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[2018] FWC 3949
General information, not legal advice.
Fair Work Commission
2018-07-04
Original judgment source is linked above.
[2018] FWC 3949 [Note: An appeal pursuant to s.604 (C2018/4074) was lodged against this decision.]
s.185 - Enterprise agreement
Application for approval of the Diamond Offshore General Company Enterprise Agreement 2018-2022.
[1] An application has been made for approval of an enterprise agreement known as the Diamond Offshore General Company Enterprise Agreement 2018-2022 (the Agreement). The application was made by the Diamond Offshore General Company (the Applicant) pursuant to s.185 of the Fair Work Act 2009 (the Act). The Agreement is a single enterprise agreement. The application was received by the Fair Work Commission (the Commission) on 12 January 2018.
[2] On 22 January 2018 the Australian Institute of Marine and Power Engineers (AIMPE) and the Australian Maritime Officers Union (AMOU) both separately sent an email to the Commission seeking leave to address the Commission regarding the approval of the Agreement. The then Maritime Union of Australia (MUA), which has since merged to become part of the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), sent an email to the Commission on 23 January 2018 indicating that it wished to be heard in respect of the application as it had concerns that the Agreement did not pass the better off overall test (BOOT). None of the three unions (together referred to as the Unions) were bargaining representatives involved in negotiating the Agreement.
[3] On 22 February 2018 the Commission's Member Support Research Team sent an email to the Applicant setting out the Commission's preliminary views regarding the Agreement. That email read as follows:
AG2018/105 - Application for approval of the Diamond Offshore General Company Enterprise Agreement 2018-2022
I refer to the Application listed above and advise that it has been allocated to Deputy President Kovacic for consideration. Upon preliminary review, the Deputy President has noted the following:
The Deputy President refers to the requests of the Maritime Union of Australia (MUA), the Australian Institute of Marine and Power Engineers (AIMPE) and the Australian Maritime Officers Union (AMOU) to be heard in relation to this application. The Deputy President invites the views of the Applicant in relation to the respective unions' requests to be heard.
The Agreement provides an expiry date of 4 years from commencement or 27 May 2018 whichever is greater. This appears to result in an expiry date more than 4 years from approval. Section 186(5) of the Act provides that an agreement must have a nominal expiry date of not more than 4 years after the day on which the FWC approves the agreement. You are invited to provide an undertaking to address this.
The Agreement provides 4.3 weeks redundancy which includes 1.3 weeks of Long Service Leave entitlement. The inclusion of the long service leave entitlement may cause redundancy to fall below that which employees are entitled to under the National Employment Standards (NES) at 1-2 years' service. You are invited to provide an undertaking to address this point.
Rates of pay in the agreement appear to be inclusive of any allowances, penalties or entitlements due to employees under the relevant Awards. When compared to the highest rate under the Maritime Offshore Oil and Gas Award 2010 ('the Award'), concerns arise where employees would be working at times or undertaking duties that would attract the following Award allowances:
(a) The Award meal allowances as reimbursement for reasonable meal costs of at least $18.52 for breakfast, $22.21 for lunch, and $37.06 for dinner ($77.79 in total for all meals);
(b) Vessel temporarily engaged in carriage & handling of cargo allowance - not floating production facilities - $47.61 per day;
(c) Hard-lying allowance - not floating production facilities - 4 berth cabin - $71.72 per day.
The Deputy President asks that you clarify the basis upon which the rates of pay in clause 5.1 are calculated. In particular, he seeks further information in respect to the number of additional hours included in the wage rates compared to the number of additional hours employees actually work, and what allowances employees would be entitled to but for the agreement. Furthermore, he asks that you provide submissions regarding the hours that any part-time and casual employees would work, as the agreement does not provide overtime in excess of agreed hours for part-time employees and the casual loading has been reduced when compared to the Hydrocarbons Industry (Upstream) Award 2010.
If an undertaking is to be provided, please ensure that it is ..."
[4] Also on that day, the Member Support Research Team sent separate emails to AIMPE, AMOU and the then MUA inviting the Unions to provide submissions in respect of the request to be heard regarding the application. The Unions provided submissions on that issue on 26 February (AIMPE and AMOU) and 23 February 2018 (the then MUA).
[5] The Applicant responded to the above email from the Commission on 26 February 2018. In its response, the Applicant among other things:
expressed the view that the Unions would not assist the Commission in discharging its statutory obligations and did not have a right to be heard in respect of the application;
proffered undertakings in respect of the nominal expiry date and redundancy issues;
• provided an analysis of what an employee would be entitled to receive under the Maritime Offshore Oil and Gas Award 2010[1] (the Award) or the Hydrocarbons Industry (Upstream) Award 2010[2] (the Hydrocarbons Award) (including allowances, penalties and other entitlements) and what they would be entitled to under the Agreement, noting that as the Agreement provides only one base salary (i.e. $113,370.89 per annum) the calculations were based on the highest level classifications under both the Award and the Hydrocarbons Award (i.e. Master and Level 5 - Advanced Specialist respectively);
DRILLER, SENIOR ELECTRICIAN, MAINTENANCE SUPERVISOR, SUBSEA CHEF
# Based on an average week of 42 hours per week (38 ordinary hours and 4 additional hours) and an 8 week roster cycle (28 days on-duty and 28 days off duty)
* Includes provision for training days (off-duty) and overcycle/additional days
[6] The application was listed for mention and directions on 16 March 2018. At that telephone hearing the Commission decided that it would be assisted in determining the application were it to hear from the Unions given the unique nature of the leave provisions in the Award.
[7] The application was subsequently listed for telephone hearing on 18 May 2018. At that hearing, Mr John Snayden of Counsel appeared with permission for the Applicant, Mr Andrew Williamson (Assistant Federal Secretary) appeared for AIMPE, Captain Dan Pearson (Western Area Secretary/Industrial Officer) appeared for the AMOU, Mr Luke Edmonds (Legal Officer) appeared for the MUA and Mr Daryl Byron, an employee bargaining representative appeared on his own behalf.
[8] On 20 June 2018 the Commission sent the following email to the parties seeking further information regarding a number of issues:
With regard to the application by Diamond Offshore General Company (the Applicant) seeking approval of the diamond Offshore General Company Enterprise Agreement 2018-2022 I have a number of questions regarding several provisions of the Maritime Offshore Oil and Gas Award 2010 (the Award) on which I seek the your views. The questions are:
Beyond this, it would be appreciated if the Applicant could advise:
Finally, given that the Full Federal Court decision in One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77 was handed down after this application was heard, I would invite the parties to make any further submissions they may wish to make regarding the implications of that decision for this matter.
It would be appreciated if your responses could be provided by no later than close of business on Wednesday, 27 June 2018. This will assist me in finalising my decision regarding the application."
[9] The parties' responses can be summarised as follows:
all parties confirmed that leave was reflected in the annual salaries set out in the Award, though the CFMMEU also submitted that the annual salary was not a cashing out of the monetary value of the leave entitlement under the Award;
the Applicant submitted that relief employees under the Award were not entitled to notice of termination and redundancy pay, whereas the Unions contended that they were;
the Applicant stated that employees were specifically advised during the rig presentations in late November/early December 2017 that the casual loading would be reduced from 25 per cent to 20 per cent under the proposed agreement; and
the Applicant contended that there was nothing in One Key Workforce Pty Ltd v CFMEU that impacts the approval of the Agreement, whilst the Unions drawing on the decision maintained that the Applicant had failed to meet its obligations under s.180(5) of the Act.
[10] For the reasons set out below, I am not satisfied that the Agreement was genuinely agreed to by employees. Accordingly I am unable to approve the Agreement and the application will be dismissed.
[11] The CFMMEU in its submissions raised three issues:
(a) whether the Agreement had been genuinely agreed to by employees;
(c) how what it described as the false information contained in the Applicant's Form F17 - Employer's statutory declaration in support of an application for approval of an enterprise agreement (other than a greenfields agreement) should be treated by the Commission.
