| [2015] FWCFB 4422 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
VICE PRESIDENT HATCHER |
|
Appeal against decision [2015] FWCA 2389 of Commissioner Simpson at Brisbane on 7 April 2015 in matter number AG2015/720.
Introduction
[1] The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union and the Australian Manufacturing Workers’ Union (unions) have filed a notice of appeal under s.604 of the Fair Work Act 2009 (FW Act) in which they seek permission to appeal and appeal a decision of Commissioner Simpson issued on 7 April 2015 1 (Decision). In the Decision the Commissioner approved an enterprise agreement, the Sustaining Works Pty Limited Queensland Gas Field Enterprise Agreement 20152 (Agreement), after being satisfied that the approval requirements in ss.186, 187 and 188 of the FW Act had been met. The unions were not aware of the existence of the Agreement prior to its approval and accordingly did not seek to make submissions before the Commission opposing its approval. In their appeal the unions contend that the Commissioner erred in concluding that the “fairly chosen” requirement was satisfied.
[2] The “fairly chosen” approval requirement is contained in subsections 186(3) and (3A) of the FW Act, which provide:
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.
Factual background
[3] The relevant facts and circumstances of the matter require some description. The unions sought the admission of new evidence in the appeal, in the form of two affidavits affirmed by Mr Peter Ong, an organiser for the CEPU, on 15 May 2015 and 2 June 2015 respectively. This was opposed by Sustaining Works Pty Limited (Sustaining Works), but in the event that Mr Ong’s evidence was admitted it sought the admission of two affidavits in reply affirmed by Mr Martyn Paul Raymont, an Operations Manager employed by Leighton Contractors Pty Limited (Leighton), on 28 May 2015 and 3 June 2015 respectively. We have decided to admit the affidavits of Mr Ong and Mr Raymont in the appeal, because the unions, not being aware of the matter, did not have the opportunity to adduce any evidence before the Commissioner, and because we consider that the factual material contained in the affidavits provides considerable assistance to a proper understanding of the factual context. The short factual summary which follows is based to a large degree upon the contents of these affidavits.
[4] Sustaining Works is a wholly owned subsidiary of Leighton. Leighton is a major civil construction company which has been significantly involved in the construction of major gas projects in Queensland. The Leighton Contractors Pty Ltd APLNG Upstream Project Union Greenfields Agreement 2012 3 (APLNG Agreement) covered work performed by Leighton’s employees on these major gas projects. Sustaining Works was incorporated in late November 2014. The evidence of Mr Raymont was that Sustaining Works was formed to allow Leighton to competitively bid for smaller scale “sustaining operations work needed and staged to replenish the CSG [Coal Seam Gas] supply as the early wells reached exhaustion”. The APLNG Agreement did not cover this work.
[5] Leighton was successful in late 2014 in obtaining work across three field compression stations in the Surat Basin, including the Lauren Field Compressor Station. Leighton needed an enterprise agreement to cover all that work, and Sustaining Works commenced negotiations for the Agreement in February 2015 for that purpose.
[6] The Agreement was made on 27 March 2015. Clause 2.3 of the Agreement provides:
“2.3 Application of Agreement
This Agreement will apply to the Employer and the Employees engaged in classifications contained in this Agreement on the construction, installation, operations, maintenance and/or miscellaneous services works of coal seam gas pipelines and associated facilities; process facilities and compressor stations including civil, mechanical, electrical, or any minor construction work, or any work to operate, inspect, repair, replace, renovate, rehabilitate, refurbish, revamp, service, maintain, install, overhaul, upgrade and/or upkeep all or any Gas Wells, Central Processing Plants, Field Compression Stations, trunklines and any other infrastructure above or below ground associated with gas gathering facilities of coal seam gas in or around the Surat Basin Queensland where the Employer has a contract with the owners of the assets to perform such work for the Client in the State of Queensland provided that it shall not apply to the excluded personnel.”
[7] The “excluded personnel” referred to at the end of clause 2.3 are identified in clause 2.4 as being management and supervisory personnel, engineers/surveyors and employees engaged in the offsite manufacturing or fabrication of goods, materials and equipment. The classifications in the Agreement are set out in clause 5.1. There is an entry classification, and above that are five levels which encompass the following job functions and descriptions:
Labourer;
Survey Instrument Hand;
Traffic Controller;
Chainperson;
Storeperson;
Dogman;
Rigger;
Scaffolder;
Excavator Operator;
Sideboom Operator;
Grader Operator;
Front End Loader Operator;
Backhoe Operator;
Non Slewing Mobile Crane Operator;
Carpenter;
Electrician;
Plumber;
Painter;
Boilermaker;
Mechanical Fitter;
Mechanic; and
Special Class Tradespersons.
