| [2015] FWC 5332 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Agri Labour Australia Pty Ltd
(AG2015/2792)
DEPUTY PRESIDENT BARTEL |
ADELAIDE, 5 AUGUST 2015 |
Application for approval of the Agri Labour Australia Pty Ltd Enterprise Agreement 2015.
[1] An application for approval of an enterprise agreement known as the Agri Labour Australia Pty Ltd Enterprise Agreement 2015 (the Agreement) has been made by Agri Labour Australia Pty Ltd (the employer or Agri Labour). The application has been made pursuant to s.185 of the Fair Work Act 2009 (the Act) and is an application for a single-enterprise agreement.
[2] The main business of Agri Labour is the supply of labour to horticultural and primary industries and to storage and processing facilities associated with these industries, throughout Australia. Employees are engaged on a casual basis for short periods of time to meet seasonal and other increases in demand. They are most commonly transient workers seeking to maximise their income over the limited period that work is available.
[3] The modern awards relevant to the employees who are covered by the Agreement (collectively referred to as “the relevant modern awards”) are as follows:
Cotton Ginning Award 2010
Storage Services and Wholesale Award 2010
Pastoral Award 2010
Meat Industry Award 2010
Horticultural Award 2010
Food, Beverage and Tobacco Manufacturing Award 2010
Seafood Processing Award 2010
Road Transport and Distribution Award 2010
[4] The application for approval of the Agreement stated that the employer considered that the Agreement passed the Better Off Overall Test (BOOT). 1 I issued a Statement of Preliminary Findings on 11 June 2015 identifying concerns in relation to compliance of the Agreement with the statutory requirements and/or matters on which further clarification was sought. On 24 and 26 June 2015, the employer provided written submissions, a statement of Mr Casey Brown, a Director of Agri Labour and a number of undertakings. The application was heard on 26 June 2015.
[5] The provisions of the Agreement which were identified to be of concern in relation to the BOOT were:
[6] The employer has provided a series of undertakings in relation to the payment of higher duties; the application of the relevant modern award classification definitions; and the payment of the relevant modern award rates of pay, including increasing the rates under the Agreement by the same increase in the relevant modern awards over the life of the Agreement. Taking these undertakings into account, the ‘inferior’ provisions of the Agreement relate to the absence of penalty payments for work performed on weekends and on public holidays, where such hours are requested by the employee and the employee establishes a genuine need to work such hours; and the absence of overtime penalties when such hours are worked at the request of the employee (referred to collectively as the “voluntary hours provisions”).
[7] The assessment of the BOOT requires a global assessment of an enterprise agreement taking into account provisions which are more beneficial than the reference instrument and those which are less beneficial. The only terms of the Agreement that are more beneficial than those of the relevant modern awards, relate to the overtime and penalty payments that apply when such work is required by the employer. The extent of this benefit is variable depending on the scheme of payments under each of the relevant modern awards.
[8] Mr Mossman submitted that the requirement that an employee must request to work the voluntary hours and establish a genuine need to work hours on weekends and public holidays is a barrier to these provisions being utilised for mere convenience or on the basis of the personal preferences of the employer or employee. He argued that the requirement that an employee must request the voluntary hours and establish a “genuine need” should be viewed as similar to the legislative requirement that an employee who enters into an individual flexibility arrangement (IFA) pursuant to a flexibility term in an enterprise agreement or modern award must “genuinely agree” to the IFA. 2
[9] In this context Mr Mossman referred to the Explanatory Memorandum to the Fair Work Bill 2008 (the Explanatory Memorandum), which provides an example of an IFA where an employee trades monetary entitlements for non-financial benefits. Paragraph 867 states:
“867. The flexibility term must require that the employee and the employer genuinely agree to any individual flexibility arrangement (subclause 203(3)). Genuinely agree is not defined here and bears its ordinary meaning. It must also require the employer to ensure that any individual flexibility arrangement must result in the employee being better off overall than if there was no individual flexibility arrangement. It is the employer’s responsibility to ensure that this is the case (subclause 203(4)).
