[2010] FWAFB 2762

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FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

SENIOR DEPUTY PRESIDENT ACTON DEPUTY PRESIDENT SAMS COMMISSIONER WILLIAMS

MELBOURNE, 15 APRIL 2010

Appeal against the decision [2010] FWA 16 of Commissioner Smith in AG2009/19926 – appeal against the decision [2010] FWA 339 of Commissioner McKenna in AG2009/22148, AG2009/22155, AG2009/22162, A2009/22168, A2009/22171, A2009/22173, A2009/22285, A2009/22343 and A2009/22352.

Introduction

[1] These are appeals against:

(a) a decision 1 of Commissioner Smith of 5 January 2010 refusing to approve the Bupa Care Services, ANF and HSU Enterprise Agreement 2009,2 which we will refer to as the BUPA Agreement; and

(b) a decision 3 of Commissioner McKenna of 20 January 2010 refusing to approve the following single – enterprise agreements, which we will refer to as the Retail Agreements:

(i) P & A Securities Pty Ltd as trustee for the D’Agostino Family Trust Enterprise Agreement; 4

(ii) Southclose Pty Ltd as trustee for the Macphil Unit Trust Enterprise Agreement; 5

(iii) Micawell Pty Ltd as trustee for the Mockridge Family Trust Enterprise Agreement; 6

(iv) Casino Investments Pty Ltd Enterprise Agreement; 7

(v) Mad Mex Fresh Mexican Grill Pty Ltd Enterprise Agreement; 8

(vi) Robbies NSW Pty Ltd Enterprise Agreement; 9

(vii) Guns ‘r’ Us Pty Ltd as trustee for the In God We Trust Enterprise Agreement; 10

(viii) Eagle People Pty Ltd Enterprise Agreement; 11

(ix) Edward Kendall Enterprises Pty Ltd Enterprise Agreement. 12

[2] The appeals made by the employer covered by the BUPA Agreement and the employers covered by the Retail Agreements were dealt with concurrently due to the similarity in the clauses in the single-enterprise agreements that lead the Commissioners to refuse approval.

[3] The appeals were made under s.604 of the Fair Work Act 2009 (Cth) (the FW Act).

Section 604 provides:

“604(1) A person who is aggrieved by a decision:

(a) made by FWA (other than a decision of a Full Bench or the Minimum Wage Panel) …

may appeal the decision, with the permission of FWA.

604(2) Without limiting when FWA may grant permission, FWA must grant permission if FWA is satisfied that it is in the public interest to do so.

Note: Subsection (2) does not apply in relation to an application for an unfair dismissal (see section 400).

604(3) A person may appeal the decision by applying to FWA.”

[4] The Australian Council of Trade Unions and the Australian Chamber of Commerce and Industry intervened in the proceedings.

Preferred hours clauses

[5] The relevant clause in the BUPA Agreement that lead to Commissioner Smith refusing to approve the BUPA Agreement is as follows:

“33.8 Preferred hours arrangement

33.8.1 An employee may wish to work additional hours at particular times or on a continuous basis or during particular roster periods due to personal circumstances. Examples of personal circumstances are family and/or carer’s responsibilities and/or financial circumstances, but a may also include other situations.

33.8.2 An employee may at his or her initiative advise the employer in writing of the additional hours of work that he or she wishes to be rostered to work across the available shifts (at any of the employer’s facilities covered by this agreement), but it is not compulsory for an employee to do so. Where an employee requests to work additional hours on an available shift, the employer will endeavour to roster the employee to work on that shift.

33.8.3 Where an employee requests to work additional hours on an available shift at any of the employer’s facilities covered by this agreement, the employee will be paid at their ordinary hourly rate of pay (plus any applicable shift penalties). In such circumstances, overtime payments will not be payable. Further, there is to be an adequate break between periods of work that are the subject of an arrangement covered by this subclause.

33.8.4 Where the employer requests or requires an employee to work additional hours, this time will be paid at normal overtime rates. The operation of this subclause is not intended to undermine any historical overtime arrangement(s) requested or required by the employer.

33.8.5 An employee may give written notice to change his or her preferred hours arrangements, or cease a preferred hours arrangement and revert to the ordinary spread of hours under the agreement at any time. Unless otherwise agreed, this change will take effect from the next roster to be posted.

33.8.6 The operation of this subclause shall be trialled and then reviewed by the persons covered by this Agreement after 6 months in operation. Should any issue raised in that review process not be resolved, it may be referred to FWA in accordance with the dispute resolution procedure in clause 41 of this Agreement.”

[6] The relevant clauses in the Retail Agreements that led Commissioner McKenna to refuse to approve the Retail Agreements are similar to the following from the Robbies NSW Pty Ltd Enterprise Agreement, although the title categories and applicable penalty in clause 5 may vary between the Retail Agreements:

“5. Instead of the wage rates outlined in section 11 of this agreement, you will be entitled to a loaded rate during the following times, based on the rates set out in section 12:

Title	Applicable Penalty
Public Holidays	Full time and part time employees: 250% of the hourly rate of the applicable full time classification outlined in section 12 of this agreement. (minimum payment for 4 hours) Casual employees: 250% of the hourly rate of the applicable casual classification outlined in section 12 of this agreement (minimum payment for 4 hours)
Saturday	Full time and part time employees: 150% of the hourly rate of the applicable full time classification outlined in section 12 of this agreement.
Sunday	Full time and part time employees: 150% of the hourly rate of the applicable full time classification outlined in section 12 of this agreement.
Late Work	All employees: (Monday to Friday, 10pm – 12.00 midnight) An additional hourly amount of $1.3455 (minimum payment of $1.93) (Monday to Friday, 12.00 midnight to 6.00 am – includes midnight Sunday) An additional hourly amount of $1.963 (minimum payment of $1.93)
Additional Hours (as defined in clause 29)	Full time and part time employees: 150% of the hourly rate of the applicable full time classification outlined in section 12 of this agreement for the first 3 hours and 200% thereafter and 200% on Sunday. (minimum 2 hours for work performed on a rostered day off) Casual employees: 173% of the hourly rate of the applicable full time classification outlined in section 12 of this agreement for the first 3 hours and 223% thereafter and 223% on Sunday. (minimum 2 hours for work performed on a rostered day off)

6. At any time during the operation of this agreement, you may elect to work during the times outlined in section 5 by nominating your preferred hours of work.

7. If you elect to work your nominated preferred hours then you will be paid at the basic hourly rate of pay (as defined at clause 121) even if you may have otherwise received an additional amount for working those hours.

8. You may consent to working your preferred hours at the basic hourly rate of pay because these working hours suit your circumstances (eg help you balance your work and family responsibilities).

9. To nominate your preferred hours of work you will need to complete the preferred hours of work form that is contained in Schedule 1 to this agreement.

10. By completing this form, we are not obligated to provide you with work for these preferred hours.”

[7] Schedule 1 as mentioned in clause 9 above is as follows:

“

Schedule 1

Election of Preferred Hours Form

I elect to work preferred hours as stated below and I understand that Robbies NSW Pty Ltd is under no obligation to provide me with work for these preferred hours.

I consent to working these hours at the basic hourly rate of pay because these working hours suit my circumstances.

I understand that my employer cannot require me to sign this preferred hours form.

I understand that if I make such an election to work my preferred hours at the basic hourly rate of pay then I will not be entitled to the additional amounts for working these times as outlined in clause 5 of this agreement.

I nominate the below hours of work as my preferred hours for which I am willing to be paid at the basic hourly rate of pay only.

Time	Please sign to indicate your acceptance
Public Holidays
Saturday
Sunday
Late Work
Additional Hours (as defined in clause 29)

I understand that I may change my preference at any time by providing written notice of my request to my employer.

Employee Signature		Employer Signature
Date		Date”

Approval of enterprise agreements

[8] Sections 186 and 187 of the FW Act set out the requirements that must be met for Fair Work Australia to approve an enterprise agreement. They provide:

“SECTION 186 WHEN FWA MUST APPROVE AN ENTERPRISE AGREEMENT—GENERAL REQUIREMENTS

Basic rule

186(1) If an application for the approval of an enterprise agreement is made under section 185, FWA must approve the agreement under this section if the requirements set out in this section and section 187 are met.

Note: FWA may approve an enterprise agreement under this section with undertakings (see section 190).

Requirements relating to the safety net etc.