[8] An application for approval of the Agreement was lodged in the Commission on the same day that the Agreement was made. The statutory declaration accompanying that application disclosed that as of that date, Sustaining Works only employed five people who were covered by the Agreement. All five of these employees were concreters employed in the Surat Basin in Queensland.
[9] There was a meeting between representatives of Leighton and the unions about the Agreement on 8 April 2015. One of the representatives of Leighton explained the reason why the Agreement was made in the following terms:
“The client has told us we have to reduce our cost by 30 percent. We have decided to reduce labour costs to assist with this. Sustaining Works has been created and has an Agreement which reflects how we are going to reduce our costs”.
[10] When the same representative was asked why there was no attempt to try and negotiate an agreement with the unions to achieve what was needed, she replied: “Because you would have told me to get fucked”.
[11] At the time of the appeal hearing, Sustaining Works only employed two persons, who were concreters, who were covered by the Agreement. They were only expected to be employed for a few further weeks. These employees’ labour was supplied by Sustaining Works to Leighton, Leighton being the entity which had contracted to carry out the relevant project work. Another separate labour hire business, Protech Working Recruitment Pty Ltd (Protech), has been engaged by Leighton to supply labour for this work and, although this business is not covered by the Agreement, the labour it has supplied has been paid in accordance with the terms of the Agreement. In excess of 100 employees were being supplied by Protech in this manner at the time of the hearing.
Submissions
Unions’ submissions
[12] As earlier stated, the basis of the unions’ appeal was that the Commissioner erred in being satisfied under s.186(3) of the FW Act that the group of employees covered by the Agreement was fairly chosen. In support of this proposition the unions submitted:
(1) The selection of the group covered by the Agreement was unfair because it undermined collective bargaining in a manner which was not compatible with Part 2-4 of the FW Act and was contrary to the purpose and policy of the FW Act and the objects of the FW Act. To the extent that this proposition was inconsistent with the judgment of the Federal Court Full Court in Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd 4, it was respectfully submitted that this decision was wrong and should not be followed.
(2) In circumstances where the Agreement was negotiated and made with five concreters, there could not be satisfaction that the selection of a group of employees encompassing the broad range of job functions set out in the classification structure was fair. The selection of such a broad group at a time when Sustaining Works only engaged the five concreters meant that future employees were deprived of the right to collectively bargain.
(3) The Full Court’s decision in CFMEU v John Holland acknowledged that in assessing whether the fairly chosen requirement was satisfied, it was necessary to have regard to the business rationale for the scope of the proposed agreement and deal with any possibility of unfair exploitation. In this respect, the evidence disclosed that at the time the Agreement was made Sustaining Works knew that it had been awarded a contract for a substantial piece of construction work and would need more employees. The Agreement contained terms and conditions substantially below the “market rates” for gas projects established by agreements entered into by Leighton and other companies - in particular the APLNG Agreement. This was evidence, the unions submitted, that the reason for the extended coverage clause was to obviate the need to bargain with the entire workforce or to bargain with relevant unions for a greenfields agreement and thereby to undercut the established market rates.
[13] The unions submitted that permission to appeal should be granted because the appeal raised important issues of principle which were likely to be directly relevant to future applications for approval of enterprise agreements and to the scheme of bargaining, and because the Decision was attended by serious jurisdictional error.
[14] The unions sought that the Decision be quashed, and that the application for approval of the Agreement be reheard and dismissed.
Sustaining Works’ submissions
[15] Sustaining Works submitted firstly that the unions did not have standing to bring the appeal because neither was a “person who is aggrieved” by the Decision as required by s.604(1). Sustaining Works further submitted that the appeal was not in the public interest and permission to appeal should not be granted because the issues raised by the appeal had been dealt with by the Federal Court Full Court in CFMEU v John Holland.
[16] In the event that permission to appeal was granted, it was submitted that the appeal should be dismissed because there was no error in the Commissioner’s conclusion that the “fairly chosen” requirement in s.186(3) was satisfied. In determining whether a group of employees was fairly chosen, whether the Agreement undermined collective bargaining was not a relevant consideration and in any event the Agreement did not undermine collective bargaining. The FW Act enabled employees who were employed at the time an enterprise agreement was made, even if few in number, to agree to terms and conditions of employment that would bind future employees employed under the terms of that agreement, and did not prevent employees making an agreement which covered classifications other than their own. It was incorrect to find that as the Agreement was made with a small number of employees, it improperly denied future employees an opportunity to bargain, since the deprivation of an opportunity to bargain arose when any new employee was engaged during the term of an agreement. These propositions, it was submitted, were firmly established in CFMEU v John Holland.