[12] With regard to the first of those issues, the CFMMEU submitted that there was no evidence before the Commission that at any time before approval of the Agreement the Applicant had drawn employees' attention to the following issues:
(a) clause 4.3 of the Agreement permits the Applicant to engage employees as part-time employees whereas the Award does not;
(b) clause 4.4 of the Agreement permits the Applicant to engage employees as casual employees whereas the Award does not;
(c) clause 5.1 of the Agreement permits the Applicant to pay employees less than the minimum wages found at Clause 13 of the Award;
(d) clause 7 of the Agreement provides that employees accrue 5 weeks of annual leave per year and 2 weeks of personal leave per year which is less than the leave accrued under clause 19 of the Award;
(e) clause 10 of the Agreement makes it a requirement that employees submit to the Applicant's Fitness for Work and other policies and to fitness for work and medical tests at the Applicant's discretion whereas the Award contains no equivalent requirement; and
(e) clause 14 of the Award provides for the following benefits for which there was no equivalent in the Agreement:
iv. reimbursement for damage to personal effects or for the loss of equipment,
vi. reimbursement for medical examinations under the Navigation Act 1912 (Cth) and for passport expenses,
[13] The CFFMEU also referred to the response to question 3.5 in the Form F17 which answered "No" to the question of whether the Agreement contained any terms that were less beneficial than the reference instruments (i.e. the Award and the Hydrocarbons Award). Against that background, the CFMMEU contended that it would have been impossible for the Applicant to have taken steps to explain to employees the terms of the Agreement and their effect. As such, the CFMMEU further contended, the Commission could not be satisfied that the Agreement had been genuinely agreed to by employees.
[14] As to the BOOT, in addition to the issues listed above, the CFMMEU identified the following features of the Agreement as less beneficial than the Award:
clause 5.2 of the Agreement which provides for an annual salary review resulting in any wage increases being at the Applicant's discretion whereas the Award rates of pay are adjusted annually as a result of the Annual Wage Review;
clause 4.8 - Employee duties and responsibilities which imposes a number of obligations on employees for which there was no equivalent Award provision; and
the Agreement's dispute resolution procedure (clause 13) which only provides for arbitration by the Commission where both parties consent.
[15] Attached to the CFMMEU's submissions was a comparison of what a casual Integrated Rating employed under the Agreement and a Relief Integrated Rating employed under the Award working an even-time roster on a support vessel for one year would earn. That comparison calculated that the Integrated Rating would be worse off under the Agreement relative to the Award by $9,309.22 per annum. As such, the CFMMEU contended the Commission could not be satisfied that the Agreement passed the BOOT or that the requirements of s.186 of the Act had been met.
[16] In respect of the third issued identified by the CFMMEU, the union posited that in view of what it described as the "false and misleading information" contained in the Form F17 the Commission should be sceptical about any other assurances or evidence given by Mr Kevin Milham who signed the Form F17. In particular, the CFMMEU highlighted that there was no specific reference to employees being provided the Diamond Offshore Drug and Alcohol Policy which is incorporated into the Agreement by reference at clause 10(a) and all laws regulations, licences, permit conditions and safe working procedures which are incorporated into the Agreement by reference at clause 4.8(l).
[17] For all these reasons, the CFMMEU said the Commission should dismiss the application.
[18] Key aspects of the CFMMEU's oral submissions included that:
relief employees employed under the Award are entitled to leave;
there were agreements in the industry which provided for casual employment and passed the BOOT, with casuals paid a casual loading of 25 per cent and receiving one day of leave for each day of duty (i.e. they miss out on the 0.153 leave factor which inter alia provides for annual and personal/carer's leave);
there was no guarantee that under the Agreement employees would work an even time roster arrangement, later adding that if the intention was that employees would work an even time roster the Agreement should say so explicitly;
the Agreement was not limited to certain classes of vessels meaning that salaries were not greater than the Award for some classifications, i.e. the Master, Facility Master and Chief Engineer classifications working on "Facilities" as per clause 13.1(a) of the Award;
there was nothing to prevent the Applicant from in future manning facilities and other vessels; and
when allowances were taken into account, the Agreement did not pass the BOOT.
[19] The CFMMEU relied on the decisions in BGC Contracting Pty Ltd[3] (BGC), Falcon Mining Pty Ltd[4] and Construction, Forestry, Mining and Energy Union v Shamrock Civil Pty Ltd[5] (Shamrock) in support of its submissions.
[20] AIMPE in its submissions highlighted that clause 19.1 - Leave factor and entitlement to leave of the Award stipulates a leave factor of 1.153 for each day of duty on a vessel or necessarily travelling to or from a vessel or place of work, adding that on the basis of a four week duty cycle over a year an individual would accrue 210.4225 days off. AIMPE contrasted this with the Agreement which provides 5 weeks' annual leave each year. AIMPE described this as a significant reduction in employee entitlements and that as a result employees would not be better off overall under the Agreement.
[21] AIMPE also highlighted the Applicant's response to question 3.5 in the Form F17 which declared that the Agreement did not contain any terms that were less beneficial than the reference instrument. Relying on the decision in Shamrock AIMPE contended that the Commission could not be satisfied that the Applicant had complied with the pre-approval requirements set out in s.180(5) of the Act and that the Agreement had therefore not been genuinely agreed to by employees.
[22] For these reasons AIMPE submitted that the application for approval of the Agreement should be dismissed.
[23] At the hearing, AIMPE relied on the CFFMEU's oral submissions.
[24] The AMOU's submissions were almost identical to those filed by AIMPE and as such are not repeated here. At the hearing, the AMOU also relied on the CFFMEU's oral submissions.
[25] With regard to AIMPE's and the AMOU's submissions, the Applicant agreed with the unions' calculation of the number of days off that an employee working an even time roster would accrue under clause 19.3 of the Award. The Applicant submitted that its employees return home at the end of each roster cycle and that as such an employee who would be covered by the Award working its roster would use 28 of their 'days off' during the off duty period. Accordingly an employee working its roster would accrue 210.4225 days off per year, minus the 182.5 days used during the off duty cycle. After off duty days were deducted the employee would be left with 27.9225 (28) additional days off per year under the Award. On that basis the Applicant submitted that its treatment of the Award's leave factor calculation is consistent with how it has been previously interpreted in the industry.
[26] With regard to the BOOT, the Applicant posited that the task to be undertaken by the Commission was not simply a matter of identifying one clause in the Award which on first glance was more beneficial than the corresponding provision in the Agreement and determining that the Agreement did not pass the BOOT as a result. The Applicant said that this was particularly the case in this instance given that the unusual language of clause 19.1 of the Award resulted in a scenario where the leave factor could not be directly compared to clause 7.1(b) of the Agreement which only compensated for an annual leave entitlement. As to why employees were better off overall under the Agreement, the Applicant contended that clause 19.2 of the Award covered all forms of leave and compensation for working weekends, public holidays and travel in the off duty period whereas clause 7.1(b) of the Agreement only provided for an entitlement to annual leave, adding that other employee entitlements were included in separate clauses in the Agreement or were compensated for by the employee's salary. More particularly, the Applicant contended that under the Agreement employees were entitled to 5 weeks' annual leave, 2 weeks' personal leave and 5 days compassionate leave on each occasion with employees compensated for working weekends and public holidays in their annual salary. In total, employees were entitled to 40 days of additional leave outside of the off duty time whereas under the Award an employee accrued 28 additional days off per year after the use of days off for off duty time. As such an employee under the Agreement received 12 additional days leave when compared to the Award and was therefore better off overall under the Agreement. The Applicant also noted that clause 7.3(c) of the Agreement provided that any unused personal leave was paid out to the employee on termination which was a benefit over and above the National Employment Standard (NES) entitlement.