186(2) FWA must be satisfied that:

(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: FWA 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

186(3) FWA must be satisfied that the group of employees covered by the agreement was fairly chosen.

186(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, FWA must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.

Requirement that there be no unlawful terms

186(4) FWA 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

186(4A) FWA must be satisfied that the agreement does not include any designated outworker terms.

Requirement for a nominal expiry date etc.

186(5) FWA must be satisfied that:

(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 FWA approves the agreement.

Requirement for a term about settling disputes

186(6) FWA must be satisfied that the agreement includes a term:

(a) that provides a procedure that requires or allows FWA, 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: FWA 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 FWA 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).

SECTION 187 WHEN FWA MUST APPROVE AN ENTERPRISE AGREEMENT—ADDITIONAL REQUIREMENTS

Additional requirements

187(1) This section sets out additional requirements that must be met before FWA approves an enterprise agreement under section 186.

Requirement that approval not be inconsistent with good faith bargaining etc.

187(2) FWA 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

187(3) If a bargaining representative is required to vary the agreement as referred to in subsection 184(2), FWA 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

187(4) FWA 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.

Requirements relating to greenfields agreements

187(5) If the agreement is a greenfields agreement, FWA must be satisfied that:

(a) the relevant employee organisations that will be covered by the agreement are (taken as a group) entitled to represent the industrial interests of a majority of the employees who will be covered by the agreement, in relation to work to be performed under the agreement; and

(b) it is in the public interest to approve the agreement.”

[9] The FW Act also requires that an enterprise agreement include a flexibility term. In this regard, the FWA Act states at ss. 202-204 that:

“SECTION 202 ENTEPRISE AGREEMENTS TO INCLUDE A FLEXIBILITY TERM ETC.

Flexibility term must be included in an enterprise agreement

202(1) An enterprise agreement must include a term (a flexibility term) that:

(a) enables an employee and his or her employer to agree to an arrangement (an individual flexibility arrangement) varying the effect of the agreement in relation to the employee and the employer, in order to meet the genuine needs of the employee and employer; and

(b) complies with section 203.

Effect of an individual flexibility arrangement

202(2) If an employee and employer agree to an individual flexibility arrangement under a flexibility term in an enterprise agreement:

(a) the agreement has effect in relation to the employee and the employer as if it were varied by the arrangement; and

(b) the arrangement is taken to be a term of the agreement.

202(3) To avoid doubt, the individual flexibility arrangement:

(a) does not change the effect the agreement has in relation to the employer and any other employee; and

(b) does not have any effect other than as a term of the agreement.

Model flexibility term

202(4) If an enterprise agreement does not include a flexibility term, the model flexibility term is taken to be a term of the agreement.

202(5) The regulations must prescribe the model flexibility term for enterprise agreements.

SECTION 203 REQUIREMENTS TO BE MET BY A FLEXIBILITY TERM

Flexibility term must meet requirements

203(1) A flexibility term in an enterprise agreement must meet the requirements set out in this section.

Requirements relating to content

203(2) The flexibility term must:

(a) set out the terms of the enterprise agreement the effect of which may be varied by an individual flexibility arrangement agreed to under the flexibility term; and

(b) require the employer to ensure that any individual flexibility arrangement agreed to under the flexibility term:

(i) must be about matters that would be permitted matters if the arrangement were an enterprise agreement; and

(ii) must not include a term that would be an unlawful term if the arrangement were an enterprise agreement.

Requirement for genuine agreement

203(3) The flexibility term must require that any individual flexibility arrangement is genuinely agreed to by the employer and the employee.

Requirement that the employee be better off overall

204(4) The flexibility term must require the employer to ensure that any individual flexibility arrangement agreed to under the term must result in the employee being better off overall than the employee would have been if no individual flexibility arrangement were agreed to.

Requirement relating to approval or consent of another person

205(5) Except as required by subparagraph (7)(a)(ii), the employer must ensure that the flexibility term does not require that any individual flexibility arrangement agreed to by an employer and employee under the term be approved, or consented to, by another person.

Requirement relating to termination of individual flexibility arrangements

203(6) The flexibility term must require the employer to ensure that any individual flexibility arrangement agreed to under the term must be able to be terminated:

(a) by either the employee, or the employer, giving written notice of not more than 28 days; or

(b) by the employee and the employer at any time if they agree, in writing, to the termination.

Other requirements

203(7) The flexibility term must require the employer to ensure that:

(a) any individual flexibility arrangement agreed to under the term must be in writing and signed:

(i) in all cases—by the employee and the employer; and

(ii) if the employee is under 18—by a parent or guardian of the employee; and

(b) a copy of any individual flexibility arrangement agreed to under the term must be given to the employee within 14 days after it is agreed to.

SECTION 204 EFFECT OF ARRANGEMENT THAT DOES NOT MEET REQUIREMENTS OF FLEXIBILITY TERM

Application of this section

204(1) This section applies if:

(a) an employee and employer agree to an arrangement that purports to be an individual flexibility arrangement under a flexibility term in an enterprise agreement; and

(b) the arrangement does not meet a requirement set out in section 203.

Note: A failure to meet such a requirement may be a contravention of a provision of Part 3-1 (which deals with general protections).

Arrangement has effect as if it were an individual flexibility arrangement

204(2) The arrangement has effect as if it were an individual flexibility arrangement.

Employer contravenes flexibility term in specified circumstances

204(3) If section 203 requires the employer to ensure that the arrangement meets the requirement, the employer contravenes the flexibility term of the agreement.

Requirement relating to termination of arrangement

204(4) If the arrangement does not provide that the arrangement is able to be terminated:

(a) by either the employee, or the employer, giving written notice of not more than 28 days; or

(b) by the employee and the employer at any time if they agree, in writing, to the termination;

the arrangement is taken to provide that the arrangement is able to be so terminated.”

[10] The model flexibility term prescribed in Schedule 2.2 to the Fair Work Regulations 2009 is as follows:

“Model flexibility term

(1) An employer and employee covered by this enterprise agreement may agree to make an individual flexibility arrangement to vary the effect of terms of the agreement if:

(a) the agreement deals with 1 or more of the following matters:

(i) arrangements about when work is performed;

(ii) overtime rates;

(iii) penalty rates;

(iv) allowances;

(v) leave loading; and

(b) the arrangement meets the genuine needs of the employer and employee in relation to 1 or more of the matters mentioned in paragraph (a); and

(c) the arrangement is genuinely agreed to by the employer and employee.

(2) The employer must ensure that the terms of the individual flexibility arrangement:

(a) are about permitted matters under section 172 of the Fair Work Act 2009; and

(b) are not unlawful terms under section 194 of the Fair Work Act 2009; and

(c) result in the employee being better off overall than the employee would be if no arrangement was made.

(3) The employer must ensure that the individual flexibility arrangement:

(a) is in writing; and

(b) includes the name of the employer and employee; and

(c) is signed by the employer and employee and if the employee is under 18 years of age, signed by a parent or guardian of the employee; and

(d) includes details of:

(i) the terms of the enterprise agreement that will be varied by the arrangement; and

(ii) how the arrangement will vary the effect of the terms; and

(iii) how the employee will be better off overall in relation to the terms and conditions of his or her employment as a result of the arrangement; and

(e) states the day on which the arrangement commences.

(4) The employer must give the employee a copy of the individual flexibility arrangement within 14 days after it is agreed to.

(5) The employer or employee may terminate the individual flexibility arrangement:

(a) by giving no more than 28 days written notice to the other party to the arrangement; or

(b) if the employer and employee agree in writing — at any time.”

[11] Sections 190 and 191 allow Fair Work Australia to approve an enterprise agreement with undertakings if Fair Work Australia is concerned the agreement does not meet the requirements in ss.186 and 187 and an acceptable undertaking given by the employer meets the concern. They provide:

“SECTION 190 FWA MAY APPROVE AN ENTERPRISE AGREEMENT WITH UNDERTAKINGS

Application of this section

190(1) This section applies if:

(a) an application for the approval of an enterprise agreement has been made under section 185; and

(b) FWA has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings

190(2) FWA may approve the agreement under section 186 if FWA is satisfied that an undertaking accepted by FWA under subsection (3) of this section meets the concern.

Undertakings

190(3) FWA may only accept a written undertaking from one or more employers covered by the agreement if FWA 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.