…”
[10] The example provided concerns an employee who requests to commence work at 7.30am on two days of the week, which is 30 minutes before the commencement of the span of ordinary hours. The request is made in order to enable the employee to leave early on those days (to coach a junior football team) and still meet his weekly hours. Penalty rates are otherwise payable for work performed from 7.30am – 8.00am. The Explanatory Memorandum goes on to record that because it is an individual arrangement the personal circumstances of the employee can be assessed in reaching a view as to whether they would be better off overall. Relevant factors that suggest the arrangement would meet the better off overall test are that the employee initiated the request for the individual flexibility arrangement; the employee genuinely agreed to the arrangement; and the period of time falling outside the span of hours is relatively insignificant.
[11] Paragraph 868 of the Explanatory Memorandum goes on to state that it is less likely that the better off overall requirement would be met where the monetary benefit foregone had a substantial value or was disproportionate to the non-monetary benefit for which it was exchanged.
[12] I am not satisfied that the assessment of the voluntary hours provisions of the Agreement is assisted in any way by the above provisions of the Explanatory Memorandum. The financial detriment to employees is potentially significant. The approach to voluntary or preferred hours which are substantive terms of an enterprise agreement, as opposed to an IFA pursuant to a flexibility term, is well settled law from the time of the Bupa decision. 3 That is, the terms and conditions of the agreement are to be measured against the terms and conditions in the relevant reference instrument. The effect the terms and conditions may have on the actions of an employer or employee is not relevant in assessing the BOOT.
[13] Mr Mossman also contended that Finance Sector Union of Australia v Suncorp Metway Staff Pty Ltd 4 stands for the proposition that the practical significance for an individual can be taken into account. This argument is misconceived. This decision applied the no disadvantage test (NDT) as defined within the relevant enterprise agreement, which was in different terms to the NDT defined within s.170XA of the Workplace Relations Act 1996, which applied at the time. Specifically the NDT in the agreement required a comparison of the terms and conditions of employment of a particular individual under an existing contract of employment with a proposed contract of employment.5
[14] In the present matter, the decision concerning hours worked is not one made by the employer and employee but by the client and the employee, and cost is a relevant factor for the client. 6 The “genuine need” requirement is not explained within the Agreement but the purpose of the provision, according to the employer’s submissions, is to enable the employees to work additional hours which may not otherwise be available, and thereby maximise their income over a restricted period of time.
[15] In summary, I do not regard the “genuine need” requirement or the “request” by employees as factors that will limit the use of the voluntary hours provisions and moreover I consider that it is envisaged by the employer that the voluntary hours provisions will be extensively utilised. I therefore conclude that the financial disadvantage attributable to the voluntary hours provisions is greater than the benefit of the higher overtime and penalty payments that apply when the client requires such hours to be worked. Accordingly I conclude that the Agreement does not pass the BOOT.
[16] The written and oral submissions of the employer also support the approval of the Agreement on the basis that it satisfies the requirements of s.189 of the Act. Section 189 provides:
“189 FWC may approve an enterprise agreement that does not pass better off overall test—public interest test
Application of this section
(1) This section applies if:
(a) the FWC is not required to approve an enterprise agreement under section 186; and
(b) the only reason for this is that the FWC is not satisfied that the agreement passes the better off overall test.
Approval of agreement if not contrary to the public interest
(2) The FWC may approve the agreement under this section if the FWC is satisfied that, because of exceptional circumstances, the approval of the agreement would not be contrary to the public interest.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).
(3) An example of a case in which the FWC may be satisfied of the matter referred to in subsection (2) is where the agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the enterprise of an employer covered by the agreement.
Nominal expiry date
(4) The nominal expiry date of an enterprise agreement approved by the FWC under this section is the earlier of the following:
(a) the date specified in the agreement as the nominal expiry date of the agreement;
(b) 2 years after the day on which the FWC approved the agreement.”
[17] Section 189 of the Act involves making a discretionary decision based on the relevant facts, constrained only by the scope and purpose of the legislation (Transport Workers’ Union of Australia v Jarman Ace Pty Ltd T/A Ace Buses 7).
[18] An attachment to the Statement of Mr Brown (Attachment CB-1) 8 sets out the industry, number of employees and geographical location where Agri Labour’s employees currently perform work. The industries/enterprises include:
[19] Attachment CB-1 shows that over 600 employees are within the scope of the Agreement, with additional employees coming on board to work on mango farms when the season commences in November/December. Work is performed at regional cities and towns as well as more remote locations.
