[2012] FWAFB 9398

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Fair Work Act 2009
s.604 - Appeal of decisions

ALDI Foods Pty Ltd
Transport Workers' Union of Australia; National Union of Workers, NSW Branch



Appeal against decision - s.185 applications for approval of enterprise agreements - decision not to approve agreements - pre-approval steps - selection of groups to be covered - genuine agreement - application of better off overall test - compliance with National Employment Standards - appeal principles - permission to appeal refused.

[1] This is an appeal, for which permission is required, against a decision 1 in which Commissioner McKenna dismissed applications made pursuant to s.185 of the Fair Work Act 2009 (the Act) by ALDI Foods Pty Ltd2 (herein referred to as ALDI) for the approval of three agreements which applied to a substantial portion of the ALDI Stores operations in Australia.

[2] The three agreements were in similar terms and involved a number of unions as employee bargaining representatives. The Shop, Distributive and Allied Employees Association (SDA) and the National Union of Workers (NUW) supported the applications while the Transport Workers’ Union of Australia (TWU) and, later, the New South Wales Branch of the NUW, opposed the applications.

[3] The Commissioner’s decision is extensive and complex. Notwithstanding this, we set out briefly the background to the applications and the main matters dealt with in the decision.


[4] The agreements provide for pay and conditions of employees working in and from three of ALDI’s distribution centres, namely, the Derrimut distribution centre in Victoria, the Stapylton distribution centre in Queensland and the Minchinbury distribution centre in New South Wales; and for employees working in ALDI’s stores that are supplied by the respective distribution centres. The Derrimut Agreement 2012 (the Derrimut Agreement) is intended to operate in Victoria and New South Wales; the Stapylton Agreement 2012 (the Stapylton Agreement) in Queensland and New South Wales; and the Minchinbury Agreement 2012 (the Minchinbury Agreement) in New South Wales. The three agreements replace agreements and Australian Workplace Agreements (AWAs) which were reached and approved under the previous Workplace Relations Act 1996 (the WR Act).

[5] The Commissioner convened several hearings with respect to the applications. There were various concerns raised in relation to the agreements and the Commissioner invited ALDI to consider the provision of undertakings. As a consequence, a significant number of undertakings relative to each agreement were provided.

[6] The Commissioner’s decision details the background to the matter and deals with four categories of issues which represented considerations in the approval process. These issues related to compliance with pre-approval requirements (s.180); threshold objections as to whether the group of employees covered by the agreements was fairly chosen and the agreements were genuinely agreed (s.186(2)(a) and (3)); miscellaneous matters concerning operative dates (s.186(5)) and coverage of AWA-covered employees; and matters relating to the better off overall test and the National Employment Standards (s.186(2)(c) and (d)).

[7] The outcome of the consideration of these matters by the Commissioner may be summarised as follows.

[8] Firstly, the Commissioner addressed concerns about the extent to which the necessary pre-approval steps were taken by ALDI. Ultimately, a series of findings or observations were made about these matters. 3 Although there might be some uncertainty in relation to the final conclusions reached by the Commissioner, it is clear that these concerns were overtaken by other matters which were regarded as more fundamental impediments to the approval of the agreements.

[9] Secondly, the Commissioner considered the threshold objections raised by the TWU and the NUW (NSW Branch). Although the Commissioner took the view that there was substance in some of these objections, she decided that they did not need to be determined as the applications should be dismissed for other reasons.

[10] Despite having so concluded, the Commissioner did make findings on some of these threshold issues. In particular, the Commissioner considered the TWU submissions that the agreements could not be approved because Fair Work Australia (FWA) could not be satisfied that the group of employees to which each agreement applied was fairly chosen (see s.186(3)) or that the agreements were genuinely agreed to by the employees to be covered. These submissions were based on provisions in the agreements which allowed ALDI to alter the distribution centre arrangements and hence the application of the agreements. This matter was the subject of undertakings offered by ALDI.

