A selection of employees and the subversion of the legislative scheme - authenticity?
36 As to the second of the matters identified, this Court can carefully scrutinise the category of employees who have expressed their agreement. It may do so to ensure that an agreement which has been approved by a limited number of employees is an agreement which has "authenticity and … moral authority". Within a narrow compass, this Court may do so to ensure the "fairness" of the approval process.
37 Albeit with reference to the Workplace Relations Act, it has been concluded that the legislative concern there previously expressed in s 170LT(6) that a "valid majority of workers employed at the time whose employment would be subject to the agreement must have genuinely made the agreement" was directed to "a concern with the authenticity and … the moral authority of the agreement" and "a concern for fairness and efficacy in agreement-making": Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission [1999] FCA 847 at [126] to [127], (1999) 93 FCR 317 at 357 per Wilcox and Madgwick JJ ("CFMEU v AIRC"). On the facts there presented, as at 21 December 1998 a mining company employed 22 employees, none of whom was involved in the operation of the mine. On that day they were given "notices of intention to make an agreement". On 6 January 1999 the agreement was approved by the employees, and on the following day an application was made to the Commission. In concluding that the agreement was not an agreement of the type contemplated by Pt VIB of the Act and that there was, accordingly, no valid application for certification before the Commission, Wilcox and Madgwick JJ formulated the question to be resolved of present relevance as follows (at 356):
[121] The question is, therefore, whether an agreement regulating terms and conditions of employment in a proposed single business, made with employees who may, in the future, be employed in that business but are not yet so employed, qualifies as an agreement that may be certified under the Act. In our view, the preferable conclusion, as a matter of both textual and purposive interpretation of the Act, is that it does not.
In answering that question, their Honours reasoned (at 357):
[126] Section 170LT(6) requires that a "valid majority of persons employed at the time whose employment would be subject to the agreement must have genuinely made the agreement". This plainly betokens a concern with the authenticity and, as it were, the moral authority of the agreement. It is perfectly understandable - indeed, one might reasonably think, plainly necessary - this be so. The principal object of the Act as a whole, as set out in s 3, is "to provide a framework for cooperative workplace relations" by, among other things:
"(d) providing the means:
(i) for wages and conditions of employment to be determined as far as possible by the agreement of employers and employees at the workplace or enterprise level upon a foundation of minimum standards; and
(ii) to ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment; and
(e) providing a framework of rights and responsibilities for employers and employees, and their organisations, which supports fair and effective agreement-making and ensures that they abide by awards and agreements applying to them." (Emphasis added.)
There can hardly be fair agreement-making between employer and employees about wages and employment conditions in a workplace (a mine is a good example) before both sets of parties have actual experience of the work and its place of performance. Without that, cooperative workplace relations are unlikely to be achieved. An agreement prematurely made is unlikely to be effective; measuring effectiveness in this context by such matters as durability, aptness and comprehensiveness. Established "safety net" standards are less likely to be respected and maintained, because the range of conditions in relation to which such standards exist may not have been fully comprehended.
[127] In short, the Act clearly indicates a concern for fairness and efficacy in agreement-making, as well as flexibility. The subject matter of the Act makes it understandable Parliament had such concerns. A consideration of those concerns supports the interpretation we consider preferable on more narrow grounds.
[128] It follows that the agreement submitted to the Commission in January 1999, and certified by Senior Deputy President Harrison on 1 February 1999, was not an agreement of the type contemplated by Pt VIB of the Act. There was no valid application for certification before the Commission. The certification order made by Senior Deputy President Harrison was ineffective. No certified agreement came into existence as a result of the proceedings before her.
38 Again with reference to the Workplace Relations Act, it has further been concluded that an employer may not select the employees called upon to vote in respect to an agreement by reference to some "arbitrary criterion": Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd [2011] FCAFC 91 at [39], (2011) 194 FCR 269 at 281 per Gray, Lander and Katzmann JJ ("Pilbara Iron Company"). To permit such a course would be to "subvert" the legislative scheme: [2011] FCAFC 91 at [38], (2011) 194 FCR at 280 per Gray, Lander and Katzmann JJ. An agreement was there sought to be entered into with 10 new employees (and which would apply to them and to future employees) but not with existing employees. The question for resolution was whether an agreement with a group of employees selected solely by reference to when their employment commenced satisfied the requirements then imposed by s 327 of the Workplace Relations Act. Section 327 provided as follows:
An employer may make an agreement (an employee collective agreement) in writing with persons employed at the time in a single business (or part of a single business) of the employer whose employment will, or would but for the operation of an [individual transitional employment agreement] that has passed its nominal expiry date, be subject to the agreement.