[20] Mr Brown stated that a number of clients have a direct workforce made up of permanent and/or casual employees, which is ‘topped up’ by Agri Labour employees at times of harvest or other times of peak demand. In a number of cases, Agri Labour employees make up the majority of the seasonal workforce.
[21] In relation to the financial capacity of the employer’s clients, Mr Brown observed that:
“The industries we supply to are characterised by peaks and troughs in work which are seasonal in nature which depend upon a number of factors like weather, prices, demand for the product etc. Those industries also tend to be subject to external factors beyond their control like international competition from overseas countries. The profit margins of host business that work in such environments are often very modest. They are businesses which tend to be “price takers” instead of “price makers.” Accordingly, these businesses are usually not in a situation where they can pay penalty rates. This tends to restrict the number of hours offered to an individual employee, as the business would prefer to employ another casual to perform additional work rather then (sic) pay penalty rates.” 9
[22] Mr Mossman submitted that:
[23] I respectfully adopt the concept of exceptional circumstances as described by Lawler VP in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Postal Corporation 13:
“In summary, the expression ‘exceptional circumstances’ requires consideration of all the circumstances. To be exceptional, circumstances must be out of the ordinary course, or unusual, or special, or uncommon but need not be unique, or unprecedented, or very rare. Circumstances will not be exceptional if they are regularly, or routinely, or normally encountered. Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional. It is not correct to construe ‘exceptional circumstances’ as being only some unexpected occurrence, although frequently it will be. Nor is it correct to construe the plural ‘circumstances’ as if it were only a singular occurrence, even though it can be a one off situation. The ordinary and natural meaning of ‘exceptional circumstances’ includes a combination of factors which, when viewed together, may reasonably be seen as producing a situation which is out of the ordinary course, unusual, special or uncommon.”
[24] The requirement in s.189(2) that the Commission be satisfied that the approval of an agreement is not contrary to the public interest involves a determination of where the public interest lies. This can involve a balancing of interests including competing public interests and is a question of fact and degree. 14 It is well settled that the public interest is broader than and separate from the interests of the parties, and although there may be overlap between the public interest and the interests of the parties, they remain distinct from each other.15
[25] In Re Joy Manufacturing Pty Ltd 16 Munro J summarised that the fundamental considerations relevant to the public interest must be those which have most substance to what are perceived to be the interests and welfare of the community and the purpose and objects of the legislation.
[26] Section 189(3) provides an example of circumstances which would satisfy the matters in s.189(2), namely, where the agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the enterprise of an employer covered by the agreement. The financial pressures on the employer and the negative public impact associated with unemployment was the circumstance which led to the approval of the agreement in Metro Velda Pty Ltd. Seasonal peaks in demand and the potential underemployment of employees in the off season was the basis for the approval of the agreement in Samphie Pty Ltd T/A Black Crow Organics 17 (Black Crow). Other circumstances which satisfied the requirement in s.189(2) include the provision of services to disadvantaged persons18 or remote communities19, where financial resources are limited.
[27] Top End Consulting was also held to satisfy the requirements in s.189(2) of the Act. This decision is discussed further, below.
[28] I accept that, faced with the options of paying Agri Labour for overtime or penalty rates for additional hours worked by the supplied labour or paying for additional labour at ordinary rates, the client is likely to choose the latter. However I do not regard this circumstance as exceptional. Had there been direct evidence that there is an issue of financial capacity of the clients, then a stronger argument for exceptional circumstances may exist. I have taken into account Mr Brown’s evidence of the “modest” profit margins of Agri Labour’s clients but I also note that in some cases clients pay Agri Labour employees at the rates applicable to their direct employees to avoid a disparity in remuneration between the two groups. 20 This suggests that for these clients, financial capacity may exist to pay higher than ordinary rates for additional hours and/or weekend and public holiday work.
[29] I am also mindful that certain industries are not seasonal in nature but rather, are subject to fluctuating demand, such as piggeries and poultry farms. In addition there is insufficient evidence about the clients operating storage and food and seafood processing businesses to enable a conclusion to be reached on the extent to which these clients operate a direct workforce throughout the year and the extent to which work is available for these employees in the off season.