FWA must seek views of bargaining representatives

190(4) FWA must not accept an undertaking under subsection (3) unless FWA has sought the views of each person who FWA knows is a bargaining representative for the agreement.

Signature requirements

190(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.

SECTION 191 EFFECT OF UNDERTAKINGS

191(1) If:

(a) FWA approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b) the agreement covers a single employer;

the undertaking is taken to be a term of the agreement, as the agreement applies to the employer.

192(2) If:

(a) FWA approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b) the agreement covers 2 or more employers;

the undertaking is taken to be a term of the agreement, as the agreement applies to each employer that gave the undertaking.”

[12] All of the enterprise agreements before us were made prior to 1 January 2010. As a result, provisions of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the Transitional Act) are relevant to their approval.

[13] Item 2 of Schedule 7 of the Transitional Act provides that s.186(2)(d) of the FW Act applies to enterprise agreements made prior to 1 January 2010 as if the words “better off overall test” were omitted and the words “no-disadvantage test” were substituted.

[14] The relevant provisions regarding the “no-disadvantage test” are set out in items 4-6 and 10 of Schedule 7 of the Transitional Act as follows:

“4 When does an agreement pass the no-disadvantage test?

4(1) An enterprise agreement passes the no-disadvantage test if FWA is satisfied that the agreement does not, or would not result, on balance, in a reduction in the overall terms and conditions of employment of the employees who are covered by the agreement under any reference instrument relating to one or more of the employees.

4(2) For the purposes of subitem (1):

(a) a law of a State or Territory that:

(i) relates to long service leave; and

(ii) applied, immediately before the application was made for approval of the agreement under section 185 of the FW Act, to an employee referred to in that subitem, or would have applied to such an employee if he or she had been employed by the employer at that time;

is taken, to the extent that it provides for long service leave, to be a reference instrument relating to the employee; and

(b) if, apart from this subitem, the only reference instrument relating to the employee is a designated award for the employee—the designated award is to be disregarded to the extent (if any) that it provides for long service leave.

Note: An enterprise agreement made during the bridging period will prevail over a law of a State or Territory, to the extent of any inconsistency, so far as that law deals with long service leave (see item 17).

4(3) An enterprise agreement or a variation of an enterprise agreement is taken to pass the no-disadvantage test if there is no reference instrument in relation to any of the employees who are covered by the agreement.

4(4) To avoid doubt, if there is a reference instrument in relation to one or more, but not all, of the employees referred to in subitem (1):

(a) if the agreement passes the no-disadvantage test under subitem (1)—it passes the test in relation to all employees who are covered by the agreement; or

(b) if the agreement does not pass the no-disadvantage test under subitem (1)—it does not pass the test in relation to any employees who are covered by the agreement.

Note 1: In addition to the no-disadvantage test, during the bridging period, the Australian Fair Pay and Conditions Standard prevails over an enterprise agreement to the extent to which the Australian Fair Pay and Conditions Standard provides a more favourable outcome for the employee or employees—see subitem 27(1).

Note 2: From the FW (safety net provisions) commencement day, a term of an enterprise agreement has no effect to the extent it excludes the National Employment Standards or any provision of the National Employment Standards (see sections 55 and 56 of the FW Act).

Note 3: This item applies to an enterprise agreement as proposed to be varied in a corresponding way to the way in which it applies to an enterprise agreement—see subitems 3(2) and (3).

Note 4: See item 10 for how FWA makes decisions under this item.

4(5) For the purposes of determining whether an enterprise agreement as proposed to be varied passes the no-disadvantage test, FWA must disregard any individual flexibility arrangement that has been agreed to by an affected employee and his or her employer under the flexibility term in the agreement.

5 Reference instruments etc.

5(1) A reference instrument, in relation to employees who are covered by an enterprise agreement, is:

(a) any relevant general instrument; or

(b) if there is no relevant general instrument—any designated award;

for one or more of the employees.

5(2) A relevant general instrument, for an employee who is covered by an enterprise agreement, is an award-based transitional instrument:

(a) that regulates, or would but for an enterprise agreement or another industrial instrument having come into operation regulate, any term or condition of employment of persons engaged in the same kind of work as that performed or to be performed by the employee under the enterprise agreement; and

(b) that applied, or would but for an enterprise agreement or another industrial instrument having come into operation have applied, to the employee’s employer immediately before the day on which the application for approval of the agreement was made under section 185 of the FW Act.

6 Enterprise agreement to be tested as at test time

6(1) In deciding whether an enterprise agreement passes, or does not pass, the no-disadvantage test, FWA must consider it as in existence at the test time.

6(2) The test time is the time when the application for approval of the agreement was made under section 185 of the FW Act …

10 Matters taken into account when testing agreement etc.

10(1) In deciding whether an enterprise agreement passes, or does not pass, the no-disadvantage test, FWA:

(a) must have regard to the work obligations of the employee or employees under the enterprise agreement; and

(b) may inform itself in any way it considers appropriate including (but not limited to) contacting any of the following:

(i) the employer;

(ii) the employee, or some or all of the employees, who are covered by the enterprise agreement;

(iii) a bargaining representative in relation to the agreement.

10(2) In deciding whether to determine that an award is a designated award in relation to an employee or employees of an employer, FWA may inform itself in any way it considers appropriate including (but not limited to) contacting any of the following:

(a) the employer;

(b) the employee or employees;

(c) if the determination would be made under item 8—a bargaining representative in relation to the agreement.”

[15] “Award-based transitional instruments” are defined in item 2(5) of Schedule 3 of the Transitional Act as “awards, State reference transitional awards or common rules, and notional agreements preserving State awards”.

[16] Item 11 of Schedule 7 of the Transitional Act is also relevant as it provides that s.186(2)(c) of the FW Act, which deals with terms that contravene s.55 of the FW Act, does not apply to an enterprise agreement made prior to 1 January 2010. Section 55 of the FW Act it will be recalled concerns the interaction between the National Employment Standards and an enterprise agreement.

BUPA Agreement decision

[17] In declining to approve the BUPA Agreement, Commissioner Smith said:

“[6] Given that this agreement must be assessed against the no-disadvantage test, it is appropriate to examine how that had been applied by the Australian Industrial Relations Commission. A review of those decisions for the purpose of this matter distils the following:

• The no-disadvantage test is an objective test.



• The no-disadvantage test is a global one and not a line by line examination.



• Meeting the no-disadvantage test in a particular case is largely a matter for the impression and judgement of the Commission member.



• The Commission should not exercise a value judgement on what it believes is an appropriate minimum or maximum standard for agreement making.



• Any diminution of widely established rights of employees should be carefully scrutinised with a view to preventing modification or undermining of community standards …

[9] In considering the application of the no disadvantage test there are a number of factors which are relevant.

[10] The first is whether or not the clause can be objectively tested. In my view the operation of this clause presents some difficulty. For its operation, the clause depends upon what a person may or may not want. In one sense it can be objectively tested: did the person want to work for ordinary rates which would other wise attract overtime or didn’t they?

[11] The clause is portrayed as being a benefit to employees. However, there is clear disadvantage when compared to the award because that person would have ordinarily received overtime for the hours worked. The benefit is said to derive from the fact that an employee will get work that they might not have otherwise been given. The no disadvantage is then said to arise from the fact that by picking the hours an employee wants to work, that is a benefit and the trade-off is that the work is performed at ordinary rates. This however is a subjective test. FWA is being asked to accept that a person believes they are better off because they get work at a rate below the safety net. The same could be said of a person who would offer for work at an amount below the minimum wage thereby giving themselves a cost and competitive edge against a person who wishes to relay upon the safety net. The concept could apply to public holidays and shift loadings. A good example may be a nurse who prefers night shift because of family responsibilities. In those circumstances it could also be argued that the act of volunteering eliminated the need for the loading.

[12] For the concept to be acceptable, it must rely upon the subjective belief of the employee rather than the objective testing of the award against the agreement.

[13] This is clearly an approach which undermines the standards fixed in awards and the basis for determining the no disadvantage test.

[14] The next issue is that it may have the potential to undermine the operation of the National Employment Standards (NES). In effect, the proposition can extend the concept of a 38 hour week. This is particularly evident in the current matter. There are 1200 employees who are categorised as support staff for which the Health and Allied Services – Private Sector – Victoria Consolidated Award 1998 [AP783872] is said to be the reference instrument. That award provides that a part time employee: works less than full-time hours of 38 per week (or less than 76 hours in a fortnight) Already the employer can roster a person under the current award clause without incurring any overtime. There is no inhibition to an agreement being reached to work for nearly a full week within the span of hours without attracting overtime.

