[2010] FWAFB 4602

Download Word Document



Fair Work Act 2009
s.604 - Appeal of decisions

McDonald's Australia Pty Ltd
Shop, Distributive and Allied Employees’ Association


SYDNEY, 21 JULY 2010

Appeal against decision [2010] FWA 1347 of Commissioner McKenna at Sydney on 23 April 2010 in matter number AG2009/23475 - whether the Commissioner erred in finding application did not meet statutory requirements for approval - whether the Commissioner erred in finding agreement did not satisfy no-disadvantage test - permission to appeal granted - appeal upheld - application for approval of agreement determined by Full Bench - application for approval of agreement granted - Fair Work Act 2009 ss 171, 180(2), 180(3), 180(5), 185-188, 604 - Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 Schedule 7 item 2.


[1] On 22 June 2010 after the hearing of this appeal we announced our decision to grant permission to appeal, allow the appeal and approve the McDonald’s Australia Enterprise Agreement 2009 (the Agreement) under s 186 of the Fair Work Act 2009 (the Act). The following are the reasons for our decision.

[2] The Agreement was made in December 2009. It covers approximately 80,000 employees employed in McDonald’s outlets by McDonald’s Australia Pty Ltd (McDonald’s) and its franchisees. The application for approval of the Agreement was made on 23 December 2009.

[3] McDonald’s and the Shop, Distributive and Allied Employees’ Association (SDA) sought to appeal against the decision of Commissioner McKenna made on 23 April 2010. 1 The decision under appeal concluded that the Agreement was incapable of approval given deficiencies in the application, the failure to meet the Act’s pre-approval requirements, the failure to meet the no-disadvantage test and the inadequacy of some of the proposed written undertakings.

[4] At the hearing of the appeal on 22 June 2010 Mr S Wood, Mr J Tracey and Mr D Cross of counsel represented McDonald’s, Mr D Bliss represented the SDA and Mr M Mead represented Australian Industry Group (AIG).

The decision under appeal

[5] Prior to issuing the decision in this matter the Commissioner listed the matter for hearing on 19 January, 3 February, 25 February, 2 March and 11 March 2010. During those proceedings and in separate written material the Commissioner raised various issues of concern and the parties provided responses to the matters raised.

[6] In a very lengthy 110 page decision made on 23 April 2010 Commissioner McKenna decided to dismiss the application for approval of the Agreement on each of the following grounds:

[7] The Commissioner said that each of these grounds justified dismissal of the application alone. The Commissioner’s reasons will be dealt with in greater detail in considering the grounds of appeal and the subject matter of the relevant aspects of the decision.

The nature and grounds of the appeal

[8] An appeal under s 604 of the Act is properly characterised as an appeal by way of a rehearing. The authorities in relation to the predecessor provisions of the Workplace Relations Act 1996 9 are equally applicable to appeals under s 604. A successful appeal requires the identification of error on the part of the primary decision-maker.

[9] To the extent that any part of the decision involves the exercise of a discretion, the principles concerning appeals against discretionary decisions apply. 10 Because a decision-maker charged with the making of a discretionary decision has some latitude as to the decision to be made, the correctness of the decision can only be challenged by showing error in the decision-making process.11

[10] A decision is of a discretionary nature if no one consideration or combination of considerations is necessarily determinative of the result and the decision-maker is left some latitude as to the choice of decision to be made. The discretion may be broad or narrow such as when the decision-maker is required to make a particular decision if a particular opinion or value judgement is formed. 12

[11] The appellants accepted that in order to succeed in the appeal they needed to demonstrate that each of the bases for dismissing the application was in error. They asserted that errors were made in the consideration and application of certain pre-approval requirements, errors were made in the approach to applying the no-disadvantage test and other miscellaneous errors were made. Further details are discussed in relation to each ground of appeal below.

Relevant legislation

[12] Part 2-4 of the Act deals with enterprise agreements. That part has specific objects expressed in s 171 as follows:

[13] The appellants emphasised the facilitative aspects of these objectives. We agree that these objectives place the primary role for making enterprise agreements on the parties to those agreements and their representatives and that the role of Fair Work Australia (FWA) includes facilitating the making of enterprise agreements. In general we believe that the requirements for approval should be considered in a practical, non-technical manner and that reasonable efforts should be made to clarify matters with the parties and consider undertakings to clarify or remedy concerns to the extent that these may be available under s 190 of the Act.