Justices Gray, Lander and Katzmann concluded that the phrase "part of a single business" required that the "part" must be "a recognisable section, segment or constituent of the business", identifiable by reference to factors other than the employees themselves or the date that they acquired that characteristic: [2011] FCAFC 91 at [45], (2011) 194 FCR at 282 to 283. In declaring that the agreement did not come into effect as a workplace agreement, their Honours observed (at 280 to 282):
[38] It is possible to discern in Div 2 of Pt 8 of the Workplace Relations Act something of an underlying purpose, when the legislative history is taken into account. [Australian Workplace Agreements] were replaced by [individual transitional employment agreements], which could have only a limited life. As the primary judge said at [6] of his reasons for judgment, "An emphasis on collective negotiation of terms and conditions of employment was re-introduced into the [Workplace Relations Act]". If the underlying purpose of the legislative scheme that included s 327 of the Workplace Relations Act is to reduce the emphasis on individual negotiation, and to increase the emphasis on collective negotiation, this might assist in the interpretation of s 327. If it were possible for an employer to choose any employees it wishes, and to designate them as the employees in part of its single business with whom it wishes to make a collective agreement, the underlying purpose of promoting collective negotiation might be subverted. The proposition can be tested this way. Instead of entering into an agreement with a group of employees chosen by reference to their date of commencement of work, an employer could use other criteria. Thus, an employer wishing to negotiate for terms and conditions of employment more favourable to it, and less favourable to employees, could choose to enter into an agreement only with those employees who were prepared to accept the employer's proposal. If the resulting agreement bound employees who came to work for the employer at a later date (as the [Pilbara Iron Enterprise Agreement] is intended to do), over time an employer could downgrade terms and conditions of employment without any real opportunity for its relevant workforce at the time of entry into the agreement to raise objection to this. An employer whose proposed agreement is rejected by a majority of a group of employees could simply select as a new group the minority who would have approved the agreement and impose the employer's choice of terms and conditions on subsequent employees. The group selected could be as small as two employees. Indeed, if the principle found in s 23(b) of the Acts Interpretation Act that, in the absence of a contrary intention, the plural includes the singular, were to be regarded as applicable, the employer could select a group consisting of one employee. In any of these ways, a construction of s 327 of the Workplace Relations Act that permitted arbitrary selection of the group of employees with whom an agreement was to be made would be contrary to the underlying purpose of the legislation that brought the Workplace Relations Act into the form it was at the time of the events the subject of this case.
[39] It is no answer to these contentions to say, as the primary judge did at [31] of his reasons for judgment, that a union collective agreement could be entered into in respect of a very small number of employees. So also could s 327 result in an agreement applicable only to a very small number of employees, if there were only a small number of employees employed in a part of a single business whose work would be subject to that agreement. The issue is not one of numbers, but of composition of the group. The question is whether the employees concerned can be selected by reference to some arbitrary criterion and then, having been selected, labelled as the part of a single business to which the agreement is to relate.
…
[41] Some slight guidance as to the meaning of s 327 might be found in s 340(2), which provides for the approval of an employee collective agreement or union collective agreement. In substance, all of the persons employed at the time whose employment will be subject to the agreement must have a reasonable opportunity to decide whether they want to approve the agreement. There must then be a manifestation of that decision, either by a vote or by some other means, and a majority of those persons must decide that they want to approve the agreement. This provision demonstrates the intended collective nature of the agreement. It makes clear that, even though there might be employees who do not approve the agreement, their wishes can be overridden by a majority approval. The dissenters will also be bound by the agreement. In the event that there was majority disapproval of a proposed agreement, to construe s 327 as allowing the employer the option of going ahead with the proposed agreement only with the minority who approved it would make nonsense of the process contemplated by s 340(2).
39 This concern for the "collective" nature of agreements, and the need for "fairness and efficacy", it is respectfully concluded, is equally applicable to Pt 2-4 of the Fair Work Act. An "agreement" which does not meet such minimal standards falls short of an "agreement" which is capable of approval by the Commission pursuant to s 186.
40 There is no difficulty in a small number of employees voting in favour of an enterprise agreement which has the potential to "cover" (Fair Work Act s 53) a large number of future employees: Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd [2015] FCAFC 16 at [34] to [41], (2015) 228 FCR 297 at 306 to 307 ("John Holland"). Buchanan J there, however, recognised that there is "potential for manipulation of the agreement-making procedures": [2015] FCAFC 16 at [33], (2015) 228 FCR 297 at 305 to 306. His Honour there observed:
[33] There is no requirement that employees who vote to make an agreement must have been in employment for any length of time, and there is no requirement that they remain in employment after the agreement is made. Presumably, the presently employed members of such a group will act from self-interest, rather than from any particular concern for the interests of future employees. The potential for manipulation of the agreement-making procedures is, accordingly, a real one. However, no suggestion of that kind is made in the present case and the possibility may therefore be put to one side for the purpose of the discussion. That is an important consideration because it suggests, as the primary judge thought, that determination of whether the group of employees was fairly chosen in the present case needed to bring to account the business rationale for the choice, as well as deal with any possibility of unfair exploitation. It was not irrelevant in that assessment to bear in mind, as the primary judge said, that the agreement provided benefits, not detriments, for those to whom it would apply.
It was there concluded (inter alia) that "the group of employees covered by the agreement" as referred to in s 186(3) of the Fair Work Act was a reference "to the whole class of employees to whom the agreement might in the future apply, rather than the group of employees which actually voted on whether to make the agreement": [2015] FCAFC 16 at [2], (2015) 228 FCR at 299 per Besanko J. See also: [2015] FCAFC 16 at [36], (2015) 228 FCR at 306 per Buchanan J. Barker J agreed with Buchanan J.