[15] The Nurses (Victorian Health Services) Award 2000 [AP790805] has a similar provision: A part-time employee is one who is employed and who is ready, willing and available to work on a regular basis any number of hours up to but not exceeding 38 hours in any one week (or 76 in a fortnight) provided that the number of hours worked may vary from week to week by mutual agreement.

[16] The example given by BUPA that some employees have two jobs during the week and would prefer to only have one which was extended so as to avoid a higher tax rate on the second job, can be achieved under the award as it stands. The issue boils down to an employee who would work more than 38 hours per week and outside the spread of hours. This is why it could be seen to undermine the intention of the NES. Whilst, on one view, there is no compulsion to work more then 38 ordinary hours per week (without averaging), the proposed provision perhaps undermines the concept of 38 ordinary hours. If the provision is used to “encourage” employees to volunteer to work those hours so that overtime costs are avoided then it does work more strongly against the concept of a 38 hour week.

[17] Against this background, it can be seen that this proposed clause represents a cost saving rather than a benefit. It would be difficult to suggest that an employee would see the benefit in being paid less than that which would ordinarily apply. In short, it is the gift of employment that the employer is offering provided it is at a discounted rate from the safety net. This is a concept which, in my view, has far reaching implications for the operation of the safety net of wages and conditions.

[18] Finally, the question is whether or not, on balance, the benefits contained in the proposed agreement mean that the no disadvantage test is satisfied? I do not doubt that the parties have negotiated an agreement which in some cases is superior to the underpinning reference instruments.

[19] However, in my view, the issue in this area of employment is so fundamental to the operation of the safety net and the NES that the agreement must be rejected as failing the no disadvantage test.

[20] I decline to approve the agreement.”  13 [Endnotes omitted]

Retail Agreements decision

[18] Commissioner McKenna gave an ex tempore decision in transcript on 13 January 2010 dismissing the applications for approval of the Retail Agreements. The Commissioner said:

“PN26

THE COMMISSIONER: I'm not prepared to deal with these applications on the basis of the undertakings previously accepted by Commissioner Raffaelli. I propose to dismiss the applications.

PN27

The Tribunal has before it various applications which have all been filed by the National Retail Association. Each of the applications contains provisions in relation to preferred hours. I have had the benefit of reading the comparatively recent decision of Commissioner Smith in the Booker [sic] Care Services matter. I respectfully concur with the rationale adopted by Commissioner Smith in relation to the question of preferred hours.

PN28

Mr Tindley, who has appeared in all matters today, has conceded that the preferred hours arrangement in the agreements would run foul of the no disadvantage test. He has submitted that in those circumstances it would be appropriate that I adopt an approach earlier accepted by Commissioner Raffaelli that undertakings be given as to the preferred hours arrangements. I am not satisfied that this is an appropriate course in relation to the applications before me. The applications are dismissed.”

[19] The Commissioner later issued a decision in which she said:

“[1] Further to my ex tempore decision on 13 January 2010, I note approval of these applications was that day declined on the basis of the concession, appropriately made, by Mr N Tindley of the National Retail Association, that the ‘preferred hours’ provisions common to each of them would fail to meet the no disadvantage test; and I was not otherwise satisfied it was appropriate to accede to Mr Tindley’s application that undertakings should be accepted in relation to those provisions. The proceedings are concluded accordingly.” 14

Appeal on the BUPA Agreement

[20] Before us the appellant, Bupa Care Services Pty Limited (BUPA), submitted, amongst other things, that Commissioner Smith erred in failing to properly apply the “no-disadvantage test” and in failing to provide BUPA with a reasonable opportunity to give an undertaking to address the Commissioner’s concern that the BUPA Agreement did not pass the “no-disadvantage test”.

[21] The application of a “no-disadvantage test” in relevantly similar terms to the “no-disadvantage test” in Part 2 of Schedule 7 of the Transitional Act was considered by a Full Bench of the Australian Industrial Relations Commission (the Commission) in Re MSA Security Officers Certified Agreement [2003]. 15

[22] Section 170LT of the then Workplace Relations Act 1996 (Cth) (the WR Act) relevantly provided that:

“(1) If an application is made to the Commission in accordance with Division 2 or 3 to certify an agreement, the Commission must certify the agreement if, and must not certify the agreement unless, it is satisfied that the requirements of this section are met.

(2) The agreement must pass the no-disadvantage test (see Part VIE).”

[23] Section 170XA of the WR Act provided:

“(1) An agreement passes the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment.

(2) Subject to sections 170XB, 170XC and 170XD, an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under:

(a) relevant awards or designated awards; and

(b) any law of the Commonwealth, or of a State or Territory, that the Employment Advocate or the Commission (as the case may be) considers relevant.”

[24] The Security Officers case concerned an appeal against certification of an agreement which contained a term providing for extra hours or shifts to be worked at ordinary rates of pay by agreement between the employer and an employee, notwithstanding the overtime rates in the agreement, which agreement the employee would not unreasonably withhold. In determining the appeal, the majority of the Full Bench stated:

“[76] In the proceedings below, the appellant submitted that the working by agreement of additional hours, which attract the overtime provisions of the Award, would result in a disadvantage to employees given clause 15 of the Award provides for overtime done outside of ordinary hours to be paid at the rate of time and a half for the first two hours and double time thereafter.

[77] In the proceedings before Polites SDP, the respondent relied on a distinction between hours which are worked in line with the employee's preference to work additional hours and to earn extra income, versus hours which are worked at the request or instruction of the employer and submitted that the ability to work to earn extra income is something that is one of the beneficial parts of the Agreement.

[78] In his Decision, Polites SDP appears to have accepted this distinction, assuming that the provision in the Agreement which provides that consent to working voluntary additional hours should not be unreasonably withheld does not mean that an employee may be pressured over his or her reasons for refusing consent.

[79] We fail to see how the distinction between hours performed beyond ordinary hours at the employer’s direction and hours performed with the voluntary agreement of the employee is available for the purpose of applying the no-disadvantage test, given the terms of the Award. To the extent it was relied upon, Polites SDP relied on an irrelevant matter and misconstrued and misapplied the no-disadvantage test. That test is to be applied by reference to the terms and conditions of the competing instruments - the Award and the Agreement.

[80] The terms of the Award in relation to work performed in excess of the ordinary hours prescribed by the Award do not distinguish between voluntary and directed work. On the contrary, the Award, in clause 16.1, specifically used the term ‘All work done outside ordinary hours prescribed by clause 15’. Had the Award described the basis for payment of overtime rates differently, providing, for example, that the rates applied in circumstances where the employee was required to work hours in excess of those in clause 15, the situation may have been different. However, it is not a situation which we need consider further given the particular terms of the relevant Award in the present circumstances. In applying the statutory test by reference to the terms and conditions of the competing instruments in the circumstances of the present matter, the Award is clear in its requirement for the payment of overtime rates prescribed in relation to all work done outside ordinary hours prescribed by clause 15.

[81] Further, the consideration in relation to work undertaken in excess of those prescribed as ordinary hours by the Award, which led Polites SDP to consider the effect of clause 28 of the Agreement on the no-disadvantage test seems to have included an assumption that by working an additional number of hours at a significantly lesser rate of pay (the ordinary time rate) than that prescribed by the Award (time and a half for the first 2 hours and double time thereafter) employees would not be disadvantaged. The assumption reflects the respondent’s contention that the opportunity to work more hours, in addition to the ordinary hours prescribed in the Award, would offset the disadvantage arising from the lesser rates prescribed in the Agreement. We fail to see the relevance of this proposition to the application of the no-disadvantage test. This is because the no-disadvantage test does not involve an analysis of matters other than the terms and conditions of the Award as against the Agreement. The number of hours of work which may be performed by the employees, as opposed to what they will be paid for hours worked, is not a matter prescribed by the Agreement. The subject matter addressed by the respondent concerned the operational possibilities of the employers business to provide additional working hours at rates of pay less than those prescribed by the Award. By having regard to the employers prediction of what the operational circumstances of the business would or might be Polites SDP departed from the statutory test. What was being compared was not the terms of the Award and the Agreement. By relying upon what was put to him by the respondent, SDP Polites was comparing the terms of the Award with the effects of the potential operational arrangements of the employer, rather the terms of the Agreement in relation to the amounts payable to employees for hours worked compared to the terms of the Award in that respect.

