FWAFB 3552
FAIR WORK AUSTRALIA
Fair Work Act 2009
s.605—Minister may apply for review of a decision
JUSTICE GIUDICE, PRESIDENT
MELBOURNE, 19 MAY 2010
 This is an application by the Minister for Employment and Workplace Relations (the Minister) for review of a decision made by Commissioner Ryan on 23 February 2010. 1 In that decision the Commissioner granted an application by Trimas Corporation Pty Ltd (Trimas) under s.185 of the Fair Work Act 2009 (Fair Work Act) for approval of an enterprise agreement.
 The Minister’s application is made pursuant to s.605 of the Fair Work Act. Under that section the Minister may apply for a review of a decision of a member of Fair Work Australia if the Minister believes that the decision is contrary to the public interest. It is in the discretion of a Full Bench whether to conduct a review, subject to the proviso that if the Full Bench is satisfied that a review would be in the public interest it must conduct one. The relevant terms of s.605 are:
“605 Minister’s entitlement to apply for review of a decision
(1) The Minister may apply to FWA for a review to be conducted by FWA of a decision made by FWA (other than a decision of a Full Bench or the Minimum Wage Panel) if the Minister believes that the decision is contrary to the public interest.
(2) Without limiting when FWA may conduct a review, FWA must conduct a review of the decision if FWA is satisfied that it is in the public interest to conduct the review.
 Mr Niall of counsel appeared for the Minister, Mr McCauley for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU), Mr Clarke for the Australian Council of Trade Unions and Mr Mead for the Australian Industry Group (AiGroup) and Trimas.
The statutory provisions
 The Minister’s application relates to one aspect of the Commissioner’s decision only, namely: the validity of the flexibility term in the agreement. In order to explain the basis for the application it is necessary to refer to some legislative provisions. Section 202 of the Fair Work Act provides that every enterprise agreement must include a flexibility term. The section should be set out in full:
“202 Enterprise agreements to include a flexibility term, etc
Flexibility term must be included in an enterprise agreement
(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
(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.
(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
(4) If an enterprise agreement does not include a flexibility term, the model flexibility term is taken to be a term of the agreement.
(5) The regulations must prescribe the model flexibility term for enterprise agreements.”
 A number of aspects of these provisions should be noted. Firstly, the flexibility term must enable the employer and the individual employee to agree to an individual flexibility arrangement “varying the effect of the agreement” (s.202(1)(a)). Second, the flexibility term must comply with the requirements in s.203 (s.202(1)(b)). Third, if an individual flexibility arrangement is made pursuant to the flexibility term the enterprise agreement has effect in relation to the employer and the employee “as if it were varied by the arrangement” (s.202(2)(a)). If an enterprise agreement does not include a flexibility term, the model flexibility term in the Fair Work Regulations 2009 (the Regulations) is taken to be a term of the agreement (ss.202(4) and (5)). The model flexibility term is in Schedule 2.2 to the Regulations. For ease of reference we include the model flexibility term as an appendix to this decision.
 The requirements to be met by a flexibility term are set out in s.203 of the Fair Work Act. It is unnecessary to set out the whole of the section. Section 203(2)(a) is particularly relevant to this matter. It provides that a flexibility term must set out the terms of the enterprise agreement “the effect of which may be varied” by an individual flexibility arrangement.
 Where Fair Work Australia approves an enterprise agreement and the model flexibility term is taken to be a term of the agreement that fact must be noted in the decision approving the agreement. This is dealt with in s.201(1) of the Fair Work Act, which reads as follows:
“201 Approval decision to note certain matters
Approval decision to note model terms included in an enterprise agreement
(a) FWA approves an enterprise agreement; and
(b) either or both of the following apply:
(i) the model flexibility term is taken, under subsection 202(4), to be a term of the agreement;
(ii) the model consultation term is taken, under subsection 205(2), to be a term of the agreement;
FWA must note in its decision to approve the agreement that those terms are so included in the agreement.”