[11] Thirdly, the Commissioner identified a range of matters which, absent undertakings or clarification, might prevent approval of the agreements. These matters included the start and end dates of the agreements, coverage of AWA covered employees and, to some extent, the potential application of one of the agreements to maintenance engineers. 4 Undertakings were provided by ALDI with respect to some of these matters. In other respects, these issues were not further developed as a result of the Commissioner’s decision regarding other objections.5

[12] Fourthly, the Commissioner identified three fundamental impediments to the approval of the agreements. These related to the better off overall test and the NES and are the critical matters addressed in the appeal. They concern the extent to which clause 5 of the agreements allows employees to be engaged under conditions different to those set out in the agreements, such that FWA is unable to properly apply the better off overall test; whether the agreements deprived employees of the effective capacity to refuse to work contracted hours which are in excess of 38 per week in contravention of the NES; and whether the part time working arrangements in the agreements did not meet the better off overall test. In each instance, the Commissioner found that these matters precluded her from giving approval to the agreements.

The Appeal

[13] On appeal, ALDI argued that the Commissioner’s decision was characterised by multiple errors and that its effect was such that it created confusion and disarray, particularly given ongoing agreement negotiations relative to other parts of ALDI’s business in Australia.

[14] It was submitted that, on the basis of the errors identified, the appeal should be upheld and the applications reconsidered by the Full Bench. To the extent that it was necessary, ALDI proposed to provide additional undertakings to the Full Bench, some of which superseded the earlier undertakings provided to the Commissioner.

[15] The positions taken by the TWU and the NSW Branch of the NUW (the Unions) were consistent in that they submitted that there was no appealable error in the decision to refuse the agreement applications. The Unions submitted that ALDI should renegotiate the agreements, taking into account the issues identified by the Commissioner. In the alternative, if the appeal was upheld, the Unions sought to be heard in relation to the revised undertakings proposed by ALDI.

[16] Neither the SDA nor the Victorian office of the NUW sought to be heard or to make submissions in the appeal.

[17] Sections 186 and 187 of the Act set out a series of matters which, if FWA is satisfied are met, mean that an agreement must be approved. This satisfaction involves the exercise of discretion, involving a degree of subjectivity or value judgement. Whilst pursuant to s.604 an appeal might proceed by way of rehearing, the powers of a Full Bench on appeal are only exercisable if there is error on the part of the primary decision maker. The High Court addressed this concept of error in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission 6 in the following terms:

[18] There are a number of matters addressed in the decision of the Commissioner where we might have adopted a different approach. However, we have taken the view that the Commissioner’s decision should not be disturbed unless it is shown that there has been some material error in the decision-making process whereby it was determined that the agreements should not be approved. In the circumstances of this appeal, the error would need to be demonstrated in relation to the consideration of the fundamental concerns which led the Commissioner to refuse to approve the agreements.

[19] In the course of what was a lengthy and complex case, the Commissioner had to consider many matters arising out of the evidence and submissions presented. We recognise that in some respects it might be possible to point to failings in the Commissioner’s consideration of some of the extensive material before her. However this is not sufficient in order for an appeal to succeed. For example, we note that in her consideration of the matters, the Commissioner reached various conclusions about the evidence provided by Mr Zalunardo, the Managing Director of the ALDI Prestons Region. We are not satisfied that all of these conclusions are sustainable and recognise that the Commissioner may have fallen into error in this regard. However, a link between such error and the Commissioner’s ultimate conclusions has not been made out in the appeal. For the present appeal to succeed, it must be shown that there has been error of some significance in relation to the fundamental considerations underpinning the decision not to approve the agreements.

[20] As referred to earlier, the fundamental considerations in the Commissioner’s decision relate to the application of the better off overall test; hours of work and the National Employment Standards; and part time working arrangements. We now turn to consider these matters.

(a) The better off overall test

[21] An important issue in relation to the approval process concerned the application of the better off overall test and, in particular, whether the test could be applied having regard to clause 5 of the agreements, which allowed ALDI to engage employees under different hours of work and pay arrangements.