[27] As to the CFMMEU's contention that the Agreement had not been genuinely agreed to, the Applicant stated that it took reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained and communicated to the relevant employees in an appropriate manner. In support of that contention the Applicant pointed to the email it sent to employees on 18 December 2017 which provided employees with a copy of the proposed Agreement together with various supplementary documents, including a document titled "2018 Enterprise Agreement - Explanation of terms and effects" which explained the terms of the Agreement and their effect. That email also had attached to it a copy of the Applicant's Employment Policy. In addition, the Applicant conducted rig visits on 27-28 November and 6-8 December 2017 to discuss the terms of the Agreement. Against that background, the Applicant refuted the CFMMEU's contention that it had failed to satisfy s.188(a)(i) of the Act and that the Agreement had not been genuinely agreed to by employees.
[28] The Applicant also responded to the CFMMEU's contention that it had not complied with s.180(5) of the Act because it did not draw to employees' attention six areas of the Agreement which the CFMMEU considers less beneficial than the Award. Specifically the Applicant contended that:
it did inform employees that it may engage part-time or casual employees as part of the Agreement presentation provided to employees and noted that while the Award makes no reference to part-time engagement or casual work (albeit that relief work is similar to casual work) it does not state that employees could not be engaged on a part-time basis;
clause 5.1 which sets out the minimum annual salary of employees was explained to the employees in the Agreement presentation and during the rig visits, and further, is not less beneficial than the applicable rates contained in the Award;
leave provided under the Agreement was more generous than what an employee is entitled to under the Award with leave conditions specifically referenced in the Agreement presentation;
the fitness for work clause was set out and explained in the Agreement presentation, adding that the absence of an equivalent provision in the Award did not result in employees being worse off; and
the allowances in clause 14 of the Award referenced by the CFMMEU in its submissions were either irrelevant to its operations (noting that the Hydrocarbons Award was also applicable to its operations), provided for in the Agreement or compensated for by salary. In particular the Applicant submitted that:
− as set out in the Agreement presentation employees were not required to take meals onshore and it provides all meals, travel expenses and accommodation for its employees on duty in any event,
− in addition, it provides a meal allowance of $35 for breakfast, $35 for lunch and $60 for dinner where employees are required to attend training onshore with this policy set out in a memorandum which had been distributed to all employees,
− it provides employees with protective clothing where required,
− it does not require employees to wear personal effects whilst on duty as it provides all protective clothing,
− it also provided reimbursement for prescription safety glasses up to a value of $300 to employees,
− it has an education assistance policy which provides that employees can request assistance to upskill with the policy, which is readily available on its intranet, providing for up to $3,000 a year in tuition or $4,500 for a post-graduate qualification such as a master's degree,
− it incurs the costs of any medical exams which it requires with this set out in the training matrix, adding that the policy is readily available on its intranet,
− the minimum salary provided in the Agreement provides a greater overall entitlement than employees would receive from the shared or hard lying allowance, and
− the communication allowance, keep allowance, and personal accident and insurance allowances were not relevant as employees do not work on a floating production facility as specified by the Award.
[29] Against that background, the Applicant contended that there was no basis to the CFMMEU's submission that it was unable to satisfy the Commission that s.188(a)(i) of the Act had been met.
[30] With regard to the other issues raised in the CFMMEU's submissions, the Applicant submitted that:
having regard to its submissions of 26 February 2018 regarding the BOOT, employees covered by the Agreement would be significantly better off than if they were employed under the Award;
the comparison attached to the CFMMEU's submissions was nonsensical for a number of reasons including that it did not use the correct method of calculating the employee's daily rate in accordance with the Agreement, noting that the casual loading of 20 per cent was applied in addition to an employee's rate of pay;
the comparison was therefore of little assistance to the Commission;
clause 5.2 of the Agreement clearly stated that the minimum rate of pay would be reviewed annually and that the Applicant would adjust the rate of pay if necessary in accordance with the Annual Wage Review;
clause 4.8 of the Agreement simply set out the employee's duties and responsibilities, with the clause a standard provision which was typically included in a similar form in most employment contracts and enterprise agreements;
the Agreement's dispute resolution procedure satisfied the requirements of s.186(6) of the Act;
• the Full Bench in Woolworths Ltd trading as Produce and Recycling Distribution Centre[6] (Woolworths) held that s.186(6) of the Act does not require the parties to include a term in an enterprise agreement that provides for arbitration and that arbitration of disputes was not an essential ingredient that needed to be included for a dispute settlement term to meet the requirements of the Act;
[31] In its oral submissions, the Applicant submitted among other things that:
with regard to the issues raised by the CFMMEU in its submissions and set out at paragraph [10] above, none of those issues necessitated a different response to question 3.5 of the Form F17;
the CFMMEU had led no evidence to substantiate its claim that the Form F17 was misleading;
• the decision in BGC had been overturned on appeal[7], noting that one of the grounds of the appeal related to the requirements of s.180(5) of the Act and that that point was not decided in the appeal as the primary decision was overturned on other grounds;
[32] Mr Byron did not provide or make any submissions.
[33] The relevant provisions of the Act are set out below.
- Employees must be given a copy of a proposed enterprise agreement etc.
Terms of the agreement must be explained to employees etc.
(5) The employer must take all reasonable steps to ensure that:
(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and
(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.
(6) Without limiting paragraph (5)(b), the following are examples of the kinds of employees whose circumstances and needs are to be taken into account for the purposes of complying with that paragraph:
(a) employees from culturally and linguistically diverse backgrounds;
(c) employees who did not have a bargaining representative for the agreement.
186 When the FWC must approve an enterprise agreement - general requirements
(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).
(a) if the agreement is not a greenfields agreement - the agreement has been genuinely agreed to by the employees covered by the agreement; and
(b) if the agreement is a multi-enterprise agreement:
(i) the agreement has been genuinely agreed to by each employer covered by the agreement; and
(ii) no person coerced, or threatened to coerce, any of the employers to make the agreement; and
(c) the terms of the agreement do not contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.); and
(d) the agreement passes the better off overall test.
Note 1: For when an enterprise agreement has been genuinely agreed to by employees, see section 188.
Note 2: The FWC may approve an enterprise agreement that does not pass the better off overall test if approval would not be contrary to the public interest (see section 189).
Note 3: The terms of an enterprise agreement may supplement the National Employment Standards (see paragraph 55(4)(b)).
Requirement that the group of employees covered by the agreement is fairly chosen
(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.
(4) The FWC must be satisfied that the agreement does not include any unlawful terms (see Subdivision D of this Division).
Requirement that there be no designated outworker terms
(4A) The FWC must be satisfied that the agreement does not include any designated outworker terms.
(a) the agreement specifies a date as its nominal expiry date; and
(b) the date will not be more than 4 years after the day on which the FWC approves the agreement.
(b) The FWC must be satisfied that the agreement includes a term:
(a) that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:
(i) about any matters arising under the agreement; and
(ii) in relation to the National Employment Standards; and
(b) that allows for the representation of employees covered by the agreement for the purposes of that procedure.
Note 1: The FWC or a person must not settle a dispute about whether an employer had reasonable business grounds under subsection 65(5) or 76(4) (see subsections 739(2) and 740(2)).
Note 2: However, this does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4).
187 Wh****en the FWC must approve an enterprise agreement - additional requirements
(1) This section sets out additional requirements that must be met before the FWC approves an enterprise agreement under section 186.
Requirement that approval not be inconsistent with good faith bargaining etc.
(2) The FWC must be satisfied that approving the agreement would not be inconsistent with or undermine good faith bargaining by one or more bargaining representatives for a proposed enterprise agreement, or an enterprise agreement, in relation to which a scope order is in operation.
Requirement relating to notice of variation of agreement
(3) If a bargaining representative is required to vary the agreement as referred to in subsection 184(2), the FWC must be satisfied that the bargaining representative has complied with that subsection and subsection 184(3) (which deals with giving notice of the variation).