 At the outset a question of statutory construction arises. We read s.202(4) as providing that if the proposed agreement does not include a flexibility term, or includes a term which does not meet the requirements of s.203, the model term is to be a term of the agreement. At first glance that section would appear to operate independently of any decision by Fair Work Australia. On closer analysis, however, a legislative intention can be discerned that Fair Work Australia can make a legally binding decision in relation to the matter under s.201(1). It is clear that the tribunal is not able to exercise judicial power. Accordingly a decision under s.201(1) could not operate as a declaration of the legal position under s.202(4). On the other hand, it is highly unlikely that a decision under s.201(1) is intended to have no legal effect but to operate in a purely advisory way. Under that interpretation the parties would be no better informed as to the true legal position as a result of the decision and would still be exposed to the possibility of a contrary decision being reached by a court, possibly with very serious consequences. It is likely that the legislature intended that where Fair Work Australia is of the opinion that the agreement does not contain a flexibility term, or includes a term which purports to be a flexibility term but which does not meet the requirements of s.203, it can clarify the position in its decision. Where the decision approving an agreement notes that the model flexibility term is taken to be a term of the agreement, the decision governs the legal effect of the agreement. We shall approach the review on that footing.
 In this case application was made for approval of an enterprise agreement known as the Trimas Operations Waterview Close Collective Bargaining Agreement 2009 2 (the agreement). The agreement contains the following provision:
“12. WORKPLACE FLEXIBILITY
12.1. The terms in clause 12.4 of the Agreement may be varied by an individual flexibility arrangement (“IFA”).
12.2. The Employer will not make an IFA unless the following conditions are satisfied:
12.2.1 The IFA must be about matters that would be permitted matters if the arrangement were an enterprise agreement;
12.2.2. The IFA must not include a term that would be an unlawful term if the arrangement were an enterprise agreement;
12.2.3. The IFA must be genuinely agreed to by the employer and the employee;
12.2.4. The IFA must result in the employee being better off overall than the employee would have been if no individual flexibility arrangement were agreed to;
12.2.5. The IFA must be able to be terminated:
22.214.171.124. by either the employee, or the employer, giving written notice of not more than 28 days; or
126.96.36.199. by the employee and the employer at any time if they agree, in writing, to the termination
12.2.6 The IFA must be in writing and signed:
188.8.131.52. in all cases – by the employee and the employer; and
184.108.40.206. if the employee is under 18 – by a parent or guardian of the employee;
12.2.7. The IFA must be given to the employee within 14 days after it is agreed to.
12.3. It is a very serious breach of this Agreement if the Employer enters into an IFA and the above conditions are not satisfied.
12.4. The terms of this agreement that may be subject to an IFA are:
Clauses 7.1.10(a), 7.5.1(e)(ii), and 6.4.3 of the Metal, Engineering & Associated Industries Award 1998 as those stood on 1 March 2006 and are incorporated as terms of this agreement by clause 5 of this agreement.
12.5. The facilitative provisions and the flexibility term in the award are not incorporated into this agreement, despite any term of this agreement to the contrary.
12.6. Where the employer intends to reach any individual flexibility arrangement under this agreement, the employer must inform in writing any union(s) covered by this agreement of the employer’s intent to enter such an arrangement, at least seven days prior to entering that arrangement. When informing the union(s) under this subclause, the employer must: include details of the term(s) of the agreement and/or incorporated award(s), and which classification of employees are proposed to be subject to such an arrangement; and not disclose the name of any employee who the employer proposes to be subject to the individual flexibility arrangement, without the consent of that employee. For the avoidance of doubt, informing union(s) under this subclause does not mean that those union(s) must approve or consent to the individual flexibility arrangement.”
 For present purposes the effect of this provision can be summarised quite briefly. Clause 5 of the agreement incorporates by reference all of the provisions of Part 1 of the Metal, Engineering and Associated Industries Award 1998 3 (the manufacturing award) as at 1 March 2006. Clause 12.4 of the agreement identifies three clauses in the manufacturing award. Clause 12.1 indicates that the three clauses identified may be subject to an individual flexibility arrangement.