[14] Section 186 of the Act imposes an obligation on FWA to approve an agreement if an application for approval of the agreement is made under s 185 and the requirements of ss 186 and 187 are satisfied. These sections provide:

[15] Some of these tests are subject to further legislative explanation. The requirement that the agreement be genuinely agreed to by the employees covered by the agreement in s 186(2) is explained in s 188 as follows:

[16] By virtue of item 2 of Schedule 7 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 the relevant test to be applied to agreements reached prior to 2010 is the no-disadvantage test in lieu of the better off overall test in s 186(2)(d).

[17] We propose to consider the matters in detail by reference to the Commissioner’s grounds for dismissing the application for approval of the Agreement.

The validity of the application

[18] After reviewing the material filed with the application and the submissions made to her by the parties the Commissioner stated as follows:

[19] The appellants submitted that this conclusion incorrectly elevated a requirement to file accurate forms and declarations to a requirement for approval of the agreement. They submitted that the critical questions for approval of an agreement are whether the statutory tests are met, not whether the original declarations made in support of the application are complete. They further submitted that during the process of hearings and submissions the appellants provided all missing information. The Commissioner never requested all of this information to be reflected in amended declarations and did not properly address the supplementary declarations filed by the parties and their submissions in the hearings.

[20] The appellants submitted that all relevant information was provided in a variety of ways including uncontested submissions and instructions given by counsel from the bar table and this is demonstrated by reference to the criteria for approval themselves. However in founding a decision to dismiss the application on the adequacy of the originating declaration the Commissioner was imposing a requirement not found in the Act. The appellants addressed each of the alleged deficiencies and demonstrated that complete information was provided at subsequent stages. The appellants submitted that this was the purpose of those hearings and submissions, yet the outcomes of those processes were not fully considered in determining that the application should be dismissed because of the state of the declarations.

[21] We agree with these submissions. If there is an omission of information relevant to any of the tests that are required to be determined it is prudent for FWA to draw these matters to the attention of the parties and give them an opportunity to supplement the material they have filed. Material provided in response to that request should be taken into account and put in a required form if requested. Often questions answered by representatives in proceedings or otherwise in writing will be sufficient. If the material is insufficient it bears upon the level of satisfaction for the relevant test. There is no separate requirement to remedy all deficiencies in sworn declarations. To the extent that information remained incomplete it is a matter for consideration later in relation to the applicable tests. As the Commissioner founded a conclusion on the general status of declarations and information she was in error. This amounted to the imposition of an additional test contrary to the terms of s 186 and was an error. We reject the notion that there was a requirement to be met independent of satisfaction of the tests in ss 186 and 187.

The requirements of s 180(3)

[22] The Commissioner’s conclusion on this matter was expressed as follows:

[23] The requirement in s 180(3) was that the employer take all reasonable steps to notify employees of the time, place and voting method for a ballot prior to the access period for the agreement. The employer adopted a variety of means of communications and provided extensive details of these communications. The communications included a joint letter from McDonald’s and the SDA provided electronically on 3 December, other electronic access to posters including poster #3 on or before 7 December, access to advice through local management and information sessions conducted by McDonald’s. The Commissioner accepted that poster #3 contained the relevant information.

[24] The appellants criticised the breaking down of each separate communication to identify perceived deficiencies and suggest that it reflects an approach of trying to find defects rather than adopt a fair view of the communications as a whole. They submitted that the approach does not consider the essential task under s 180(3) - whether the employer took reasonable steps. They further submitted that the reliance on ambiguity as to the dates of some communications was misconceived as whichever date the information was conveyed, the communication still occurred prior to the start of the access period.

[25] We are generally in agreement with the submissions of the appellants. It does not appear to us that the approach of the Commissioner is consistent with the requirement in s 188 to be satisfied that the employer took reasonable steps to ensure that certain information was provided to employees. The Commissioner has elevated the test to requiring the applicants to establish in a definitive way that all employees were in fact informed of the matters. Further, the Commissioner has apparently disregarded some evidence because of some confusion over the dates of communications where the differences were immaterial. She has further criticised some of the evidence as hearsay. In matters of this nature it is often unnecessary or impractical to lead better evidence. In our view the Commissioner’s approach was not consistent with the Act. In not applying the correct test the Commissioner erred.