Requirements relating to particular kinds of employees
(4) The FWC must be satisfied as referred to in any provisions of Subdivision E of this Division that apply in relation to the agreement.
Note: Subdivision E of this Division deals with approval requirements relating to particular kinds of employees.
188 When employees have genuinely agreed to an enterprise agreement
An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:
(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:
(i) subsections 180(2), (3) and (5) (which deal with pre-approval steps);
190 FWC may approve an enterprise agreement with undertakings
(a) an application for the approval of an enterprise agreement has been made under subsection 182(4) or section 185; and
(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.
(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:
(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.
FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.
(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.
When a non-greenfields agreement passes the better off overall test
(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.
FWC must disregard individual flexibility arrangement
(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.
When a greenfields agreement passes the better off overall test
(5) An award covered employee for an enterprise agreement is an employee who:
(b) at the test time, is covered by a modern award (the relevant modern award) that:
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:
(b) would be covered by a modern award (the relevant modern award) that:
(ii) would cover the person in relation to the work that he or she would perform under the agreement; and
(6) The test time is the time the application for approval of the agreement by the FWC was made under subsection 182(4) or section 185.
FWC may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee."
[34] In short, the Unions' submissions raise two threshold issues which the Commission needs to determine, i.e. whether the Agreement was genuinely agreed to by employees and whether the Agreement passes the BOOT. I will deal with each of those issues separately.
Was the Agreement genuinely agreed to by employees?
[35] The Full Bench in Shamrock observed as follows in respect of whether the requirements in s.180(5) of the Act had been satisfied in that case:
"[33] It is important to note that the Form F17 is a statutory declaration as to what the Applicant declares that they have done to satisfy the various requirements of the legislation. While in some circumstances an Applicant will incorrectly answer question 3.4 and/or question 3.5 because they have omitted one or some items from the list, and because the omitted items are not particularly significant this may not necessarily be a cause for concern. However, in this case a declaration that there are no less beneficial terms does give rise to concern as it is apparent that in fact there were a significant number of less beneficial terms. Aside from the obvious concern that the declarant has made a declaration which is untrue, it gives rise to a further concern as to the nature of the explanation given to employees as to terms of the Agreement and the effect of those terms. That is, it at least raises a real question as to the explanation to employees about the terms of the Agreement and in particular the effect of those terms, in circumstances where the employer is attesting that the agreement has no less beneficial terms.
[36] However, it is apparent that there are in fact a number of significant reductions in the Award entitlements. In light of the concession, it is apparent that the explanation to employees was quite simply, wrong. We accept that an explanation of the terms of the Agreement and the effect of those terms to employees may not be perfect and may, depending on the circumstances, still satisfy the requirement of s.180(5) of the Act. However, an explanation which is clearly misleading (as in this case) cannot possibly meet the requirement ..."[8]
[36] However in BGC Contracting Pty Ltd[9] (BGC No.2) Deputy President Gostencnik stated that:
"[92] To the extent that the Unions rely on the decision in Construction, Forestry, Mining and Energy Union v Shamrock Civil Pty Ltd in support of their contention, that decision does not and cannot establish a decision rule as to the consequences of misstatements in an employer's statutory declaration. The significance of the misstatement will depend on the circumstance including, importantly, that which was actually communicated to the relevant employees. Here it is apparent that notwithstanding Ms Tolomei's declaration, the information actually communicated to relevant employees was accurate."[10] (Footnotes omitted, underlining added)
[37] A relevant consideration in the context of this matter is that the Agreement replaces the Diamond Offshore General Company Enterprise Agreement 2014[11] (the 2014 Agreement) which has a nominal expiry date of 27 May 2018[12]. Among other things, that agreement provides for and/or requires:
persons to be employed inter alia as part-time or casual employees (clause 5.1);
the payment of a 25 per cent loading to casual employees (clause 5.4);
employees to in essence do what was reasonably necessary to fulfil their duties, diligently perform their duties and responsibilities with reasonable care and skill, comply with any reasonable directions given to them by the Applicant, promote the interests of the Applicant at all times and at all times act to a high standard of professional behaviour (clause 6.2.6);
employees will be engaged to work an even time roster (clause 9.2);
21 days of annual leave per annum based on an employee's ordinary hours of 12 hours per day (clause 10.1.2) and 84 hours paid sick leave per year (clause 10.4.1);
employees to comply with all lawful directions in relation to workplace policies and procedures and with the Applicant's rules, regulations, policies, practices and procedures (clause 15); and
the Commission to arbitrate in respect of a dispute where mediation or conciliation failed to resolve the dispute (clause 16.5).
[38] The 2014 Agreement appears to have replaced the Diamond Offshore General Company Employee Collective Agreement 2008[13] (the 2008 Agreement) and largely reflect the terms of the 2008 Agreement, though I note that the casual loading increased from 20 per cent under the 2008 Agreement to 25 per cent under the 2014 Agreement.
[39] In the Form F17 lodged with the application the following explanation was provided regarding the steps taken by the Applicant to explain the terms of the Agreement and the effect of those terms to employees:
"2.6 What steps were taken by the employer to explain the terms of the agreement, and the effect of those terms, to the relevant employees?
1. The terms of the proposed agreement were explained to and agreed in bargaining meetings with a representative group of nominated bargaining representatives between the dates of 20-23 November 2017.
2. The employer conducted rig visits on 27- 28 November 2017 and 6- 8 December 2017. During those visits, the HR Manager and Senior HR Officer held meetings with the relevant employees to discuss the terms of the agreement. The meeting was conducted in a plain English manner, and the employees were encouraged to ask questions.
3. For the purposes of those meetings, the employer also prepared and delivered a PowerPoint presentation to the employees in plain English. The presentation clearly outlined the terms of the agreement and the effects which it would have on employees.
4. The HR Manager was asked to and did attend a meeting at the Perth airport on 29 November 2017 to discuss the terms of the agreement with employees who were returning home from the rig.
5. On 18 December 2017, the HR Manager also sent an email to all relevant employees which contained the agreement and an explanation of the terms and effect of the agreement.
2.7 When you explained the terms of the agreement to the employees, what did you do to take into account the particular circumstances and needs of the relevant employees?
The meetings conducted by the HR Manager and Senior HR Officer on 27-28 November 2017 and 6- 8 December 2017 were conducted in a plain English manner, given that all of the employees are from English speaking backgrounds.· Additionally, the presentations were delivered at the end of each shift. This ensured the fatigue of the employees was minimised.
The employer also prepared a PowerPoint presentation which clearly outlined the terms
To further assist the employees to understand the terms of the agreement, the employer's HR Manager sent the employees an email which provided an explanation of the terms and effect of the agreement."
[40] As to the material provided to employees and how the effect of the Agreement was explained, on 18 December 2017 Mr Milham sent an email to employees with the subject described as "Enterprise Agreement 2018 - CHANGE OF VOTING DETAILS" (emphasis as per original). That email included the following paragraph:
"Please find attached information regarding the Diamond Offshore General Company Enterprise Agreement 2018-2022. The vote on these new terms and conditions of employment will now take place between 3 January and 5 January 2018. Specific details are contained in the following attachments:
• A presentation from CIVS providing information on how to place your vote"[14]
[41] With regard to the presentation explaining the terms and conditions of the Agreement, the document provided an explanation of each clause of the Agreement. For example, in respect of engagement the presentation included the following:
[42] Similarly in respect of the operation of the Agreement, salary, hours of work, leave entitlements, fitness for work and dispute resolution the presentation included the following:
[43] The Employment Policy document attached to Mr Milham's email of 18 December 2017 addressed a number of issues including medical benefits, salary continuance, death and total and permanent disability insurance, and safety and protective equipment. Key aspects of the Employment Policy document are set out below.
Each Employee will be designated a reporting point (i.e. fly point) by Diamond Offshore. EMPLOYEES are required to present themselves at the designated reporting point at the time notified by Diamond Offshore and interstate fit for work upon arrival at the rig.