 The Commissioner’s attention was taken by cl.12.1. In particular, he was concerned by the use of the word “varied” in relation to the matters specified in cl.12.4. He found that cl.12.1 purported to confer on the parties to an individual flexibility agreement a power to vary the identified clauses. He concluded that cl.12.1 is inconsistent with the requirement in s.203(2) that a flexibility term must provide for an individual flexibility arrangement which varies “the effect of” the terms of an enterprise agreement. It can be seen that the decision rests on a distinction between two concepts: variation of a term of an enterprise agreement on the one hand and variation of the effect of a term on the other. The Commissioner decided that cl.12 did not provide for variation of the effect of a term of the agreement and therefore was not a flexibility term of the kind referred to in ss.202 and 203. He went on to find that, by operation of s.202(4), the model flexibility term was a part of the agreement.
The arguments for review
 It was submitted on behalf of the Minister, and by a number of other persons and bodies, that the distinction drawn by the Commissioner between variation of a term and variation of the effect of a term is not a valid one. They submitted that the practical effect of an individual flexibility arrangement made under a flexibility term is that it varies the terms of an enterprise agreement in relation to the employer and the individual employee concerned and that the Commissioner was wrong to find otherwise.
 The Minister also submitted that other consequences flow from the construction the Commissioner adopted. Counsel pointed out that the Commissioner, in deciding that an individual flexibility arrangement cannot vary a term of an enterprise agreement, has potentially narrowed the scope of individual flexibility arrangements. Counsel drew attention to the following passage in the Commissioner’s decision:
“ In the absence of clear language in s202 or 203 which permits the variation of the terms of an enterprise agreement through an IFA then consistent with the plain language of those provisions they must be limited to arrangements which whilst varying the consequences of the operation of the term of the agreement still remain within the parameters set by the terms of the agreement.”
The language of clause 12
 We deal first with the Commissioner’s principal conclusion. In our view an individual flexibility arrangement made pursuant to a flexibility term in an enterprise agreement does not vary the terms of the agreement – the terms of the agreement remain. But the individual flexibility arrangement alters the legal rights of the parties to it in the relevant respects. This alteration in legal rights is reflected in the language used in the statutory provisions. The provisions contain expressions such as “varying the effect of” (s.202(1)(a)), “as if it were varied” (s.202(2)(a)) and “the effect may be varied” (s.203(2)(a)). In the same way, cl.1 of the model flexibility term uses the expression “vary the effect of the terms of the agreement.”
 It is clear that cl.12.1 of the agreement does not precisely reflect the legal situation. The language indicates that an individual flexibility arrangement may vary the terms of the enterprise agreement. With respect to the Commissioner, however, we do not think that this failure to use the precise language of ss.202 and 203 means cl.12 is not a flexibility term within the meaning of those sections. There are three reasons.
 The first reason is that the terms of enterprise agreements are not the product of careful drafting by experienced Parliamentary drafters. It is not appropriate to apply such high standards when interpreting enterprise agreements. An approach which takes the purpose of the provision into account is to be preferred. In this case it is highly likely that the parties intended to agree on a provision of the kind required by the statute.
 The second consideration is that a liberal approach to the construction of the clause is appropriate in light of the language of the model flexibility term. Clause 1 of the model term, in referring to the operation of an individual flexibility arrangement on an enterprise agreement, uses the expression “vary the effect of”. Clause 3(d)(i)), however, in what is relevantly the same context, provides:
“(3) The employer must ensure that the individual flexibility arrangement:
(d) includes details of :
(i) the terms of the enterprise agreement that will be varied by the arrangement; and
 The use of the term “varied” is important.
 Thirdly, an individual flexibility arrangement made pursuant to cl.12.1 only affects the legal rights of the individual employee and the employer. Regardless of the use of the term “vary”, an individual flexibility arrangement cannot affect the legal rights of other employees in relation to the agreement. Subject to an argument as to the meaning of the word “effect”, which we deal with below, it is difficult to see that anything of substance turns on the use of the word “vary”.
 We now deal with the meaning of the word “effect” in s.202(1)(a). The Commissioner expressed the view that individual flexibility arrangements must be limited to arrangements varying the consequences of the operation of the terms of the agreement but remain within the parameters set by the terms. With respect, this seems to us to be too fine a distinction and one which puts too much weight on the use of the word “effect”. As we have indicated above, that word is intended to convey the fact that while the operation of a term of the agreement can be varied by an individual flexibility arrangement so as to alter some of the legal rights of the parties to the arrangement, the terms of the agreement as such are not varied. No greater significance should be attached to the use of the word “effect” in s.202 or elsewhere. We have considered all of the Parliamentary materials and there is nothing in them which tends against this conclusion in any way. It follows that for this reason also the failure of cl.12.1 to refer to varying the effect of a term of an enterprise agreement does not alter its character as a flexibility term.