[82] Consequently Polites SDP failed to properly take into account the relevant consideration of disadvantage arising from a real reduction in the terms and conditions of employment concerning hours of work under the Agreement, by reliance on the employers operational intentions to provide longer hours of work under the inferior terms of the Agreement.

[83] In any case, we think his Honour’s apparent concerns about this provision would have required an undertaking, rather than an assumption that an employee would not be pressured over his or her reasons for refusing consent, in order to ensure that employees were not disadvantaged. It is clear that notwithstanding his understanding as to the voluntary nature of the additional hours and his assumption concerning the withholding of consent, Polites SDP remained concerned about this provision of the Agreement, when satisfying himself as to s.170LT(2), and relied on clause 28 - No Disadvantage, as addressing those concerns …

[101] The no-disadvantage test requires an analysis of the terms and conditions of the Award as against the Agreement. Any grounds for non-satisfaction arising from this assessment might be addressed by relevant undertakings ‘in relation to the operation of the agreement’ …

[104] Section 170XA refers to an ‘overall reduction in the terms and conditions of employment’ under ‘(a) relevant awards or designated awards’. The application of the no-disadvantage test does not include an analysis of the rostering practices of employers bound by relevant or designated awards in accordance with the terms of such awards …

[107] It will be apparent from our recounting of the case put below that the issues which arose before Polites SDP were addressed superficially by the parties. The relevant provisions of the Agreement and the Award were explored by the appellant more fully on appeal than in the proceedings below. As an example, the No Disadvantage clause (clause 28 in the Agreement) was not addressed at all by the appellant below. The respondent did not fully and accurately address the competing provisions of the Agreement and the Award in the proceedings before Polites SDP. In the context of that inadequate exploration of the issues in contention and, in some instances, an inaccurate representation of relevant Award or Agreement provisions, Polites SDP, with respect, failed to properly assess or misconstrued the terms and conditions of the Agreement and the Award, relying on the submissions of the respondent, which were not substantiated by careful assessment of the terms of the competing instruments.

[108] In our Decision above, we have found that:

• in respect of the overtime provision, his Honour Polites SDP misconstrued and misapplied the no-disadvantage test, insofar as he relied upon an irrelevant consideration - the distinction drawn by the respondent between hours worked beyond ordinary hours at the employer’s discretion and hours worked with the voluntary agreement of the employee concerned …

[109] Having regard to the considerations set out above, we have concluded that the Senior Deputy President misdirected himself with respect to the essential jurisdictional requirements of the function he was required to perform in various ways. Consequently, the jurisdictional requirement that he be satisfied that the Agreement passed the no-disadvantage test could not and did not arise.

[110] In this respect, we have concluded that the Senior Deputy President variously took into account irrelevant considerations which affected his conclusion, failed to properly assess the award and the Agreement in accordance with the statutory requirements and misconstrued the terms and conditions of the Agreement and the Award in the statutory context, in a manner which effectively prevented formation of the relevant satisfaction within the correct meaning of the Act.

[111] Accordingly, we have concluded that the Senior Deputy President’s opinion of satisfaction that the requirements of the Act had been met insofar as the Agreement passed the no-disadvantage test was arrived at otherwise than in accordance with the jurisdictional requirements of the Act. Accordingly, the basis of the exercise of the power to certify the Agreement was absent.

[112] We find that Polites SDP constructively failed to exercise jurisdiction. In our view, the jurisdictional error materially affected the exercise of the power to certify the Agreement such that the jurisdiction miscarried.

[113] Accordingly, we grant leave to appeal and, pursuant to s.45(7)(a), we quash the Decision of Polites SDP in PR930722 and the Certificate issued in PR930723. Pursuant to s.45(7)(b), we decide the application for certification ourselves.

[114] For the reasons indicated in our Decision, we are not satisfied that the proposed Agreement passes the no-disadvantage test in s.170LT(2) of the Act. Disadvantages arising from the Agreement provisions considered are not remedied, in an overall sense, by other more beneficial provisions within the Agreement. Section 170LV(1) of the Act provides, where the Commission has grounds to refuse to certify an agreement, other options open to the Commission instead of refusing to certify an agreement:

‘(a) the Commission may accept an undertaking from one or more of the persons who made the agreement in relation to the operation of the agreement and, if satisfied that the undertaking meets the Commission's concerns, certify the agreement; and

(b) in any case, before refusing to certify the agreement, the Commission must give the persons who made the agreement an opportunity to take any action that may be necessary to make the agreement certifiable.’

[115] We will afford the respondent an opportunity to provide, in writing, an undertaking or undertakings, pursuant to s.170LV(1)(a), or advice of any action it proposes that may be necessary to make the agreement certifiable, pursuant to s.170LV(1)(b), for our consideration. We direct the respondent to copy any documentation arising from that opportunity to the LHMWU as an intervener. Should the respondent avail itself of that opportunity the Full Bench, or a Member of the Bench directed by it, pursuant to s.45(7)(c) of the Act, will sit to hear submissions and decide any further matters requiring decision. In the absence of any response by the respondent within 14 days of the date of this Decision, we will issue a Decision formally refusing certification of the Agreement.” 16 [Endnotes omitted]

[25] We consider the views of the majority in the Security Officers case are apposite to the appeal before us. Where there is a relevant reference instrument, the application of the “no-disadvantage test” requires a comparison of the terms and conditions of employment in the enterprise agreement against the terms and conditions of employment in any relevant reference instrument and an assessment of whether the terms and conditions in the enterprise agreement result, on balance, in a reduction in the overall terms and conditions of employment under any relevant reference instrument. The “no-disadvantage test” does not involve an analysis of matters other than the terms and conditions of the enterprise agreement against those in any relevant reference instrument. The effect the terms and conditions may have on the actions of an employer or employee is not relevant to the “no-disadvantage test”. The requirement in item 10(1)(a) of Schedule 7 of the Transitional Act for Fair Work Australia to have regard to the work obligations of the employee or employees under the enterprise agreement in deciding whether an enterprise agreement passes, or does not pass, the “no-disadvantage test” does not alter our views about the application of the “no-disadvantage test”. After all, it is the terms and conditions of employment in the enterprise agreement that determine the work obligations under the enterprise agreement.

[26] It is for this reason that the Interim Fair Work Australia Rules 2009 at Form F17–Employer’s Declaration in Support of Application for Approval of Enterprise Agreement asked questions requiring the identification of the relevant reference instruments and the terms and conditions of employment in the enterprise agreement that are more or less beneficial than those in the reference instruments.

[27] The Form F17 accompanying the application for approval of the BUPA Agreement identified the Nurses (Victorian Health Services) Award 2000 (the Nurses Award) and the Health and Allied Services – Private Sector – Victoria Consolidated Award 1998 (the HASA Award) as the relevant reference instruments for the purposes of the “no-disadvantage test”.

[28] The employer declaration also stated that the BUPA Agreement does not contain any terms or conditions of employment that are less beneficial than any terms and conditions contained in the reference instruments.

[29] Clause 30 – Modes of Employment of the Nurses Award provides that:

“30. MODES OF EMPLOYMENT

30.1 Full-time employment

30.1.1 A full-time employee is one who is employed and who is ready, willing and available to work a full week of 38 hours or an average of 38 hours as per 39.1.1 at the times and during the hours as may be mutually agreed upon or in the absence of such agreement as prescribed by the employer.

30.1.2 Subject to the provisions of 39.1.1 such employee shall be paid the weekly salary appropriate to the employee’s classification, irrespective of the number of hours worked not exceeding 38, or an average of 38 per week.

30.2 Part-time employee

30.2.1 A part-time employee is one who is employed and who is ready, willing and available to work on a regular basis any number of hours up to but not exceeding 38 hours in any one week (or 76 in a fortnight) provided that the number of hours worked may vary from week to week by mutual agreement. Such employee shall be paid per hour worked an amount equal to 1/38th of the weekly salary appropriate to the employee’s classification, provided that clauses 25 - Special rates for Saturdays and Sundays and 43.6 will also apply to part-time employees, and payment in respect of any period of annual leave or long service leave to which an employee may become entitled shall be on a pro rata basis.”