[26] On our consideration of the evidence in the matter we consider that it is beyond doubt that the employers took reasonable steps to notify employees of the relevant information in s 180(3) by the start of the access period. There are a large number of employees covered by the Agreement who work at a large number of work locations. McDonald’s and the SDA adopted a collaborative approach to communicating to employees. In our view the approach was detailed, thorough and comprehensive. We commend them for their efforts. The requirements of s 180(3) are satisfied.

The requirements of s 180(5)(a)

[27] The Commissioner commenced her consideration of this matter as follows:

[28] The Commissioner then reviewed the various communications by the SDA and McDonald’s. She said:

[29] These extracts reveal a number of errors. First, the Commissioner has not accurately stated the test under s 180(5)(a). The heading and introductory paragraphs of this aspect of the decision express the test as an absolute requirement to ensure particular outcomes are achieved. The section does not establish any such requirement. It requires only that the employer take reasonable steps to ensure that the terms and conditions are explained to employees. In misstating the test the Commissioner erred.

[30] Secondly there is no requirement in the Act that there be a full explanation of the terms of the agreement prior to the employer requesting employees vote on an agreement. The requirement in s 180(5)(a) is that the employer take reasonable steps to ensure that explanations are provided. Under s 180(1) the employer must comply with this requirement before requesting employees to approve an enterprise agreement. In our view these provisions do not preclude explanations being given during the access period. It is open to an employer to make arrangements for subsequent explanations prior to requesting employees to vote. If the arrangements are reasonable steps, s 180(5)(a) is satisfied.

[31] Thirdly there is no impediment in the Act to collaborate with bargaining representatives to provide relevant explanations. The Commissioner rejected certain explanations because they were given by the SDA. In some cases SDA documents were communicated by McDonald’s by electronic means. In our view the Commissioner was quite wrong to disregard these steps. In our view an employer would be taking reasonable steps to ensure terms are explained to employees if it collaborated with a bargaining representative to arrange for this to be undertaken.

[32] Considering the evidence for ourselves we are satisfied that the employer took reasonable steps to ensure that the agreement was explained to employees. The documents produced by the SDA and McDonald’s were comprehensive and detailed. They clearly satisfy the obligations of the employer. Again, we commend the collaborative approach of the parties.

The requirements of s 180(5)(b)

[33] The Commissioner said the following in relation to s 180(5)(b):

[34] The notion in this extract is that unless there is evidence of a differentiated method of explaining the terms of the agreement to different groups of employees the employer cannot be said to have taken reasonable steps to ensure that the explanation is provided in a reasonable manner. We reject this approach. If a method of explanation is adequate for all groups of employees there is no need that it be differentiated. There is no suggestion in any of the material or the comments of the Commissioner that any of the means of communication, or the communications as a whole, were in any way deficient. We are of the view that the Commissioner erred in her approach to this requirement.

[35] Reviewing the evidence for ourselves we note that the employers held meetings to explain the agreement. The employers used a variety of meeting venues to encourage attendance including the hiring of movie theatres. Agreement summaries were prepared by the SDA in consultation with McDonald’s. Those summaries set out the differences between the terms of the Agreement and current terms and conditions. Employees were given hard copies of the summaries or given access to electronic versions and copies on notice boards. Additional meetings were conducted by the union at which explanations were given and questions could be asked. Employees were also able to contact the People Resources Department in each State to seek clarification of any matter.

[36] In our view McDonald’s clearly took reasonable steps to ensure that the explanation was provided in an appropriate manner taking into account the needs of employees including young people.

Genuine agreement

[37] The Commissioner determined that there were other grounds for believing that employees did not genuinely agree to the Agreement. The matters she relied on were the questions about the applicability of casual loadings in the territories, savings provisions, comparison materials which in some cases referred to agreements rather than reference instruments, and the content of summary documents regarding changes such as a one hour minimum engagement for attendance at training sessions and wage rates in Tasmania. In relation to the last mentioned matter the Commissioner said:

[38] The appellants take strong objection to the notion that there is not genuine agreement. They point out that: notice about the ability to appoint bargaining representatives was given some months before; not one of the employees appointed anyone other than the SDA; there was no evidence of any of the employees expressing concerns as to the genuineness of their agreement throughout the lengthy approval process; and, a 45% turn out to vote of which a majority of over 90% voted in favour. Further, ambiguities such as the application of casual loadings in the territories and wage rates in Tasmania were resolved by undertakings. The SDA submitted that minor language differences on savings and implementation issues amounted to very little as there was no practical differences in the outcome. The appellants further asserted that the modified wage increase for Tasmanian employees was wrongly described as a wage decrease.