[22] Clause 5 of the Minchinbury Agreement relevantly provides:

[23] This clause is effectively repeated (with appropriate changes) in each of the other agreements. For present purposes, the relevant part of each of the clauses is that which allows ALDI, during the life of the agreement, to engage employees “under different hours of work and pay arrangements”.

[24] The Commissioner found that the effect of the clause was to permit ALDI, with respect to employees otherwise falling within the work classifications in the agreements, to set hours of work and rates of pay that were different to those elsewhere provided in the agreements. In so finding, the Commissioner rejected a submission from ALDI that the provision was to be read as confined to determining, for example, the proportionate rate of pay for someone working a specified number of hours per week on a part-time basis.

[25] The Commissioner concluded as follows:

[26] It is clear from the language used in clause 5 of the agreements that ALDI “may engage” employees on a differential basis, which at least includes the capacity to engage new employees on rates of pay and conditions as determined by ALDI and put forward as a condition of employment. The words “an appropriate rate of pay will be set” confirm the unilateral nature of the provision, and tend to contradict the submission by ALDI to the effect that such arrangements will be done by agreement. Further, we do not consider that the requirement that the rates of pay will be set “taking into account” the rates in the agreement has the effect of requiring the rates of pay in the agreement to be complied with in the case of a clause 5 arrangement. In any event, it would seem that the requirement to take something into account might only involve evaluating it and giving it due weight,  7 not being bound to apply it.

[27] In these circumstances, it was open to the Commissioner to conclude that the better off overall test in s.193 was incapable of satisfaction because the rates of pay (or hours of work) of an employee subject to a clause 5 “arrangement” could not be known. This is because the pay arrangements and hours of work may be changed under the terms of clause 5 of the agreements by ALDI offering roles with different hours of work and pay arrangements and employees accepting those roles. It follows that FWA would be unable, for the purposes of s.193(1), to make the necessary comparison so as to be satisfied that the employees (existing and prospective) would be better off overall if the agreement applied to them rather than the relevant modern award. The provisions of clause 5 were such as to prevent FWA from being in a position where it could, at the test time, make the necessary comparison.

[28] In the appeal proceedings, ALDI submitted that the proper interpretation of the clause was that it provided some flexibility in terms of the engagement of employees within the parameters of the agreement and where the wages must be agreed by reference to the relevant provisions of the agreement. It was said that if there is any doubt as to this interpretation of the clause, ALDI would undertake to apply the provision in accordance with its interpretation. Reference was also made to the possible recourse to the dispute procedures in the agreements where a dispute arises as to the application of the clause.

[29] We recognise that an undertaking might address some of the concerns identified in relation to clause 5. However we are not satisfied that the undertaking proffered in the appeal proceedings would resolve the problem identified by the Commissioner or that the occasion has arisen for the acceptance of such an undertaking by the appeal bench. The Commissioner decided that, because of clause 5, the terms and conditions of some employees were unascertainable for the purpose of the application of the better off overall test. We have not found that the Commissioner was in error in reaching that conclusion. Accordingly, and unless error is demonstrated in other parts of the decision-making process, the occasion does not arise for us to consider the new undertakings proposed by ALDI.

(b) Hours of work and the National Employment Standards

[30] The second significant issue identified by the Commissioner in relation to the approval process concerned the extent to which the agreements deprived employees of the effective capacity to refuse to work hours in excess of 38 per week in contravention of the NES.

[31] In relation to the NES, the Commissioner found as follows:

[32] Section 62 of the Act relevantly provides:

[33] Section 55(1) provides that an enterprise agreement must not exclude the National Employment Standards or any provision of the NES. We have already referred to the requirement in s.186(2)(c) that, as a precondition for approval, FWA must be satisfied that an agreement does not contravene s.55.