[17] Finally, Sustaining Works contended that the proposition that the Agreement provided for rates below the established market rates for gas projects was an irrelevant consideration provided that the better off overall test in s.193 was satisfied. In any event, it was submitted, the work covered by the Agreement was not in the same labour market as major gas projects, being work which was more of a “rats and mice” nature.
Consideration
Standing to bring the appeal
[18] Section 604 of the FW Act provides that a “person who is aggrieved by a decision” may appeal the decision by applying to the Commission. In CEPU and AMWU v Main People Pty Ltd 5 a Full Bench of the Commission considered the issue of standing in circumstances where the appellant unions sought to appeal the approval of an enterprise agreement. In that appeal neither union had been a bargaining representative for the agreement and there was no evidence that any employees who voted to approve the agreement were members of either union or had asked the unions to represent their interests in relation to the Agreement. The Full Bench determined:
“[7] The appellants have the right to represent employees under the terms of the Agreement. Moreover, given the nature of the respondent's business, and the industry within which it operates, we are satisfied that it is likely that some members of the appellants will be employed by the respondent in the future, in classifications covered by the Agreement. In the circumstances of this case we consider that this gives the appellants an interest in the decision to approve the Agreement beyond that of an ordinary member of the public. Accordingly, we are satisfied that the appellants have standing to appeal the decision to approve the Agreement.”
[19] We consider that this reasoning and conclusion are applicable to this appeal. Although there is no evidence that the employees who made the Agreement were members of the unions, and the unions were not bargaining representatives for the Agreement, we consider that the unions have the requisite interest in the decision to approve the Agreement in that they have extensive coverage in the gas industry and it is likely, to the extent that Sustaining Works employs persons under the Agreement in the future, that some will be members of the unions. We therefore reject the challenge to the unions’ standing to bring the appeal.
Fairly chosen issue
[20] We consider that the first two of the unions’ submissions, earlier identified, may be determined by reference to the Federal Court Full Court decision in CFMEU v John Holland. The proposition that an enterprise agreement which is made by an employer with a small group of employees but is drafted to apply to a much larger group or class of employees does not comply with the “fairly chosen” requirement in s.186(3) because it undermines collective bargaining and is contrary to the policy, purpose and objects of the FW Act was firmly rejected in CFMEU v John Holland. Buchanan J (with whom Besanko and Barker JJ relevantly agreed) said in relation to this proposition:
“[66] The second error found by the primary judge is crystallised in the following passages in the Full Bench decision:
[30] ... In this case three employees on one site have bargained and agreed on an agreement with potentially very wide application to other employees who have not engaged in bargaining under Part 2-4 of the Act and will not be given the opportunity to bargain. ...
...
[34] ... We also consider that the operation of the Agreement, as made with the three employees, would undermine collective bargaining by other employees in a manner not compatible with the objects of Part 2-4, ...
[67] Although the Full Bench was directed by s 578(a) to take into account the objects of Part 2-4 (as stated in s 171) it is far from clear how the Full Bench was able to conclude that an agreement made with three employees could “undermine” collective bargaining, or that it was relevant to state any conclusion in such broad terms.
[68] It is not correct, with respect, to say (or suggest or infer) as the Full Bench did in [30], that there were in fact other employees who had been denied a chance to bargain. The “other employees” referred to were potential (and unknown) possible future employees who would never have a chance to bargain unless there was no agreement in place when they were engaged. Deprivation of that opportunity would arise in the case of any employee engaged during the term of an agreement.
[69] It should be noted that the statutory objective in s 171(a) (which I set out earlier) refers to “collective bargaining in good faith”, but it is apparent that this statutory objective, and the reference in s 171(b) to “good faith bargaining”, must be understood in the overall context set by Part 2-4 of the FW Act.
[70] Neither “collective bargaining” nor “good faith” is defined by the FW Act. There are, however, a number of procedural directions and discretions in the FW Act which concern “good faith bargaining requirements” (see s 228 and following). They include facilities for bargaining representatives to seek bargaining orders, majority support determinations and scope orders. None of those procedures was relevant to the present case.
[71] It has not been suggested that it was impermissible for three employees to be asked to make an agreement or vote to do so. The FW Act permits such an agreement to be made and requires that it be approved if the statutory tests are met. Unless the proposed agreement failed to meet a relevant statutory test there could be no basis for introducing a further, more general, requirement of the kind adopted by the Full Bench.