[39] We agree that this aspect of the decision also involves errors. We find that there is no proper basis for concluding that the employees who voted for the agreement did not genuinely agree to it.

The requirements of s 180(2)

[40] The Commissioner decided to dismiss the application on the further ground that the employers did not provide employees with a copy of the National Employment Standards (NES) and did not provide employees in Broken Hill with a copy of the South Australian Long Service Leave Act 1987. The Commissioner determined that these documents were required to be provided to employees under s 180(2)(a)(ii).

[41] The appellants challenged the statement of the legislative requirement by the Commissioner. They submitted that there is a misstatement of the test which requires reasonable steps to be taken. We agree that the Commissioner misstated the test.

[42] The appellants also challenged the conclusion reached. Section 180(2) requires employers to take reasonable steps to ensure that employees have access to the agreement and other incorporated documents. This will particularly relate to documents that are not otherwise in the public domain. The appellants asserted that while the Agreement refers to the NES in various respects it does not incorporate the terms of the NES into the Agreement.

[43] We have reviewed the terms of the Agreement and agree with that submission. References in the Agreement to the NES do not incorporate the terms of the NES into the Agreement. The South Australian Long Service Leave Act 1987 is however incorporated because the terms of the agreement provide for its application in Broken Hill - which is beyond its legislative effect. The benefits are greater than those provided by New South Wales legislation. The laws of the land are available to Australian citizens in a variety of ways. We find that the employer was not required to take any further steps to ensure that the relevant employees had access to the South Australian legislation. Because the legislation is freely available in the public domain, no further steps were required.

The no-disadvantage test

[44] The consideration by the Commissioner of the no-disadvantage test spans some 270 paragraphs of the decision. Her conclusion was expressed as follows:

[45] The appellants challenged this finding and the analysis which led to this conclusion. Numerous errors are asserted. For example at paragraph [132] of the Commissioner’s decision she identifies various benefits that are provided under the Agreement to employees at Levels 1-3 and which are not provided to employees classified at Level 4. The Commissioner describes the disadvantages as “industrially-confronting” 14 and largely on the basis of this analysis concludes that Level 4 employees are disadvantaged overall. The appellants pointed out that the analysis fails to recognise that Level 4 employees were previously not covered by the reference instruments and the Commissioner has not undertaken any comparison between entitlements under reference instruments and entitlements under the Agreement in reaching a conclusion on no-disadvantage in relation to Level 4 employees.

[46] Another example is paragraph [250] in which the Commissioner said as follows:

[47] The appellants submitted that the NES permit cashing out arrangements in enterprise agreements but do not contain any general entitlement to cashing out. The comparison with the NES is not to the point. The task was to consider the benefits under the Agreement by comparison with the relevant terms of reference instruments. It is irrelevant to compare benefits available to different categories of employees under the agreement and to construe the NES in this way.

[48] A further example concerns minimum engagement periods. For casuals, the minimum engagement period of two and a half hours is an improvement of 30 minutes on the provisions under the New South Wales reference instrument, the South Australian/Northern Territory instrument, the Victorian instrument, the Queensland instrument and the Western Australian instrument, each of which provide for a two hour minimum engagement. It is a decrease compared to the ACT instrument which provides for a three hour engagement or two hours by agreement with the employee. For part time employees, the minimum engagement period of three hours is a 30 minute improvement on the New South Wales and Victorian instruments, and a one hour improvement on the Queensland instrument. It is the same as the Western Australian and ACT instruments. The agreement also provides for a minimum engagement of one hour for attendance at voluntary crew meetings. Attendance at the crew meetings is voluntary but encouraged. The employers and the SDA considered that the nature of these voluntary crew meetings, which are primarily used for training, are not covered by the minimum engagement provisions of reference instruments and therefore do not involve a reduction in entitlements.