[34] Clause 12 of the Minchinbury Agreement, 8 with respect to full-time employees, states that such employees will be required to work 38 hours per week plus reasonable additional hours, on any five out of seven days, Monday to Sunday. However, the clause also permits full-time employees to be engaged as either “Salaried Employees” or “Hourly Rate Employees”, and as to the former category provides:

[35] This provision is repeated with respect to Salaried Store Employees in Schedule 1, Part A of the agreement, which goes on to provide:

A relevantly identical provision applies to Warehouse Employees in Schedule 3, Part A of the agreement.

[36] Further, with respect to Hourly Rate Employees engaged in ALDI’s Transport and Distribution functions, ordinary hours may exceed 38 per week (see Schedules 4 and 8 of the agreement). Clause 32 of the Minchinbury Agreement 9 defines “Ordinary Hours” to mean “all hours worked which are non-overtime hours, including those hours which attract a shift loading and penalties”. Schedule 4 (“Transport and Distribution Employees”) provides that overtime is all work performed in excess of 10 ordinary hours per shift, 50 ordinary hours per week or 217 hours per month, with the result that ordinary hours for such employees are, on average, 50 hours per week. Schedule 8 (“Transport and Distribution Employees – Fortnightly Pay Arrangements”), which will replace Schedule 4 in its entirety upon the provision of 3 months notice by ALDI to employees, requires truck drivers to be placed on contract hours of up to 96 per fortnight (i.e. 48 per week averaged over 2 weeks) at the commencement of the Schedule. These hours cannot be changed except with the agreement of ALDI. “Banked hours” (i.e. hours worked in excess of contract hours) can be used to top up any shortfall in worked contract hours in any fortnight.

[37] Provisions to similar effect are to be found in the Derrimut Agreement and the Stapylton Agreement.

[38] Reading these provisions together, it is clear that employees can be required to work in excess of 38 hours per week. Salaried Store Employees may, as a condition of employment on engagement, be required to work additional hours, and this cannot subsequently be changed unless ALDI agrees. This is the case even where, for example due to changed family circumstances, such additional hours become unreasonable. Truck drivers have ordinary hours of 50 per week on average. These must be regarded as cases where the agreement deems the additional hours to be reasonable for the purpose of clause 12.

[39] The agreements provide dispute resolution procedures. Clause 29 of the Minchinbury Agreement 10 relevantly states:

[40] In the appeal proceedings ALDI offered an undertaking that it would agree to arbitration by FWA of any dispute over reasonable working hours. However, no such undertaking was before the Commissioner in the first instance proceedings.

[41] The agreement provisions create the potential for employees to contract to work in excess of 38 hours per week. Of itself, this does not represent an impediment to the approval of the agreements provided the NES safeguards are observed. However, to the extent that any employee who has contracted to work more than 38 hours in a week is then unable to alter that arrangement to meet a particular personal circumstance, and the issue is incapable of resolution other than at the discretion of ALDI, the agreements may be considered to operate in contravention of the NES.

[42] Whilst we think this situation is unlikely to arise, and in any event the concern might have been addressed by way of an undertaking, we do not consider the Commissioner’s conclusion was attended with error of an appealable nature. The Commissioner raised concerns in relation to hours of work in the context of the NES and decided that the agreements could not be approved without undertakings to address those concerns. 11 The provisions of the agreements are clearly inconsistent with the National Employment Standard concerning working hours contained in s.62 of the Act, and therefore the Commissioner could not be satisfied that the terms of the agreements did not contravene s.55 (see s.186(2)(c)).

(c) Part time employment and the better off overall test

[43] The third significant matter relied upon by the Commissioner in refusing to approve the agreements relates to part time employment and the better off overall test. We note that the Unions did not make any submissions in the appeal with respect to part time working arrangements.

[44] Clause 12 of the Minchinbury Agreement provides for full time, part time, limited roster or casual employment. It defines part time employment as less than 38 hours per week, paid on a pro rata basis. Part-time employees may be salaried employees or hourly rate employees with specified contracted hours. Hours worked in excess of contracted hours may be “banked” so that the employee may, at a later time, work less than the contracted hours without any salary deduction.