[72] In my respectful view, the criticism expressed by the Full Bench in [30] and [34] of its decision which I set out earlier was misplaced. The “employees” to whom the Full Bench referred were future employees. It was not to the point that an agreement was made before some employees were engaged: that was a feature of the process. It would be the inevitable result also of any greenfields agreement when no employee covered by the agreement would have an opportunity to vote to accept its terms…”
[21] In his judgment Besanko J added the following observation:
“[3] Secondly, I think the concept of collective bargaining will have quite a limited role in determining whether the group of employees covered by the agreement was fairly chosen. It is true that enterprise-level collective bargaining is referred to in the object of the Act (s 3(f)), and that s 578(a) requires the Fair Work Commission to take into account the objects of the Act in performing functions or exercising powers in relation to a matter under the Act. Furthermore, the special expertise of the Fair Work Commission must be acknowledged. Nevertheless, it was not argued by the appellant that an agreement voted on by employees falling within the particular job classifications could not cover other job classifications. To apply a criterion of collective bargaining in those circumstances involves a comparison between the number of employees who voted on the agreement, and the number who might be covered by the agreement. Reasonable minds not only might differ but are likely to differ as to when the comparison is such that collective bargaining is engaged as a relevant consideration under s 186(3). That suggests, to my mind, that if the concept of collective bargaining has a role in the determination of the issue posed by s 186(3) of the Act, it is quite a limited one.”
[22] The passage from the judgment of Buchanan J quoted above (at [68] and [72] in particular) also stated a firm rejection of the propositions advanced in the unions’ second submission earlier set out, namely that the “fairly chosen” requirement could not be satisfied where a small group of employees entered into an agreement covering a much broader group and thereby deprived future employees in the broader group of the right to collectively bargain. As Buchanan J pointed out, under the FW Act it is a consequence of the making of any enterprise agreement (including greenfields agreements, the negotiation of which does not involve any employees) that future employees are prevented from engaging in bargaining under the FW Act while the agreement remains within its nominal term. That therefore cannot be a reason, by itself, to conclude that the group of employees covered by an enterprise agreement was not fairly chosen.
[23] The submission that CFMEU v John Holland was wrongly decided is noted. It is not a submission which it is open for us to consider.
[24] It was acknowledged in CFMEU v John Holland that deliberate manipulation of the agreement-making procedures under the FW Act might found a conclusion that the group of employees covered by the agreement was not fairly chosen. Buchanan J said (emphasis added):
“[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.”
[25] The unions relied upon the above passage in support of their third submission that the business rationale for the selection of the group to be covered by the Agreement was illegitimate because it was concerned with undercutting “market rates” for gas project work. We cannot accept that submission. The evidence before us disclosed that Sustaining Works was established for the specific purpose of obtaining small-scale supplementary gas supply project work in the Surat Basin. Leighton’s costs were not competitive in the market for this work, and accordingly Sustaining Works needed an enterprise agreement with lower rates than the APLNG Agreement in order to assist in achieving the necessary reduction in costs. It was also necessary to have an enterprise agreement which covered the whole range of functions required by this work, which the APLNG Agreement did not have.
[26] There was no question that the Agreement satisfied the better off overall test, and the statutory declaration in support of the application for approval of the Agreement showed that certain terms and conditions including wage rates were markedly more beneficial than the reference instrument, being the Hydrocarbons Industry (Upstream) Award 2010 6. In those circumstances, we do not consider that the fact that the Agreement did not match the rates and conditions in the APLNG Agreement is relevant to the question of whether the group of employees covered by the Agreement was fairly chosen. While it is entirely understandable that the unions strongly desired, in the interests of their current and future members, to maintain the standards established by the APLNG Agreement on all future gas project work, we nonetheless consider that there was an intelligible and legitimate business rationale for the selection by Sustaining Works of the employees to be covered by the Agreement. Further, while Sustaining Works may have had the option to bargain for a greenfields agreement with the unions rather than taking the course it did, its apparent assessment that it could not have achieved the outcome it required in bargaining with the unions provided a legitimate rationale for not exercising that option. In any event, as was made clear in CFMEU v John Holland, the FW Act does not contain any policy preference for greenfields agreements over other types of agreements, and where a greenfields agreement is made and approved, its effect is likewise to prohibit collective bargaining under the provisions of the FW Act while the agreement remains within its nominal term.