Diamond Offshore will provide transport from the designated reporting point to the rig and return. Diamond Offshore will make travel arrangements to reflect minimum waiting times for Employees. The cost of transfers, accommodation and reasonable meal expenses will be met by Diamond Offshore. If the Employee chooses not to use the transit transport then the cost is at the Employee's own expense. Reasonable meal costs will be as advised by Diamond Offshore from time to time. Any costs exceeding that advised limit will be the responsibility of the Employee.
Should the rig to which the Employee is assigned be transferred out of Australian Territorial Waters (and overseas assignment), the Employee will receive a Foreign Service Payment (FSP) of 20% of the Employee's base salary rate for the period the Employee is on the overseas assignment.
In the event an Employee is temporarily assigned to work on a rig already outside of Australian Territorial waters, the 20% FSP will also apply for the period the employee is on the overseas assignment.
Diamond Offshore will provide to permanent Employees private medical cover. This clause does not apply to a casual Employee, fixed-term Employee or a maximum-term Employee.
These medical benefits shall continue to be paid by Diamond Offshore for a period of three (3) months after the termination of the Contract of Employment except in the case of behaviour that leads to a termination.
All permanent Employees are provided with Short Term Disability Insurance. This clause does not apply to a casual Employee, fixed-term Employee or a maximum-term Employee.
There is a qualifying period of two (2) months before this benefit can be accessed.
The payment of benefits under the policy is subject to certain exclusions and limitations common to insurance policies of this type ...
Death and Total and Permanent Disability Insurance is provided for each permanent Employee under Diamond Offshore's Insurance Policy. This clause does not apply to a casual Employee, fixed-term Employee or a maximum-term Employee.
All Employees will comply with relevant Acts, Regulations and other Codes of Practice and Company Safety Policy (as amended from time to time).
Employees will be provided free of charge with Personal Protective Equipment (PPE) by Diamond Offshore which will include but not be limited to eye-wear, gloves, safety boots, hard hats and ear protection.
The employee agrees to abide by Diamond Offshore's policies regarding the use of drugs and alcohol.
All Employees are required to submit to random drug and alcohol screening and testing. Employees may also be tested where Diamond Offshore has a reasonable cause to suspect the Employee may be under the influence of a substance that is affecting his/her ability to work or where there is a work-related incident involving the employee.
Diamond Offshore has a zero tolerance policy. An employee who fails a drug or alcohol screening may be subject to disciplinary action up to and including termination.
"Fit for Work" means that an employee is in a state (physical, mental and emotional, which enables the Employee to perform assigned task competently and to establish standards set by Diamond Offshore, and in a manner which does not compromise or threaten the safety or health of themselves or others. Employees are required to report for duty fit for work ..."
[44] In this case the CFFMEU contended that there was no evidence before the Commission that at any time before approval of the Agreement the Applicant had drawn employees' attention to the issues set out at paragraph [10] above. Beyond that, the CFMMEU:
contended that in view of the response to question 3.5 in the Form F17 it would have been impossible for the Applicant to have taken steps to explain to employees the terms of the Agreement and their effect; and
highlighted that there was no specific reference to employees being provided the Diamond Offshore Drug and Alcohol Policy which is incorporated into the Agreement by reference at clause 10(a) and all laws regulations, licences, permit conditions and safe working procedures which are incorporated into the Agreement by reference at clause 4.8(l)
[45] The Applicant disputed those contentions primarily for the reasons set out at paragraph [26] above.
[46] The issue of whether or not material was incorporated into an agreement by reference was considered by Deputy President Gostencnik in Broadsword Marine Contractors Pty Ltd v Maritime Union of Australia, The and Others[15] (Broadsword). In that case, the Deputy President set out his approach on that issue in the following terms:
"[26] The question whether the policies referred to in each of the abovementioned clauses of the Agreement are incorporated into the Agreement by reference may, for present purposes, be answered by asking whether the provisions of these clauses of the Agreement impose any obligation on employees who are covered by the Agreement to comply with the policies to which reference is made.
[32] The requirement in s.180(2) of the Act is not one expressed in absolute terms. Rather, it is a requirement that an employer must take all reasonable steps to ensure, relevantly that material incorporated into an agreement is given to employees during the excess [sic] period or that employees have access to the material throughout the access period.
[34] To the extent that certain policies have been incorporated by reference, it seems apparent from Mr Paul's evidence that employees had access to those policies throughout the access period as they had been provided with all of the policies during induction. The policies were also accessible at the workplace. These are policies with which the employees are expected to be familiar and comply during their employment with the Applicant. That is why they are given copies during induction. In the circumstances, I do not think it reasonable that the Applicant be separately required to provide employees with another copy of these policies.
[35] On the basis of the material before me I am satisfied that the Applicant has complied with s.180(2) of the Act."[16]
[47] I agree with and adopt the approach of the Deputy President.
[48] With regard to the CFMMEU's contention regarding the Applicant's Drug and Alcohol Policy, clause 10(a) of the Agreement provides as follows:
(a) Employees must attend work in a fit and proper state that will enable them to complete their duties without danger to themselves or others and must at all times comply with Diamond Offshore's policies, including submitting to drug and alcohol testing when required."
[49] Following the approach in Broadsword I consider clause 10(a) of the Agreement has the practical effect of imposing an obligation on employees who are covered by the Agreement to comply with the Applicant's Drug and Alcohol Policy, including submitting to drug and alcohol testing when required. This in turn points to that policy being incorporated into the Agreement.
[50] However, as previously mentioned, the Applicant noted in its submissions that its Employment Policy contained reference to its policies regarding the use of drugs and alcohol and drug and alcohol screening, that all employees were required to read and sign its drug and alcohol policy when they commenced employment and that the policy is readily available on its intranet. Accordingly, for the same reasons as set out in Broadsword, I do not think it reasonable that the Applicant in this case be separately required to provide employees with another copy of its Drug and Alcohol Policy during the access period.
[51] As to the CFMMEU's contention regarding clause 4.8(l) of the Agreement, I note that the provision is part of a clause which sets out employees' duties and responsibilities. In my view, the provision does no more than provide an overview of what is expected of employees and does not of itself impose an obligation on employees to comply with all laws regulations, licences, permit conditions and safe working procedures. In my view this is because the word "abide", as opposed to the word "comply" is used in clause 4.8(l). The Macquarie Dictionary defines abide as "...7. Abide by, a. to accept and continue to observe (an undertaking, promise, agreement, rule, law, etc.): ..." whereas comply is defined as _"... 1. to do as required or requested. -_phrase 2. comply to, to be in accord with (government regulations). 3. comply with, to act in accordance with (wishes, commands, requirements, conditions, etc.) ...". Having regard to those definitions supports my view that the term abide establishes a lower threshold than comply and that as a result the documents are not incorporated into the Agreement. As such, there was no need for those documents to be provided to employees during the access period.
[52] I turn now to consider the Unions' contention that in view of the response to question 3.5 in the Form F17 it would have been impossible for the Applicant to have taken steps to explain to employees the terms of the Agreement and their effect.
[53] By way of background, the response to Question 3.5 provided in the Form F17 reads as follows:
"3.5 Does the agreement contain any terms and conditions of employment that are less beneficial than equivalent terms and conditions in the reference instruments listed in questions 3.1.and 3.2 and/or does the agreement omit any entitlements that are conferred by those reference instruments?
If you have answered Yes to question 3.5 - Identify the terms and conditions of the agreement that are less beneficial than the reference instruments and any entitlements that are omitted from the agreement. Your answer should indicate whether all or only some of the employees are affected and, if only some employees are affected, identify the groups of employees affected.