[30] Clause 39 – Hours of Work of the Nurses Award provides that:

“39. HOURS OF WORK

39.1 Hours for an ordinary weeks work

39.1.1 The hours for an ordinary week’s work shall be 38, or be an average 38 per week in a fortnight or in a four week period (or by mutual agreement, a five week period in the case of an employee working ten hour shifts) and shall be paid either:

39.1.1(a) in a week of five days in shifts of not more than eight hours each; or

39.1.1(b) by mutual agreement in a week of four days in shifts of not more than ten hours each; or

39.1.1(c) by mutual agreement, provided that the length of any ordinary shift shall not exceed ten hours; or

39.1.1(d) in 76 hours per fortnight to be worked as not more than ten days of not more than eight hours each; or

39.1.1(e) in 152 hours per four week period to be worked as nineteen days each of eight hours.”

[31] Clause 23 – Rosters of the Nurses Award provides that:

“23. ROSTERS

23.1 The ordinary hours of duty of full-time and part-time employees shall be worked according to a roster or rosters which shall be exhibited at some reasonably convenient place accessible to employees to whom it applies, where it may be seen by such employees and also by the executive secretary or other accredited representative of the union …

23.2 A roster of at least fourteen days duration, or in the case of Registered Nurses in the public sector - 28 days duration, setting out employees’ daily ordinary working hours, commencing and finishing times and meal intervals shall be posted at least fourteen days before it comes into operation in each work location.

23.3 Except as in emergency situations seven days notice shall be given of a change of roster …

23.5 Where an employer requires an employee without seven days notice and outside the excepted circumstances prescribed in 23.3, to perform ordinary duty at other times than those previously rostered, the employee shall be paid in accordance with the hours worked, with the addition of a daily allowance equal to 2-1/2% of the base rate/allowance rate per week.

23.5.1 Provided that a part-time employee who agrees to work shift(s) in addition to those already rostered will not be entitled to the above specified allowance for the additional shift(s) worked.

23.5.2 Nothing in this clause shall operate to affect the fourteen days period of notice provision of clause 39 - Hours of work … of this award.”

[32] Clause 43 – Allowances of the Nurses Award provides for shift allowances.

[33] Clause 42 – Overtime of the Nurses Award provides that:

“42. OVERTIME

42.1 Except in the case of a Director of Nursing in an institution where a Deputy or Assistant Director of Nursing is also employed all work done in excess of the ordinary hours prescribed shall be paid at the rate of time and a half for the first two hours and double time thereafter. For the purpose of this clause each day or shift shall stand alone.”

[34] Clauses of relevantly similar effect are contained in the HASA Award.

[35] The BUPA Agreement incorporates these clauses from the Nurses Award and the HASA Award but also states that the express terms of the BUPA Agreement are supplementary to and are to be read and interpreted wholly in conjunction with the incorporated clauses, provided that where an express term of the BUPA Agreement is inconsistent with an incorporated clause then the express term prevails to the extent of any inconsistency.

[36] We think it is apparent that under the Nurses Award overtime worked by an employee is paid for at the rate of time and a half for the first two hours and double time thereafter regardless of whether the request to work overtime is at the initiative of the employer or employee. Under the BUPA Agreement overtime worked by an employee is paid for at the overtime rate if the request to work overtime is at the initiative of the employer and at the ordinary hours’ rate if the request to work overtime is at the initiative of the employee. As a result, the BUPA Agreement contains at least one term or condition of employment that is less beneficial than the terms and conditions in the Nurses Award, that is the payment of overtime at the ordinary hours’ rate rather than at the overtime rate where the request to work overtime is at the initiative of the employee.

[37] A similar situation exists in respect of the HASA Award and the BUPA Agreement.

[38] This leads us to query the accuracy of the employer declaration that accompanied the application for approval of the BUPA Agreement, where it indicated the BUPA Agreement does not contain any terms or conditions of employment that are less beneficial than any terms and conditions contained in the reference instruments.

[39] Nonetheless, the only less beneficial clause in the BUPA Agreement with which Commissioner Smith seemed concerned was the preferred hours clause. Perhaps this is because it is the only less beneficial clause, or because the more beneficial and other less beneficial clauses are such that they do not, or would not result, on balance in a reduction in the overall terms and conditions of employment of the employees covered by the enterprise agreement under the reference instruments.

[40] We apprehend no error in Commissioner Smith’s application of the “no-disadvantage test”. It is apparent the Commissioner compared the preferred hours clause against certain relevant clauses in the relevant awards. The Commissioner’s reference to the National Employment Standards was infelicitous but in effect involved no more than a comparison of the preferred hours’ clause against yet other clauses, being the full-time ordinary hours clauses, of the relevant awards. These comparisons were obviously for the purposes of making the “on balance” assessment in the “no-disadvantage test”.

[41] However, in our view, the Commissioner erred in failing to consider a written undertaking from BUPA aimed at meeting his concern the BUPA Agreement did not pass the “no-disadvantage test”.

[42] As earlier indicated, s.190 of the FW Act provides that if a s.185 application for approval of an enterprise agreement is made and Fair Work Australia has a concern the enterprise agreement does not meet the requirements in ss.186 and 187, one of which due to the operation of the Transitional Act is that Fair Work Australia be satisfied the enterprise agreement passes the “no-disadvantage test”, Fair Work Australia may approve the enterprise agreement if satisfied that a written undertaking from the employer meets the concern and the effect of Fair Work Australia accepting the undertaking is not likely to cause financial detriment to any employee covered by the enterprise agreement or result in substantial changes to the enterprise agreement. Pursuant to s.191 of the FW Act, if Fair Work Australia approves an enterprise agreement after accepting a written undertaking in relation to the enterprise agreement, the undertaking is taken to be a term of the enterprise agreement.

[43] The Explanatory Memorandum to the Fair Work Bill 2008 said in respect of then cl. 190:

“Clause 190 – FWA may approve an enterprise agreement with undertakings

803. This clause provides that FWA may approve an enterprise agreement with undertakings where the approval requirements in clause 186 and 187 have not been met.

804. Subclause 190(1) provides that this clause only applies if FWA has a concern that the agreement does not meet one or more of the requirements in clauses 186, 187 and 189.

• For example, an enterprise agreement may contain a term that the employer will not approve requests for annual leave during the end of financial year accounts processing.

805. Subclause 88(2) provides that an employer must not unnecessarily refuse to agree to a request by an employee to take paid annual leave. FWA may be concerned that the term might breach clause 55 (which deals with the interaction of enterprise agreements and the NES) because it excludes subclause 88(2). Paragraph 186(2)(c) requires FWA to be satisfied that the terms of an agreement do not contravene clause 55. FWA might accept an undertaking from the employer that it will not unnecessarily refuse an employee’s request to take paid annual leave at any time, including during the end of financial year accounts processing. Note that the fact that the employer needs all employees to work at this time would be relevant to whether a refusal was unreasonable under subclause 88(2).

806. Subclause 190(2) enables FWA to approve the agreement under clause 186 or clause 189 where it is satisfied that the undertaking clarifies the intended operation of the agreement.

807. Subclause 190(3) provides that FWA may only accept a written undertaking from one or more employers covered by the agreement if FWA is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement, or result in substantial changes to the agreement. This enables FWA to accept an undertaking that addresses a concern it has, e.g., about whether an enterprise agreement passes the better off overall test under clause 193.”

[44] Section 190 bears similarity to s.170LV(1)(a) of the WR Act prior to its amendment by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth).

[45] Section 170LV(1)(a) provided that:

“(1) If, under section 170LT or 170LU, the Commission has grounds to refuse to certify an agreement:

(a) the Commission may accept an undertaking from one or more of the persons who made the agreement in relation to the operation of the agreement and, if satisfied that the undertaking meets the Commission’s concerns, certify the agreement”.

[46] Section 170LT set out matters in respect of which the Commission was required to be satisfied to certify an agreement and included that the agreement passed the “no-disadvantage test”.

[47] Of particular note, s.170LV(1)(a) referred to the Commission accepting an undertaking meeting its concerns, being concerns that provided grounds for the Commission to refuse to certify the agreement.

[48] The Explanatory Memorandum to the Workplace Relations and Other Legislation Amendment Bill 1996 said in respect of s.170LV:

“New section 170LV – Other options open to Commission instead of refusing to certify an agreement

9.106 This new section sets out alternatives open to the Commission, where the Commission has grounds under sections 170LT or 170LU to refuse to certify an agreement, other than refusing to certify the agreement. These options ensure that those who made the agreement are given the opportunity to rectify any problem, rather than certification simply being refused, and the agreement having to be remade.