[30] Accordingly, I am unable to conclude that the convergence of the circumstances identified in Top End Consulting is present in this case in respect to the majority of clients identified Attachment CB-1. In Top End Consulting there was evidence about the financial capacity of mango growers and the limited period of time over which they operate, and of clients in locations which are essentially cut off from road traffic in the wet season and unable to operate in this period. This is a far cry from a food processing enterprise located in the produce growing area of Devonport in Tasmania.
[31] Due to the lack of sufficient information about the circumstances of Agri Labour’s clients and the breadth of the businesses they operate, I am unable to conclude that exceptional circumstances exist.
[32] While it is not necessary to do so, it is appropriate to say something about the public interest in this matter. Section 189(2) does not require that the approval of the Agreement must promote the public interest, only that it would not be contrary to or undermine the public interest. Nonetheless, it is claimed by Agri Labour that the public interest is served by the approval of the Agreement because it would address underemployment of employees engaged in seasonal industries. Mr Mossman relied upon an article, entitled, “Oxymoronic or Employer Logic? Preferred Hours under the Fair Work Act” 21, in support of the existence of underemployment in seasonal industries. This article cites Black Crow as an example of a decision where failure to approve the agreement “… may lead to negative public outcomes associated with … underemployment…”22 I note that Black Crow did not concern a transient workforce but a direct workforce where “… it is not uncommon for employees to work less than 38 hours per week in the off season, and … the employer offers no overtime during that period.”23
[33] This article does not stand for the proposition that transient workers travelling from location to location are underemployed. There is a public interest in ensuring that the direct employees of the client, who may be engaged under the terms of a modern award or an enterprise agreement that passes the BOOT, are not denied additional hours in favour of cheaper labour hire employees during times of seasonal demand. To do otherwise may result in the underemployment of the direct employees who have limited opportunity for hours in the off season, as per Black Crow. These circumstances, that is, where the client has directly engaged employees throughout the year, did not arise for consideration in Top End Consulting.
[34] The following views expressed by Commissioner Asbury in Jellifish! Pty Ltd are apposite to the present matter:
“In my view, public interest considerations in the context of s.189 could involve deciding whether a term of an agreement sought to be approved under that provision, undermines or reduces entitlements in a modern award to the extent that members of the public whose employment is regulated by that award may have interests which are impacted by the approval of the agreement. It may also be the case that there is a public interest consideration in maintaining a level playing field among employees in a particular industry or sector. This is particularly so given that the Objects of the Act include at s 3(b):
‘ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders.’” 24
[35] The approval of the Agreement would in my view be contrary to the public interest even if exceptional circumstances were found to exist.
[36] I do not discount that the circumstances of some of the employer’s clients may demonstrate that because of exceptional circumstances the approval of the Agreement would not be contrary to the public interest, however insufficient information has been put forward to enable such a conclusion to be reached. The application for approval is dismissed.
DEPUTY PRESIDENT
Appearances:
Mr C Mossman, counsel for the Employer with Mr C Brown
Hearing details:
2015:
Adelaide with a video link to Brisbane,
26 June.
1 Sections 186(2)(d) and 193 of the Act.
2 Sections 144(4)(b) and 203(3) of the Act.
3 Bupa Care Services Pty Ltd (2010)196 IR 1; [2010] FWAFB 2762.
4 PR950237, VP Lawler, 12 November 2004.
5 At para [15].
6 Written submissions at para 30.
8 Ex A1 Attachment CB-1.
9 Ex A1 at para 7.
12 [2010] FWA 6642.
13 (2007) 167 IR 4.
14 Re Queensland Electricity Commission & Ors: Ex parte Electrical Trades Union of Australia (1987) 61 ALJR 393 at 395, per Mason CJ, Wilson and Dawson JJ.
15 See for example Re Kellogg Brown & Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000, 139 IR 34, PR955357.
16 Print T1133, Munro J, 25 September 2000.
18 Jarman Ace, supra.
19 Milingimbi & Outstations Progress Resource Association, [2011] FWAA 1431.
20 At PN58.
21 Cameron C, (2012) 25 Australian Journal of Labour Law 43.
22 Ibid, at 55.
23 Supra, at [10].
24 Supra, at [82].
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