[27] There was no evidence in this case of deliberate manipulation of the agreement-making process. There was no suggestion that the five employees with whom the Agreement was made were not bona fide employees of Sustaining Works at the relevant time. Events since the Agreement was made do not demonstrate any expansion of the Sustaining Works workforce into a wider group which has been deprived of the right to collectively bargain; Sustaining Works actually employed less persons under the Agreement at the time of the appeal hearing than at the time the Agreement was made. The fact that Protech supplies labour to Leighton and pays that labour in accordance with the terms of the Agreement is not a relevant consideration. Although the business rationale for Leighton using Protech rather than Sustaining Works to supply labour is not clear, it is nonetheless the case that Protech and its employees are not covered by the Agreement and, unless some other enterprise agreement already applies to their employment, have the capacity to engage in enterprise bargaining for their own agreement should they wish to do so. The unions’ third submission is therefore rejected.
Another issue
[28] In the course of the appeal hearing, a separate issue was identified which was not raised by the unions’ notice of appeal but which we consider is necessary for us to deal with. Section 185(2)(a) of the FW Act requires, in relation to an application for approval of an enterprise agreement, that the application be accompanied by “a signed copy of the agreement”. Section 185(5) empowers the making of regulations prescribing requirements relating to the signing of enterprise agreements. In that respect, reg.2.06A(2) of the Fair Work Regulations 2009 provides:
(2) For paragraph 185(2)(a) of the Act, a copy of an enterprise agreement is a signed copy only if:
(a) it is signed by:
(i) the employer covered by the agreement; and
(ii) at least 1 representative of the employees covered by the agreement; and
(b) it includes:
(i) the full name and address of each person who signs the agreement; and
(ii) an explanation of the person’s authority to sign the agreement.
[29] The copy of the Agreement which accompanied Sustaining Works’ application for approval of the Agreement was not signed in accordance with reg.2.06A(2). It was signed by two persons “for and on behalf of the Employees”. The first of these gave his name as “C. Fabar”. That is not a full name. The “address” given was “Leightons Chinchilla”. That is not, in accordance with common understanding, an address. The second employee, Kieth [sic] Johnson, gave an “address” as “c/o Leighton Contractors”. That is also clearly not a proper address.
[30] Section 185(2) is expressed in mandatory terms. Section 186(1) empowers approval of an enterprise agreement only if “an application for the approval of an enterprise agreement is made under section 185 …”. We consider that an application “under” s.185 must be one made in accordance with it. Further, s.585 requires that “An application to the FWC must be in accordance with the procedural rules (if any) relating to applications of that kind”. Accordingly it is not open to the Commission to simply ignore a failure to comply with the signature requirements. Section 586 empowers the Commission to deal with errors and irregularities in applications and associated documents as follows:
586 Correcting and amending applications and documents etc.
The FWC may:
(a) allow a correction or amendment of any application, or other document relating to a matter before the FWC, on any terms that it considers appropriate; or
(b) waive an irregularity in the form or manner in which an application is made to the FWC.
[31] However, because the signature issue was never raised before the Commissioner, there was never any opportunity for the exercise of the power in s.586 to deal with the problem. As a result the Commissioner’s approval of the Agreement was arguably not in accordance with s.186(1) because he did not have before him an application made in accordance with s.185.
[32] Having regard to ss.604 and 607, we consider that we cannot ourselves exercise the powers available under s.586 without at least granting permission to appeal. We consider that it is appropriate to grant permission to appeal in the public interest in order to ensure that the mandatory provisions of the FW Act which we have identified are complied with. Pursuant to s.586(a), we will allow Sustaining Works to file a copy of the Agreement which is signed in accordance with the requirements of reg.2.06A(2) within 14 days of the date of this decision. Once this is done, we will exercise our power in s.607(3)(a) to confirm the Decision. In the event that some unanticipated difficulty arises, we grant liberty to apply. If a signed copy of the Agreement is not filed, we will hear from the parties further as to what course should be taken in that circumstance.
Conclusion
[33] We order as follows:
(1) Permission to appeal is granted.
(2) Pursuant to s.586(a) of the FW Act, Sustaining Works is allowed to correct its approval application by lodging in the Commission and serving on the unions a copy of the Agreement which is signed in accordance with reg.2.06A(2) of the Fair Work Regulations 2009 within 14 days of the date of this decision.
(3) Liberty to apply is granted.
VICE PRESIDENT
Appearances:
W. Friend QC with C. Massy solicitor for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and the Australian Manufacturing Workers’ Union.
J. Murdoch QC with M. Coonan solicitor for Sustaining Works Pty Limited.
Hearing details:
2015.
Brisbane:
3 June.
4 [2015] FCAFC 16
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