NES, clause 24.4 provides: "Where the Industry Specific Redundancy Scheme at clause 17 of the Award provides a greater entitlement than the redundancy provision under this clause, the Company will pay to the Employee the amount listed in the Award". However we do note that clause 24.8(a) of the Agreement excludes from redundancy pay any employee "employed for a specified period or for a specified task". Such employees are not excluded from redundancy pay under the Award, because clause 17.2 of the Award defines redundancy to mean "a situation where an employee ceases to be employed by an employer to whom this award applies, other than for reasons of misconduct or refusal of duty". For such employees, we accept that the postulated detriment could occur. We accept as reasonable the quantification of the detriment, which is based on the methodology for the calculation of redundancy for employees with under 12 months' service provided for in clause 17.3(b) of the Award.

[8] The crib break detriment in the analysis is caused by the fact that the Agreement does not contain the benefit provided by clause 35.3(b) of the Award, under which an employee required to work two or more hours of overtime is entitled to a crib break, without deduction of pay, of 20 minutes after the normal finishing time. Where the break is not taken, the clause provides that the employee is regarded as having worked 20 minutes more than the time work and is paid accordingly (which effectively makes the 20 minutes payable at double time). We accept that the crib break is commonly paid out this way, at least outside the house building sector. Accordingly we accept that the non-provision of crib time in the Agreement, for the CW3 classification, leads to a shortfall of some $72.60 per week.

[9] The third comparison is attached as annexure B to this decision. It compares a tradesperson classified as CW4 under the Award to the "Tradesperson - Other" classification in the Agreement. Because of the same crib break and redundancy elements, it produces a pay shortfall of $93.81.

[10] There are no compensating benefits in the Agreement we can identify which would make up these shortfalls. Indeed, Levent conceded that the absence or inferiority of a number of non-monetary benefits in the Agreement which were provided for in the Award caused the Agreement to fail the BOOT. The benefits in the Award for which there was not an at least equally beneficial benefit in the Award included paid training for employee representatives, casual conversion provisions, the job search entitlement, payment for loss of tools and clothing, paid stoppages of work during inclement weather, and the entitlement to a 12 hour break after 20 hours' continuous work.

[11] Accordingly we accept that the Agreement does not pass the BOOT, and the Commissioner erred in concluding otherwise. We consider that on this basis alone permission to appeal should be granted, the appeal upheld, and the Decision quashed. It is not necessary in these circumstances for us to consider the CFMEU's other grounds of appeal.

[12] Having reached this conclusion, the normal course would be for Levent's application for the approval of the Agreement to be re-determined either by us or by referral to a single member of the Commission. However Levent has advised that it now wishes to discontinue its application. Accordingly we will allow a period of 14 days for it to file a notice of discontinuance.

[13] We order as follows:

(3) The Decision ( [2017] FWCA 2234) is quashed.

(4) Levent is allowed 14 days to file a notice of discontinuance of its application for approval of the Agreement (AG2017/453).

S Farrell from the Chamber of Commerce and Industry of Western Australia on behalf of Levent Painting Pty Ltd t/a Levent Altintas.

[1] [2017] FWCA 2234

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