[45] Schedule 2 of the agreement provides for Hourly Rate Store Employees to work ordinary hours within the specified hours with overtime being paid at time and one half for work in excess of nine ordinary hours per day, or 38 per week and so forth. The Schedule also provides for limited roster employees, who may nominate the days on which they are available to work and be rostered to work.

[46] The Commissioner sets out in her decision the provisions of the agreements relating to part time employees. 12 In particular the Commissioner was concerned about the part time arrangements under the agreements in relation to stores employees as against the General Retail Industry Award 2010.13 The Commissioner noted the submission of ALDI that the part time employment arrangements under the agreements are based on a different concept than that provided in the award. The Commissioner then compared the arrangements for part time employees under the agreements and the award.14 For example, the Commissioner considered that limited roster part time employees under the agreements do not have the protections provided by the award as to matters such as hours worked, starting and finishing times and minimum engagement.15 Further the Commissioner considered that the agreements might be applied in such a way that the limited roster part time employees might be entitled to casual rates under the award and therefore that the rates for such employees would be lower than those payable under the award.16

[47] The Commissioner concluded her consideration in relation to part time employees as follows:

[48] In the appeal, ALDI submitted that there was no evidence to allow the Commissioner to conclude that, were the employer bound to apply award provisions, it would engage present part time employees on the present arrangements. It was said that these arrangements have grown by agreement between employer and employee and there has never been a dispute between ALDI and its part time employees about the flexibility of their employment. 17

[49] The Commissioner had available to her wage comparison information provided by ALDI. ALDI did not provide undertakings with respect to the concerns raised by the Commissioner in relation to part time employees. We think the Commissioner’s concerns could have been addressed through the provision of undertakings. Those undertakings would have preserved the capacity for the continuation of the banking arrangements, current overtime provisions and contracted hours arrangements on the basis of a regular reconciliation of employee payments against the relevant award minima. We have noted that, in the appeal, ALDI provided an additional comparison of the agreement rates with casual award rates. Notwithstanding this, we consider that the Commissioner was, on the basis of the material before her, entitled to conclude that the part time employment provisions did not meet the requirements of the better off overall test.


[50] For all the above reasons, we have concluded that the Commissioner had a sound basis for refusing to approve the agreements having regard to the fundamental problems identified. Whilst some of these problems might have been addressed by undertakings, we do not consider that appropriate undertakings were proffered by ALDI in the proceedings before the Commissioner.

[51] Given the issues raised in the appeal regarding the implications for ALDI’s operations and the complexities in the decision at first instance, we consider that it would be appropriate in the public interest to grant permission to appeal (s.604(2)). However, we are not satisfied that appealable error of the kind referred to in House v The King has been established in relation to the Commissioner’s decision. In particular, we are not satisfied that there were any errors of such a nature in relation to the Commissioner’s consideration and determination of the applications for the approval of the agreements as would warrant an appeal bench overturning the decision made.

[52] Accordingly, the appeal is dismissed.

Other matters

[53] Having so concluded, we note that there are other matters which would need to be considered in relation to the approval of the agreements beyond those relied upon by the Commissioner in reaching her decision. Even if the appeal was upheld, we would have reservations as to whether, on the basis of what is currently before FWA, the agreements should be approved. These reservations relate in particular to the undertakings offered by ALDI in the proceedings before the Commissioner and on appeal and to the requirements of s.186(3) of the Act.

[54] There were a significant number of undertakings offered by ALDI in relation to the fundamental matters considered above and the other concerns raised by the Commissioner. 18 Further and varied undertakings were offered in the course of the appeal. Having regard to the number and extent of the undertakings involved, we are concerned that the undertakings, in totality, have the potential to involve substantial changes to the agreements.

[55] In this regard, we refer to s.190 of the Act which relevantly provides:

[56] To the extent to which ALDI may seek to repeat the agreement making process, the incorporation in the agreements of the various issues addressed in the undertakings which were proffered in the proceedings before the Commissioner and on appeal should be considered.