[49] The employer and the SDA contended before the Commissioner that these changes represented an advantage for employees. The Commissioner focused her attention on the one hour crew meeting provisions and rejected the proposition that the Agreement provides more beneficial arrangements.

[50] We consider that the Commissioner’s conclusion in this regard is unsustainable. The changes regarding minimum engagement periods should have been considered as a whole. For junior employees, the additional income that is likely to arise for each engagement is significant. On the other hand, the voluntary attendance at crew meetings, even if it involves a reduction in entitlements, is far outweighed by the more beneficial entitlements. Any balanced consideration of these provisions would determine that the Agreement contains advantages to employees in this regard.

[51] The Commissioner used her conclusion on this point as a factor leading to her conclusion that the Agreement represents an emphatic diminution in overall terms and conditions. Because of the errors in the examples we have given, which are only examples of the matters raised before us, 15 we believe that the Commissioner erred.

[52] We agree that these are fundamental errors. It is not necessary to consider all of the other alleged errors in order to determine whether to allow the appeal. In our view the conclusion on no-disadvantage is attended by errors of approach and in its underpinning reasoning. We will determine whether the Agreement passes the no-disadvantage test on the material before us.

[53] We have considered the material regarding the advantages and disadvantages to employees under the Agreement in conjunction with the undertakings given by McDonald’s in the proceedings before the Commissioner and updated in the proceedings before us. We consider that the Agreement does contain some disadvantages to employees compared to the content in reference instruments. The disadvantage is minimised in many cases by undertakings given by McDonald’s. In other cases the disadvantage is confined to a small proportion of employees and is the consequence of adopting uniform national provisions, or contingent on future events. Some disadvantage exists in relation to the wage rate for some age groups in Western Australia, the casual loading in Western Australia, some allowances, weekend overtime in Western Australia, public holidays in the ACT, South Australia and Northern Territory, redundancy, and compassionate leave consequent on the reduction of benefits to the level in the NES.

[54] The Agreement contains advantages to certain groups of employees or generally in relation to the classification structure, the rates of pay, early morning work penalties, hours of work provisions, minimum engagements, overtime rates, redundancy entitlements, casual loadings, junior rates, allowances, salary sacrifice, breaks, annual leave, public holidays, emergency services leave, national disaster leave, jury service, unpaid leave, blood donor leave, bone marrow leave, defence force leave, part-time employment and dispute resolution. There is a savings provision in the Agreement to protect each individual’s current rate of pay. The undertakings provided by McDonald’s are attached to our separate decision to approve the Agreement and form part of the Agreement. 16

[55] We have considered the comparative material which explains the relevant advantages and disadvantages to employees and have concluded that the Agreement does 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 reference instruments applying to the employees.


[56] For the above reasons, on 22 June we granted permission to appeal, allowed the appeal and quashed the decision of Commissioner McKenna.

[57] In a separate decision of 29 June 2010 we approved the Agreement under s 186 of the Act. 17



S Wood, J Tracey and D Cross of counsel for McDonald’s Australia Pty Ltd

D Bliss for the Shop, Distributive and Allied Employees’ Association

M Mead for the Australian Industry Group

Hearing details:

June 22

 1   McDonald’s Australia Pty Ltd on behalf of Operators of McDonald’s outlets [2010] FWA 1347

 2   Ibid at [34]

 3   Ibid at [56]

 4   Ibid at [79]

 5   Ibid at [83]

 6   Ibid at [97]

 7   Ibid at [106]

 8   Ibid at [356]

 9   Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at 204 [17]

 10   House v R (1936) 55 CLR 499

 11   Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at 205 [21]

 12   Ibid at 204-205 [19]

 13   McDonald’s Australia Pty Ltd on behalf of Operators of McDonald’s outlets [2010] FWA 1347 at [96]

 14   McDonald’s Australia Pty Ltd on behalf of Operators of McDonald’s outlets [2010] FWA 1347 at [133]

 15   Exhibit W4

 16   McDonald’s Australia Pty Ltd; Shop, Distributive and Allied Employees’ Association [2010] FWAA 4754

 17   Ibid

Printed by authority of the Commonwealth Government Printer

<Price code C, PR998486>