9.107 Under paragraph (1)(a), the Commission may accept an undertaking about the operation of the agreement from one or more of the persons who made the agreement. If satisfied that its concerns are met, the Commission may certify the agreement.”

[49] In light of the provisions of s.190, we think that the Commissioner, on being satisfied an application for approval of the BUPA Agreement had been made under s.185 and on being concerned the BUPA Agreement did not meet the requirements set out in ss.186 and 187 because it did not pass the “no-disadvantage test”, was required to:

(a) give BUPA the opportunity to give a written undertaking aimed at meeting that concern;

(b) consider whether any written undertaking proffered by BUPA met the requirements relating to the signing of undertakings prescribed by the Fair Work Regulations 2009;

(c) seek the views of each of the bargaining representatives of which he was aware on any written undertaking proffered by BUPA which met the signing requirements in the regulations;

(d) consider whether he was satisfied that Fair Work Australia accepting the written undertaking was not likely to cause financial detriment to any employee covered by the BUPA Agreement or result in substantial changes to the BUPA Agreement;

(e) consider whether he was satisfied the written undertaking met his concern about the BUPA Agreement not passing the “no-disadvantage test”; and

(f) then decide whether to approve the BUPA Agreement under s.186.

[50] The Commissioner conducted proceedings on 21 December 2009 primarily to hear submissions going to clause 33.8, the preferred hours clause, of the BUPA Agreement and whether that clause could be said to be consistent with the “no-disadvantage test”. 17

[51] During the course of those proceedings the following exchange took place between the Commissioner and Mr B. Gee representing BUPA:

“PN146

THE COMMISSIONER: Could you assist me with some information, I don't ask you to do it now, about that annual leave and superannuation question.

PN147

MR GEE: We'll have an answer to you today.

PN148

THE COMMISSIONER: Can you add to that salary sacrifice?

PN149

MR GEE: Yes.

PN150

THE COMMISSIONER: Salary sacrifice is predicated on ordinary earnings.

PN151

MR GEE: Yes, we can do that today.

PN152

THE COMMISSIONER: I would be grateful.

PN153

MR GEE: In our respectful submission the agreement is capable of being approved in its present form and that is what we ask Fair Work Australia to do. If for any reason Fair Work Australia is against us on that then I have had some brief discussions with Ms Kelly and would appreciate an opportunity to form and undertaking in suitable terms if that would remedy any difficulties.

PN154

THE COMMISSIONER: Another?

PN155

MR GEE: To provide an undertaking.

PN156

THE COMMISSIONER: I see.

PN157

MR GEE: An undertaking under Section 190 would remedy any particular difficulty that Fair Work Australia had.

PN158

THE COMMISSIONER: I'm just wondering where an undertaking goes, or what sort of undertaking might be arranged but I think it's a pretty straightforward question that I have answer isn't it? If I adopt your view that the agreement as a whole and the circumstances surrounding the clause means that the agreement doesn't fail the no disadvantage test it is approved. If upon reflection I examine the sorts of issues I have raised for comment and find that it does fail the no disadvantage test I'm not sure what sort of undertaking would overcome that.

PN159

MR GEE: I don't wish to argue against my submission but - - -

PN160

THE COMMISSIONER: No, no.

PN161

MR GEE: If I could be so bold, if for example there was an issue about a particular application, you yourself has raised the issue of a part time working in excess of an average of 38 hours per week.

PN162

THE COMMISSIONER: Yes.

PN163

MR GEE: That is something, although we say the agreement doesn't need remedy in that respect, that is something that is able to be dealt with by way of an undertaking.

PN164

THE COMMISSIONER: I see. I follow.

PN165

MR GEE: For example.

PN166

THE COMMISSIONER: I follow. All right, thank you very much for your submissions. I'll await the material this afternoon and issue a decision as quickly as I can. Thank you, the matter is adjourned.”

[52] Following these proceedings the Commissioner issued his decision of 5 January 2010.

[53] It is apparent the Commissioner did not give BUPA an opportunity to provide a written undertaking to meet his concern the BUPA Agreement did not pass the “no-disadvantage test” before declining to approve the BUPA Agreement. In failing to do so, the Commissioner made an appealable error.

[54] Before us BUPA submitted that if there were concerns the BUPA Agreement did not meet the requirements in ss.186 and 187 of the FW Act it would be prepared to proffer a written undertaking which would have the effect of excising cl. 33.8 from the enterprise agreement.

[55] Subsequent to the appeal hearing BUPA filed in Fair Work Australia a written undertaking signed by the Chief Executive Officer of BUPA and also signed by the employee bargaining representatives, being the Australian Nursing Federation (ANF) and the Health Services Union (HSU), indicating their agreement to the written undertaking provided by BUPA. The written undertaking is as follows:

“UNDERTAKING

AG2009/19926 Bupa Care Services, ANF and HSU Enterprise Agreement 2009 (“Agreement”)

On behalf of Bupa Care Services Pty Limited (“Bupa Care Services”), an undertaking is given that while the Agreement is in operation, Bupa Care Services will not refer to, rely on or apply clause 33.8 of the Agreement.

This undertaking is made according to section 190 of the Fair Work Act 2009 (Cth) (“Act”), and Bupa Care Services understands this undertaking will be taken to be a term of the Agreement pursuant to section 191 of the Act.”

[56] The bargaining representatives for the BUPA Agreement, namely BUPA, the ANF and the HSU, support this written undertaking and have not suggested the undertaking is likely to cause financial detriment to any employee covered by the enterprise agreement or result in substantial changes to the enterprise agreement.

[57] We are satisfied the effect of accepting such a written undertaking is not likely to cause financial detriment to any employee covered by the BUPA Agreement or result in substantial changes to the enterprise agreement. The effect of clause 33.8 is to reduce an overtime payment in certain circumstances from time and a half for the first two hours of overtime and double time thereafter to ordinary time. This is a financial detriment to an employee covered by the agreement. The undertaking will effectively remove that financial detriment. Further, the undertaking renders ineffective what appears to be a relatively minor aspect of the enterprise agreement.

[58] We are also satisfied that this written undertaking by rendering ineffective cl. 33.8 of the BUPA Agreement meets the concern that the enterprise agreement does not pass the “no-disadvantage test” because of cl. 33.8.

[59] However, it is not appropriate that we determine whether or not to approve the BUPA Agreement given our concern about the accuracy of the employer declaration that accompanied the application for approval of the enterprise agreement.

[60] In the circumstances, the appropriate course is for us to grant permission to appeal, uphold the appeal, quash the decision 18 of Commissioner Smith of 5 January 2010 declining to approve the BUPA Agreement and refer the application for approval of the BUPA Agreement to a Fair Work Australia member to determine having regard to our decision and a revised Form F17 that is filed by BUPA. We will refer the application for approval of the BUPA Agreement to Senior Deputy President Acton.

Appeal on the Retail Agreements

[61] The employer appellants covered by the Retail Agreements submitted to us that Commissioner McKenna erred in denying them procedural fairness by listing the applications for approval of the Retail Agreements for mention but then proceeding without notice to final determination of the applications and in failing to give adequate reasons for dismissing the applications.

[62] As earlier indicated, the Commissioner conducted proceedings on the applications for approval of the Retail Agreements on 13 January 2010. During the proceedings the following exchange took place between the Commissioner and Mr N. Tindley of the National Retail Association Ltd representing the employers covered by the Retail Agreements:

“PN14

THE COMMISSIONER: I am minded to dismiss the applications because I concur with the - respectfully concur with the approach of Commissioner Smith in relation to these styles of provisions and I wanted to give you the opportunity to say anything by way of submission that might have an impact on any decision that I might make in that respect.

PN15

MR TINDLEY: Commissioner, the situation we have, this is not a new issue for us. The situation of what we will call the preferred hours provisions of these agreements was before Commissioner Raffaelli in late December. Commissioner Raffaelli was prepared to accept an undertaking, a specifically worded undertaking and I'm happy, if you would like me to - I have got a copy of the undertaking that was given and I can orally provide that and that, in our submission, would - if that undertaken was given then that would resolve the issue of whether that preferred hours provision could be applied at all ever under the agreement and would resolve the issues in relation to the no disadvantage test with respect to the preferred hours.