[57] One of the requirements which must be met for the approval of an enterprise agreement is that the group of employees to be covered by the agreement must be “fairly chosen” (see s.186(3) of the Act). In considering this requirement, the Commissioner referred to a range of decisions by FWA dealing with whether a group of employees has been fairly chosen and opting-out arrangements. 19 It would seem that the Commissioner decided that the group of employees to be covered by each of the ALDI agreements was not fairly chosen as it is a group that is variable at ALDI’s discretion.20 In this regard, we note that in the definitions clause in each of the agreements, the respective regions are defined as meaning ALDI’s operations which are nominated by ALDI from time to time as falling within the Derrimut, Stapylton and Minchinbury regions.21 This meant that the coverage of the agreements might be expanded or contracted at ALDI’s discretion, with the result that particular groups of employees might be brought into or taken out of the coverage of the agreements during the term of their operation.

[58] We consider that the scope provided under the agreements for the coverage of the agreements to be varied and for employees to be engaged under different pay and hours arrangements (see e.g. clauses 3, 5 and 32 of the Minchinbury Agreement) 22 raises issues in relation to the requirement for the approval of enterprise agreements in s.186(3) of the Act. We have reservations as to whether the agreements in their present form satisfy this requirement. In this regard we note that the impact of “opt out” and similar provisions in agreements on the requirements of the “fairly chosen” test in s.186(3) has been considered in several Full Bench decisions of FWA, including most recently in Construction, Forestry, Mining and Energy Union v Queensland Bulk Handling Pty Ltd.23



G Hatcher Senior Counsel and A Perigo of counsel for ALDI.

A Hatcher Senior Counsel and O Fagir for the TWU.

A Joseph of counsel and S Mueller for the NUW - NSW Branch.

Hearing details:

May 24.

 1   [2012] FWA 161.

 2   As General Partner of ALDI Stores (a Limited Partnership).

 3   [2012] FWA 161 at [54], [56]-[57].

 4   Ibid at [48].

 5   Although we differ with the Commissioner’s conclusions with respect to some of these issues, we have concluded that the Commissioner did not ultimately refuse to approve the agreements on the basis of these issues.

 6   (2000) 203 CLR 194 at 204-5 (citations removed).

 7   See Nestle Australia Ltd v Commissioner of Taxation (1987) 16 FCR 167 at 184 (Wilcox J).

 8   See also clause 12 of both the Derrimut and Stapylton Agreements.

 9   See also clause 33 of the Derrimut Agreement and clause 32 of the Stapylton Agreement.

 10   See also clause 30 of the Derrimut Agreement and clause 29 of the Stapylton Agreement.

 11   [2012] FWA 161 at [90].

 12   Ibid at [63]-[72].

 13   MA000004.

 14   See [2012] FWA 161 at [66]-[71].

 15   Ibid at [68].

 16   Ibid at [69]-[71].

 17   Outline of submissions of the Appellant, para 120.

 18   The undertakings are referred to in the Commissioner’s decision at [76]-[90].

 19   Newlands Coal Pty Ltd [2010] FWA 4811; Newlands Coal Pty Ltd v CFMEU [2010] FWAFB 7401; CFMEU v Deputy President Hamberger [2011] FCA 719; Newlands Coal Pty Ltd v CFMEU [2011] FWAFB 7325; New Acland Coal Pty Ltd [2011] 9075; New Acland Coal Pty Ltd [2011] FWAA 9311; and Newlands Coal Pty Ltd [2012] FWAFB 721.

 20   [2012] FWA 161 at [32], [40] and [47].

 21   See clauses 3 and 32 of the Minchinbury and Stapylton Agreements, and clauses 3 and 33 of the Derrimut Agreement.

 22   See also clauses 3, 5 and 32 of the Stapylton Agreement, and clauses 3, 5 and 33 of the Derrimut Agreement.

 23   [2012] FWAFB 7551. See also CFMEU v John Holland Pty Ltd [2012] FWAFB 7866.

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