 For these reasons we have concluded that the language of cl.12.1 does not affect its validity as a flexibility term within the meaning ss.202 and 203.
Can the specified terms be varied?
 An additional and separate challenge to the validity of cl.12 was advanced in the review proceedings. AiGroup, on its own behalf and on behalf of Trimas, submitted that cl.12 is not a valid flexibility term because it is not possible to vary the effect of any of the provisions identified in cl.12.4. This submission is based on the premise that if it is not possible to vary the effect of any of the provisions to which a purported flexibility term relates, the flexibility term cannot be a valid one for the purposes of ss.202 and 203. AiGroup submitted that in order to be a valid flexibility term, it must be possible to use the term to vary the effect of at least one provision in the enterprise agreement.
 We agree with the substance of AiGroup’s submission. A term which does not provide for change in the effect of any of the terms of the agreement cannot be a flexibility term. Furthermore, the change provided for must be of the nature identified in ss.202 and 203. The question in this case is whether cl.12 provides for a relevant change in the effect of any of the terms of the agreement. That question can only be answered by an examination of the clauses specified in cl.12.4.
 Clause 12.4 refers to three provisions in the manufacturing award. The first is cl.6.4.3 which reads as follows:
“6.4.3 One in, All in does not Apply
The assignment of overtime by an employer to an employee is to be based on specific work requirements and the practice of "one in, all in" overtime must not apply.”
 This provision has two elements. The first element is the requirement that assignment of overtime should be based on specific work requirements. It is possible that agreement might be made to vary the effect of that requirement in relation to a particular employee in order to accommodate the employee’s needs, family obligation for example. While it depends what interpretation is given to the phrase “specific work requirements” we cannot conclude, on the material and submissions before us, that the effect of that part of the clause is incapable of being varied by an individual flexibility arrangement.
 The second element of the clause is the requirement that the principle of “one in, all in” is not to apply in relation to overtime. While it is not difficult to envisage the effect of that prohibition being altered by individual arrangement, it is very difficult to envisage the circumstances in which such an alteration would meet the genuine needs of the employer and the employees as required by s.202(1)(a). Be that as it may, we cannot form the conclusion that the effect of cl.6.4.3 is incapable of being varied, at least in relation to the first element of the clause.
 AiGroup submitted that its “capability” argument cannot succeed if one of the clauses specified in the flexibility term is capable of being varied. Therefore it is unnecessary to examine the other two clauses in the manufacturing award that are specified in cl.12.4. We reject the contention that it is not possible to vary the effect of any of the provisions identified in cl.12.4.
 It is appropriate to make a general comment concerning this aspect of the review. When the parties to an enterprise agreement identify provisions in what purports to be a flexibility term, Fair Work Australia would generally be likely to accept that the effect of those provisions is capable of being varied by an individual flexibility arrangement. In other words, considerable weight would be given to the parties’ views as evidenced by the agreement. While the general position is clear, this case has some unusual features. We refer in particular to the fact that, despite having agreed to the agreement being put to a vote of the employees with cl.12 in it, Trimas reserved the right to argue in Fair Work Australia that cl.12 was not valid. Trimas in due course did just that. Had we concluded that argument was correct, and that indeed cl.12 was not valid, questions might have arisen concerning the validity of the agreement itself.
 For these reasons the Commissioner fell into error. Clause 12.1 is a valid flexibility term and the model term does not apply. In the circumstances the Commissioner’s decision on this point cannot stand. Trimas is to file and serve on the Minister and the AMWU within 7 days a draft order to give effect to this decision.
R. Niall of counsel for the Minister for Employment and Workplace Relations.
T. McCauley for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).
T. Clarke for the Australian Council of Trade Unions.
M. Mead for the Australian Industry Group and Trimas Corporation Pty Ltd.
Final written submissions:
1  FWAA 1485.
3 AP789529 CRV.
Appendix A to the Full Bench decision of 19 May 2010
Fair Work Regulations 2009
Schedule 2.2—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;
(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.
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