PN16

THE COMMISSIONER: Yes, if you pass up the document.

PN17

MR TINDLEY: I apologise because of the short notice, I don't have it in a format that I think the Commission - it's effectively a copy of an email that was sent to Commissioner Raffaelli's associate.

PN18

THE COMMISSIONER: I see.

PN19

MR TINDLEY: And subsequently decisions were issued approving those agreements.

PN20

THE COMMISSIONER: Perhaps you could read the relevant extract onto the record.

PN21

MR TINDLEY: Thanks, Commissioner. The undertaking was as follows:

PN22

In respect to the application for approval of the above agreement the employers, Outside Timbers Pty Ltd, as trustee for the Young Family Trust undertakes not to apply or accept any agreement in writing, even if approached by an employee to work voluntary preferred hours at ordinary rates as provided in clauses 9, 10 and schedule 1 of the agreement.

PN23

So that was a complete removal of the ability to engage people, un-engage employees on those preferred hours.

PN24

THE COMMISSIONER: Is there anything else that you want to say by way of submission?

PN25

MR TINDLEY: No, Commissioner. Effectively we understand the position that there is an inability for those preferred hours to meet the requirements of the no disadvantage test. The situation arose as a result of the new approval process under Fair Work Australia. The employers concerned in these applications have all indicated their willingness to provide those undertakings. In our submission that would deal with any no disadvantage test issues and allow the agreements to be approved.”

[63] The Commissioner then went on to indicate she was not prepared to deal with the applications for approval of the Retail Agreements on the basis of the undertakings previously accepted by Commissioner Raffaelli and dismissed the applications.

[64] We think it is apparent the Commissioner failed to give proper effect to the requirements in s.190 of the FW Act or, at least, failed to give reasons as to why she was not satisfied in respect of the matters in s.190(2) and (3) by the undertakings proffered by the employers covered by the Retail Agreements. As a result we conclude the Commissioner made an appealable error in dismissing the applications for approval of the Retail Agreements.

[65] The Form F17 accompanying each of the applications for approval of the Retail Agreements identify the following as relevant reference instruments for the purposes of the “no-disadvantage test”:

Application No.	Reference Instruments
AG2009/22155 AG2009/22173	Retail Take-Away Food Award – South-Eastern Division 2003
AG2009/22148 AG2009/22168	Shop Employees (State) Award (NSW)
AG2009/22162	Retail Industry Award – State 2004 (QLD)
AG2009/22343	National Fast Food Retail Award 2000
AG2009/22171 AG2009/22285 AG2009/22352	Nil

[66] The applications, AG2009/22171, AG2009/22285 and AG2009/22352, that have Form F17 employer declarations that do not cite a reference instrument also state in the employer declarations that “the employer held a meeting with the employees on [date] where they were advised that the proposed agreement was in very similar terms to the applicable Award”.

[67] Further, the employer declarations in respect of applications AG2009/22171 and AG2009/22285 suggest there was not 21 clear days as required by s.181 of the FW Act between the date the employer last provided to the employees the notice of employee representational rights under s.173 of the FW Act and the date the employer requested the employees approve the agreement by voting for it.

[68] The employer declarations also state that the Retail Agreements do not contain any terms or conditions of employment that are less beneficial than any terms and conditions contained in the reference instruments.

[69] The reference instruments provide for work on public holidays, Saturday or Sunday or for late work or additional hours to be paid for at a rate in excess of the basic hourly rate of pay regardless of whether an employee nominates such work as their preferred hours or not. Under the Retail Agreements some or all of such work is paid for at a rate in excess of the basic hourly rate of pay if the employee has not nominated the work as their preferred hours and at the basic hourly rate of pay if the employee has nominated the work as their preferred hours. Accordingly, the Retail Agreements contain at least one term or condition of employment that is less beneficial than the terms and conditions in the relevant reference instruments, that is the payment for some or all of such work at the basic hourly rate of pay rather than at a rate in excess of the basic hourly rate of pay if the employee has nominated the work as their preferred hours.

[70] The accuracy, therefore, of the employer declarations that accompanied the applications for approval of the Retail Agreements is questionable.

[71] In the proceedings at first instance the employers conceded the Retail Agreements did not pass the “no-disadvantage test”. Before us the employers covered by the Retail Agreements proffered written undertakings said to be signed by a relevant representative of each employer and a bargaining representative. The undertakings were all similar. That given in respect of the Robbies NSW Pty Ltd Enterprise Agreement is as follows:

“Undertaking under section 190 of the Fair Work Act 2009 (Cth)

Robbie NSW Pty Ltd, being the employer named in the Robbies NSW Pty Ltd Enterprise Agreement, hereby undertakes pursuant to section 190 of the Fair Work Act 2009 that, upon the approval of the said agreement by Fair Work Australia, and at all times thereafter whilst the said Agreement is in force and effect, the employer will not apply or enforce clauses 6, 7, 8, 9 and 10 of Section 2 of the Agreement, and Schedule 1 of the Agreement (collectively called “the clauses”) in the case of any time worked by any employee covered by the Agreement, and shall treat the clauses as if they did not form any part of the Agreement and did not confer any rights or obligations on any person.

This undertaking is given in the full knowledge and understanding that the terms of the undertaking shall be taken to be a term of the Agreement if Fair Work Australia accepts this undertaking and approves the Agreement.”

[72] For each of the Retail Agreements, the employer and a non-employer bargaining representative support the written undertaking given and have not suggested the undertaking is likely to cause financial detriment to any employee covered by the enterprise agreement or result in substantial changes to the enterprise agreement.

[73] We are satisfied for each of the Retail Agreements that the effect of Fair Work Australia accepting such a written undertaking is not likely to cause financial detriment to any employee covered by the Retail Agreements or result in substantial changes to the enterprise agreements. The effect of the preferred hours clauses in each of the Retail Agreements is to reduce the rate of pay for work on public holidays, Saturday or Sunday or for late night work or additional hours in certain circumstances from a rate in excess of the basic hourly rate of pay to the basic hourly rate of pay. This is a financial detriment to an employee covered by any of the Retail Agreements. The written undertakings will effectively remove that financial detriment. Further, each written undertaking renders ineffective what appears to be a relatively minor aspect of each of the enterprise agreements.

[74] We are also satisfied that the written undertaking by rendering ineffective the preferred hours clauses in each of the Retail Agreements meets the concern that the Retail Agreements do not pass the “no-disadvantage test” because of the preferred hours clauses.

[75] However, it is not appropriate that we determine whether or not to approve the Retail Agreements given our concern about the accuracy of the employers’ declarations that accompanied the applications for their approval and, in at least two instances, our concern that there may not be valid applications for approval before us.

[76] In the circumstances, we grant permission to appeal, uphold the appeal, quash the decision 19 of Commissioner McKenna of 20 January 2010 dismissing the applications for approval of the Retail Agreements and refer the applications for approval of the Retail Agreements to a Fair Work Australia member to determine having regard to our decision and the revised Forms F17 that are filed by the employers. We will refer the applications for approval of the Retail Agreements to Deputy President Sams.

Conclusion

[77] Orders 20 quashing the decisions of Commissioner Smith and Commissioner McKenna are issued in conjunction with this decision.

SENIOR DEPUTY PRESIDENT

Appearances:

S. Wood, counsel, with M. Felman for Bupa Care Services Pty Ltd.

D. Langmead for the Health Services Union.

T. Clarke, for the Australian Council of Trade Unions.

P. Gardner for the Australian Nursing Federation.

D. Mammone for the Australian Chamber of Commerce and Industry.

P. Wheelahan, counsel, for P & A Securities Pty Ltd as trustee for the D’Agostino Family
Trust T/as Michel’s Patisserie Murwillumbah and others.

Hearing details:

2010.
Melbourne:
March 17.

Endnotes:

 1   [2010] FWA 16.

 2   AG2009/19926.

 3   [2010] FWA 339.

 4   AG2009/22148.

 5   AG2009/22155.

 6   AG2009/22162.

 7   AG2009/22168.

 8   AG2009/22172.

 9   AG2009/22173.

 10   AG2009/22343.

 11   AG2009/22352.

 12   AG2009/22285.

 13   [2010] FWA 16.

 14   [2010] FWA 339.

 15   PR937654.

 16   Ibid.

 17   Transcript at PN 4

 18   [2010] FWA 16.

 19   [2010] FWA 339.

 20   PR995841 and PR995842.

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