The salary provided for in the agreement compensates the employees for any other entitlements that are not conferred directly in the agreement that may be provided by the relevant modern awards so that the terms and conditions of the agreement are not less beneficial than the relevant modern awards." (Emphasis as per original)
[54] In its submissions the CFMMEU contended that the Applicant had among other things failed to draw to the attention of employees the differences between the provisions of the Agreement and the Award. In Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd[17] (One Key) Justice Flick stated as follows in respect of the requirements imposed by s.180(5) of the Act:
"103 ... The requirement imposed by s 180(5) to "take all reasonable steps to ensure that ... the terms of the agreement, and the effect of those terms, are explained" is an important obligation imposed upon an employer to ensure that employees are as fully informed as practicable. The requirement is not a mere formality. Whatever steps may be necessary will depend upon the facts and circumstances of each particular case; but those steps are not satisfied by a person reading - without explanation - the terms of an agreement to an employee."[18] (Underlining added)
[55] The circumstances in this case are that the Agreement is not a first time agreement but at least a second round agreement and perhaps even a third or fourth generation agreement. As such, the CFMMEU's focus in its submissions regarding whether the Agreement was genuinely agreed to by employees on the Applicant having to explain the differences between the Agreement and the Award is in my view somewhat misplaced. Rather, given the circumstances in this case, the focus should be on whether the Applicant explained to employees the terms of the Agreement and the effect of those terms having regard to the key differences between the Agreement and the predecessor Agreement, i.e. the 2014 Agreement, and where relevant the Award.
[56] As to the Unions' contention that because the Applicant responded "No" to Question 3.5 of the Form F17 that it would have been impossible for the Applicant to have taken steps to explain to employees the terms of the Agreement and their effect, while the response to Question 3.5 may not have been as fulsome as it could have been in my view it is not completely inaccurate or false. As noted by the Full Bench in Shamrock "It is important to note that the Form F17 is a statutory declaration as to what the Applicant declares that they have done to satisfy the various requirements of the legislation. While in some circumstances an Applicant will incorrectly answer question 3.4 and/or question 3.5 because they have omitted one or some items from the list, and because the omitted items are not particularly significant this may not necessarily be a cause for concern."[19] However, an inaccurate or incorrect response to Question 3.5 does not of itself automatically mean that an applicant did not appropriately explain to employees the terms of an agreement and the effect of those terms. As stated by Deputy President Gostencnik in BGC No.2 it is what is communicated to employees that is critical in the Commission determining whether or not the requirements set out in s.180(5) of the Act have been satisfied[20].
[57] I turn now to consider that issue, i.e. what was communicated to employees. As previously noted the Agreement replaces the 2014 Agreement which passed it nominal expiry date on 27 May 2018. While the Agreement reflects the approach adopted in the 2014 Agreement in respect of a number of issues, e.g. the approach to leave (though the quantum is different), it also varies a number of aspects of the 2014 Agreement. Specifically, the Agreement when compared to the 2014 Agreement includes the following material changes:
a reduction in the level of casual loading from 25 per cent to 20 per cent;
a reduction in the minimum salary rate from $117,352 to $113,370.89 per annum;
the level of superannuation contributions is reduced from 12 per cent to 9.5 per cent;
the scope for the Commission to arbitrate in respect of disputes brought under the dispute settlement procedure is removed;
the provision relating to even time cycles (clause 9.2 of the 2014 Agreement) has been deleted;
the Foreign Service Premium (clause 7.5 of the 2014 Agreement) is not included in the Agreement but rather is referred to in the Employee Policy document and has been reduced from 25 per cent to 20 per cent; and
the living away from home allowance of $37.70 paid for each day an employee was on a rig (clause 7.1 of the 2014 Agreement) has been removed.
[58] The Applicant's response of 27 June 2018 indicated that employees were advised of the reduction in casual loading during the rig visits in late November and early December 2017. Further, the presentation circulated to employees on 18 December 2017 states that:
"Superannuation contributions will change to 9.5% ..." but does not refer to contributions being 12 per cent under clause 7.4 of the 2014 Agreement; and
if a dispute cannot be resolved at the workplace level that "the matter can be referred to the Fair Work Commission for resolution" but does not mention that the Commission will only be able to arbitrate a dispute with the consent of both parties whereas under clause 16.5(ii) of the 2014 Agreement consent was not required before the Commission could arbitrate.
[59] Further, as mentioned above, the Foreign Service Premium is not included in the Agreement but rather is set out in the Employment Policy document circulated to employees. The Employee Policy document does not highlight this shift which has the practical effect of making the payment unenforceable nor does it highlight that the level of the payment has been reduced from 25 to 20 per cent.
[60] Beyond the above references, there is no material before the Commission which points to or indicates that the other changes highlighted above were drawn to the attention of employees who would be covered by the Agreement.
[61] Given the material nature of the changes which have not been highlighted and the limited explanation of the effect of some of the other changed terms in the Agreement, I am not satisfied that the Applicant has taken all reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained to the relevant employees as required by s.180(5)(a) of the Act. As such, I cannot be satisfied that the Agreement was genuinely agreed to by employees as per s.188(a)(i) of the Act and am therefore unable to approve the Agreement as s.186(2)(a) of the Act is not satisfied.
[62] Given my finding above, it is not strictly necessary for me to deal with this issue. Nevertheless I do so on the basis that it may provide some guidance should the Applicant seek to recommence negotiations for an agreement to replace the 2014 Agreement.
[63] As previously mentioned the CFMMEU submitted that the Agreement did not pass the BOOT for the reasons set out at paragraph [10] above. I will deal with each of those issues separately.
(a) Clause 4.3 of the Agreement permits the Applicant to engage employees as part-time employees whereas the Award does not
[64] Both the Award and Hydrocarbons Award are cited as reference instruments in the Form F17. While the Award does not provide for part-time employment, the Hydrocarbons Award does at clause 10.3. Nevertheless the Agreement does not limit part-time employment to those classifications that would be covered by the Hydrocarbons Award. The Applicant stated at the hearing that it does not currently employ any part-time employees (as mentioned above the 2014 Agreement provides for part-time employment). More specifically, the Agreement provides at clause 4.3(b) that part-time employees will accrue entitlements on a pro-rata basis. As such it is difficult to envisage how employees might be disadvantaged by the Agreement providing for part-time employment, particularly as the Award provides at clause 10.3(c) that relief employees receive "on a pro-rata basis, equivalent pay and conditions to those of full-time employees".
[65] Having regard to these considerations, I do not consider that the Agreement providing part-time employment is of itself detrimental to employees who would be covered by the Agreement.
[66] Finally on this issue, I note that the Hydrocarbons Award provides that all time worked in excess of a part-time employee's ordinary hours of work and starting and finishing times will be paid at the appropriate overtime rate. While the Agreement does not reflect this approach, I consider the rate of pay in the Agreement is sufficiently above the rate of pay in the Hydrocarbons Award for the equivalent classification so as to adequately compensate for this.
(b) Clause 4.4 of the Agreement permits the Applicant to engage employees as casual employees whereas the Award does not
[67] As with part-time employment, the Award does not provide for casual employment though the Hydrocarbons Award does at clause 10.4. Again, the Agreement does not limit casual employment to those classifications that would be covered by the Hydrocarbons Award. Clause 4.4(b) of the Agreement provides casual employees are not entitled to be paid leave, notice of termination other than as provided for in the provision, redundancy pay or any other attributes of full or part-time employment save and accept for long service leave. Casual employees are paid a 20 per cent loading on their rate of pay for all hours worked, while clause 4.4(c) of the Agreement provides casual employees with a minimum of 24 hours' written notice of termination which may be extended to take into consideration the remote location of work.
[68] With regard to the calculations attached to the CFMMEU's submissions, I consider that those calculations overstate what a relief Integrated Rating working on a self-propelled MODU is entitled to under the Award as it calculates the value of leave based on estimated daily rate of pay. However, clause 13.3 of the Award provides that "the annual salaries have been fixed on an aggregate basis such that they take into account all aspects and conditions of employment" (underlining added). Having regard to the advice provided by the parties in response to the Commission's email of 20 June 2018, I interpret this as the salary rate also incorporating paid leave. This means that a relief employee would earn $71,837 per annum inclusive of leave. Conversely, the Applicant submitted that the CFMMEU's calculations underestimated the daily rate of pay under the Agreement for a casual Integrated Rating contending that it should be $622.92 per 12 hour day as opposed to the $310.61 per day relied upon by the CFMMEU. Specifically the Applicant pointed to clause 1 of the Agreement which defines rate of pay as follows:
"Rate of Pay means an Employee's rate of pay under this Agreement as defined in clause 5.1 of this Agreement. To obtain an Employee's hourly Rate of Pay divide the Employee's Rate of Pay by fifty-two (52) (being the weeks in the year) and then divide this amount by the Employee's ordinary hours of work (i.e. forty-two (42) for full-time Employees). Example $113,370.89 / 52 / 42 = Employee's hourly Rate of Pay."
[69] The Applicant further submitted that the 20 per cent casual loading applies on top of this.
[70] I accept the Applicant's methodology given the definition of Rate of Pay set out in the Agreement. Applying the casual loading would result in the casual employee earning a salary of $136,045.07 over a year, which is just short of twice the salary they would earn as a relief employee under the Award. This suggests that the rate of salary payable under the Agreement together with the casual loading is sufficient to compensate these employees for the lack of access to paid leave and notice of termination and redundancy pay under the Agreement. However, in the absence of further information I am unable to conclude that this is the case in respect of the higher paying classifications under the Award, i.e. Master, Facility Master and Chief Engineer.
(c) Clause 5.1 of the Agreement permits the Applicant to pay employees less than the minimum wages found at Clause 13 of the Award
[71] At the hearing the CFMMEU highlighted that the aggregate annual salary under the Award for the Master, Facility Master and Chief Engineer classifications working on "Facilities" as per clause 13.1(a) of the Award (i.e. $115,977, $115,977 and $121,612 respectively) was above the rate of pay specified in clause 5.1 of the Agreement (i.e. $113,370.89 per annum). In response, the Applicant submitted that it did not perform work on facilities. Further, the Applicant had previously submitted that employees may work on the vessels specified in clauses 13.1(e) and (g) of the Award, though in respect of clause 13.1(g) the drill ships category of vessels was not applicable to its operations.
[72] While I note the Applicant's submissions, the fact is that the Agreement does not specify or limit the types of vessels on which employees work. If the Agreement did, the rate of pay under the Agreement would exceed that specified in the Award for all relevant classifications. However, in the absence of any such limitation, it is possible that during the life of the Agreement the Applicant may commence to perform work on facilities, meaning that prospective Award covered employees employed in the abovementioned classifications would not be better off overall under the Agreement. As such, I could not be satisfied as per s.193(1) of the Act that "each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee."
(d) Clause 7 of the Agreement provides that employees accrue 5 weeks of annual leave per year and 2 weeks of personal leave per year which is less the leave accrued at clause 19 of the Award
[73] Clauses 19 and 20 of the Award provides as follows:
(a) Subject to clause 19.2(c) for each day of duty on a vessel or a day during which the employee is necessarily involved in travelling to or from a vessel or place of work as required by the employer, an employee will accrue an entitlement to 1.153 of a day's leave without loss of pay.
(i) The on duty period commences the day the employee joins the vessel; and
(ii) the off duty period commences the day the employee leaves the vessel.
(b) The extent to which the leave granted is more or less than that actually due will be debited or credited to the employee as less or additional leave.
(a) The leave entitlement in clause 19.1 gives effect to, amongst other things:
(i) leave with pay for weekends and public holidays worked;
(b) Where in connection with a crew change an employee spends more than one off duty day travelling to or from the vessel, the employee will accrue a day off for each additional day or part thereof spent.
(c) In acknowledgement that the swing off day is an off duty day under the provisions of this clause and that an employee may be required to perform duties for all or part of the day, the employee will be entitled to an additional payment of one day's pay at the employee's normal rate of pay as full compensation for any work performed on each such crew change day.
(d) The maximum time off an employee may accrue under this clause is 105 days. Unless agreement has been reached between the employee and employer, an employee will be required to take time off to ensure that the maximum of 105 days is not exceeded. Provided that where an employee who is scheduled on the basis of four weeks on, four weeks off, the maximum accrual will be 84 days.
19.4 Payment of leave on termination of employment
Upon termination of employment, an employee's leave entitlement under this clause will be paid at the salary rate for the last position in which the employee served.
20. Personal/carer's leave and compassionate leave
20.1 Clause 19.1 of this award gives full effect to the NES entitlements to personal/carer's leave and compassionate leave.
[74] At one level it is clear that the Agreement provides what the Award specifies in terms of annual leave (i.e. five weeks per year as per clause 19.2(a)(ii) of the Award) and also gives effect to the NES entitlement in respect of personal/carer's leave (two weeks under the Agreement as opposed to 10 days under the NES[21]) and is more beneficial than the NES in respect of compassionate leave (five days per occasion under clause 7.4 of the Agreement as opposed to two days per occasion under the NES[22]). The Agreement also provides that any accrued and untaken personal/carer's leave will be paid upon termination of an employee's employment. While the Award effectively provides this by virtue of clause 19.4, the Hydrocarbons Award does not include an equivalent provision.
[75] Under the Award the maximum time off an employee can accrue in accordance with clause 19 is 105 days, with the employee's leave entitlement to be paid upon termination of employment. The approach to leave under the Agreement does not see leave beyond that specified in the Agreement accrue (i.e. annual and personal/carer's leave). While the annual salaries payable under both the Agreement and the Award are payable irrespective of whether an employee is on duty or off duty, the differing approach to leave potentially impacts on employees when their employment is terminated. For instance, under the Award an employee who has worked "four weeks on" would have accrued 32.284 days leave (28 days x 1.153). Were the employee's employment to be terminated at the end of their swing that period of leave would be paid out. However, under the Agreement the employee would accrue 2.69 days annual leave (35 calendar days/13) with this and any accrued and untaken personal/carer's leave all that would be paid out on termination (subject to any other accrued annual leave entitlements). In other words, the employee would not be paid for any days off that they might otherwise have been paid for had their employment not been terminated. This is potentially a significant disadvantage to employees which may not be outweighed by the pay out of accrued and untaken personal/carer's leave on termination.
[76] As such, in the absence of further information I cannot be satisfied that as per s.193(1) of the Act that "each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee."
(e) Clause 10 of the Agreement makes it a requirement that employees submit to the Applicant's Fitness for Work and other policies and to fitness for work and medical tests at the Applicant's discretion whereas the Award contains no equivalent requirement
[77] Clause 10 of the Agreement provides as follows:
(a) Employees must attend work in a fit and proper state that will enable them to complete their duties without danger to themselves or others and must at all times comply with Diamond Offshore's policies, including submitting to drug and alcohol testing when required.
(b) Employees agree to undertake fitness and medical tests to ensure that they are able to fulfil the inherent requirements of their position at the direction of Diamond Offshore.
(c) The location and timing of any fitness or medical tests will be at the discretion of Diamond Offshore.
(d) Employees shall receive reasonable notice of any fitness or medical test which they are required to attend."
[78] While the CFMMEU highlighted that the Award did not contain equivalent requirements to those set out in clause 10 of the Agreement, the Respondent submitted that this did not result in employees being worse off.
[79] The inclusion of clause 10 in the Agreement exposes an employee to civil penalty for non-compliance with the Agreement which is potentially disadvantageous for employees. However non-compliance with such a provision would generally attract disciplinary action as opposed to enforcement of the Agreement. As such, while there is some potential disadvantage to employees as a result of the inclusion of the provision in the Agreement, that disadvantage is not significant in my view.
(f) Clause 14 of the Award provides for several benefits for which there is no equivalent in the Agreement
[80] The benefits referred to by the CFMMEU are set out at paragraph [12](f) above. The Applicant contended that these benefits were either irrelevant to its operations, provided for in the Agreement or compensated for by salary (the Applicant's detailed response in respect of particular benefits is set out at paragraph [28] above).
[81] The Applicant's contention that some of these benefits referred to by the CFMMEU were irrelevant to its operations is made on the basis that its employees may only work on the vessels specified in clauses 13.1(e) and (g) of the Award (excluding drill ships under clause 13.1(g) of the Award). However, as noted above the Agreement does not specify or limit the types of vessels on which employees work. Beyond that I note that some of the benefits in clause 14 of the Award are dealt with in the Agreement (albeit in not identical terms to the Award) and/or are referred to in the Employment Policy document provided to employees with the proposed agreement. For instance:
clause 5.5(b) of the Agreement provides that employees accommodation and meals will be provided to employees during travel to and from the rig with the Employment policy document; and
the Employment Policy document specifies at Item 3 that short term disability insurance is provided for employees (excluding casual, fixed-term and maximum-term employees) and at Item 6.1 that employees will be provided with personal protective equipment free of charge.
[82] Further, with regard to benefits such as the shared accommodation, hard-lying and communication allowances, calculating these payments on the basis of an even-time roster that sees an employee work 182.5 days a year and based on the Applicant's submissions that employees share a 2 berth cabin results in a value of the allowances being $6537.15 (based on $35.82/day), $8174.18 (based on $44.79/day) and $57.46 (based on $4.42/completed fortnight) respectively. Those amounts total $14,768.79 or $14,711.33 excluding the communication allowance (which does not apply to floating production facilities). (By way of background, I have not included an amount for the Vessels temporarily engaged in carriage and handling of cargo allowance on the basis of the Applicant's submission that the allowance does not apply to the vessels it operates.) Applying those amounts to the aggregate salaries payable under the Award would see a number of classifications not better off overall under the Agreement. For instance in respect of those vessels which the Applicant contends it operates, the classifications of Master and Chief Engineers on self-propelled drilling vessels and thruster assisted vessels (excluding drill ships) and Master on non-propelled MODUs under tow would be worse off under the Agreement as a result of the exclusion of these benefits. Given that the operation of the Agreement is not explicitly limited to those vessels specified by the Applicant, a number of other classifications on other vessels covered by the Award would also be worse off under the Agreement.
[83] I would note that in the analysis provided in the Applicant's submissions comparing of earnings under the Agreement and the Award (see paragraph [5] above), the Applicant has incorrectly calculated the value of the shared accommodation and hard-lying allowances. Specifically, the Applicant has used amounts of $5.12 and $6.399 per day respectively as opposed to $35.82 and $44.79 per day respectively. Accordingly, the Applicant's analysis underestimates what a Master would earn under the Award by over $12,600.
(g) Other issues - clauses 5.2, 4.8 and 13 of the Agreement
[84] While I note the CFMMEU's contention that wages increases under clause 5.2 of the Agreement are at the Applicant's discretion whereas the Award rates of pay are adjusted annually as a result of the Annual Wage Review, it should be remembered that the BOOT is a point in time test. More specifically, s.193(1) of the Act provides that an agreement passes the BOOT if the Commission "is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee." Test time is defined at s.193(6) of the Act as "the time the application for approval of the agreement by the FWC was made under subsection 182(4) or section 185." As such, I do not accept the CFMMEU's contention that employees would not be better off overall under the Agreement as a result of clause 5.2 of the Agreement.
[85] The CFMMEU also submitted that the Agreement failed the BOOT because clause 4.8 imposed a number of obligations on employees for which there was no equivalent Award provision. The Applicant on the other hand submitted that the provision simply set out the employee's duties and responsibilities, with the clause a standard provision which was typically included in a similar form in most employment contracts and enterprise agreements.
[86] Clause 4.8 of the Agreement provides as follows:
(a) devote all their time, attention and skill, during hours of work to the performance and discharge of their duties;
(b) safely carry out their duties to the standard required by Diamond Offshore;
(c) act honestly and diligently in the performance of their duties;
(d) comply with the lawful and reasonable directions of Diamond Offshore;
(e) present for work in a professional manner and, where required, in the uniform provided by Diamond Offshore;
(f) apply the highest standards of integrity and confidentiality to ensure Diamond Offshore's activities are preserved;
(g) not (except in the course of properly carrying out their duties as in Employee of Diamond Offshore) misuse, divulge or disclose any information relating to Diamond Offshore including (but not confined to) information concerning Diamond Offshore, or the group's finances, profits, trade secrets, processes, customers, suppliers, plans, operations, contracts, tenders, commercial arrangements, transactions or any other information;
(h) not use their position at Diamond Offshore to obtain gifts or financial incentives from external clients competitors;
(i) provide information to Diamond Offshore should a breach of safety, environment, integrity would faith, or misconduct be observed will be known in relation to another Employee or agent acting for Diamond Offshore;
(j) undertake technical training and all other training as directed and comply with all new practices and procedures;
(k) act in the best interests of Diamond Offshore and do nothing to damage the reputation of Diamond Offshore will bring Diamond Offshore into disrepute; and
(l) abide by all laws, regulations, licences, permit conditions and safe working procedures that apply to Diamond Offshore's operations."
[87] While the employee duties and responsibilities in clause 4.8 of the Agreement are not reflected in the Award as posited by the Applicant they may be no more than a statement of what is set out in an employee's contract of employment or duty statement or set out an obligation that emanates from the common law, e.g. the requirement to comply with lawful and reasonable directions (clause 4.8(d)). However, there is no material before the Commission which indicates that this is the case in respect of the Applicant's employees. As previously stated in respect of clause 10 of the Agreement, the inclusion of the employee duties and responsibilities in the Agreement exposes an employee to civil penalty for non-compliance with the Agreement which is potentially disadvantageous for employees. However non-compliance would generally attract disciplinary action as opposed to enforcement of the Agreement. As such, while there is some potential disadvantage to employees as a result of the inclusion of the provision in the Agreement, that disadvantage is not significant in my view.
[88] Finally, the CFMMEU highlighted that the Agreement's dispute resolution procedure (clause 13) only provided for arbitration by the Commission where both parties consented. I note that the dispute resolution provision of the underpinning modern awards provides in both cases at clause 9.3 that "The parties may agree on the process to be utilised by the Fair Work Commission including mediation, conciliation and consent arbitration" (underlining added). I further note that the Full Bench in Woolworths noted in its decision that:
• the Full Bench in Ampol Refineries (NSW Pty Ltd and Australian Institute of Marine and Power Engineers[23] (Ampol) indicated that in its view s.170LT(8) of the Workplace Relations Act 1996 required a procedure for preventing and settling disputes, not one which guaranteed a settlement in each case; and
[89] Against that background, I am satisfied that the Agreement's dispute resolution procedure satisfies the requirements of s.186(6) of the Act and is not less beneficial than the equivalent award provisions.
[90] In summary, the above issues would not see the Agreement fail to pass the BOOT.
[91] For the reasons outlined above I am not satisfied that the Agreement was genuinely agreed to by employees. Accordingly I am unable to approve the Agreement and the application will be dismissed. An order to that effect will be issued in conjunction.
[92] I would also observe that even if I was satisfied the Agreement had been genuinely agreed to there are a number of issues going to the BOOT which would have to be satisfactorily addressed by way of acceptable undertakings before the Agreement could be approved.
L. Edmonds on behalf of the Construction, Forestry, Maritime, Mining and Energy Union (previously the Maritime Union of Australia)
A. Williamson on behalf of the Australian Institute of Marine and Power Engineers
Captain D. Pearson on behalf of the Australian Maritime Officers Union
[8] [2018] FWCFB 1772 at [33]- [36]
[12] See response to Question 1.3 in the Form F17
[14] Annexure to Applicant's submissions regarding the application for approval of the Diamond Offshore General Company Enterprise Agreement 2018- 2022
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