DECISION

Fair Work Act 2009
s.217—Enterprise agreement

Core Toughened Pty Ltd
v
Construction, Forestry, Mining and Energy Union
(AG2015/4181)

Application for variation of the Core Toughened Pty Ltd and CFMEU (FFTS Branch) Enterprise Agreement 2012-2015 to remove ambiguity or uncertainty – no ambiguity – application dismissed.

[1] Core Toughened P/L (the Applicant) filed an application to vary the Core Toughened Pty Ltd and CFMEU (FFTS Branch) Enterprise Agreement 2012-2015 (the Agreement). The application sought the following variation:

“1. Vary the Core Toughened Pty Ltd and CFMEU FFTS Branch) Enterprise Agreement 2012-2015 (Enterprise Agreement) so as to amend clause 9.4 of the Enterprise Agreement by deleting the existing words, which read:

‘An employee is entitled to a paid meal break of 30 minutes after five (5) hours of work which is to be taken at a time convenient to the business. No meal break shall be taken in the first hour or the last hour of the shift.
Employees shall receive a paid rest period of 15 minutes duration to be taken at a time convenient to the business and employees after the completion of a minimum of two (2) hours work taken from the commencement of the shift.'

and substituting the following:

‘An employee is entitled to two (2) paid rest periods of 15 minutes duration to be taken at a time convenient to the business and employees after the completion of two (2) hours work taken from the commencement of the shift.’

2. Order that the variation operates from the date the Enterprise Agreement came into operation (27 September 2012).”

Background to the Application

[2] The Construction, Forestry, Mining and Energy Union (the Union) filed an application for the Fair Work Commission to deal with a dispute arising under the terms of the Agreement – C2015/3406. The dispute concerned the provision of meal and rest breaks to employees. The Union contended that the employer was not complying with clause 9.4 of the Agreement and hadn’t been complying with clause 9.4 at any time since the Agreement was made. At the time that the dispute notification was filed with the Commission the parties had been bargaining for some time over a new enterprise agreement.

[3] This dispute was the subject of a conciliation conference before the Commission as currently constituted but remains unresolved.

[4] The Applicant filed the current application before the dispute matter had proceeded any further.

The evidence

[5] The evidence before the Commission from both the Applicant and the Union makes it clear that the Union, as the default bargaining representative for its members, never sought to have both a 30 minute paid meal break and a 15 minute paid rest break provided for in the Agreement.

[6] The evidence before the Commission from the Applicant makes it very clear that the Applicant sought to have the Agreement reflect the current practice in relation to meals breaks, namely either one 30 minute paid meal break or two 15 minute paid breaks, where one 30 minute paid meal break could not be taken due to work requirements.

[7] The evidence before the Commission from both the Applicant and the Union makes it clear that the Union drafted the proposed enterprise agreement which was the subject of bargaining and that the Union drafted the final version of the Agreement which was given to employees and which was approved by employees.

[8] The evidence before the Commission from both the Applicant and the Union makes it clear that neither the Applicant nor the Union intended clause 9.4 to read as it does.

[9] The evidence before the Commission from the Applicant makes clear that the responsible officers and managers of the Applicant did not carefully read the proposed Agreement before giving it to employees to approve.

[10] The evidence before the Commission from both the Applicant and the Union makes it absolutely clear that the terms and the effect of the terms of the Agreement were never explained to the employees before they made the Agreement. The Applicant concedes through its own evidence that the Applicant took no action whatsoever to explain the terms of the agreement and the effect of the terms of the Agreement to the employees who were to make the Agreement. The evidence for the Union was that a meeting of employees was held and that issues raised in the Log of Claims and which were dealt with by the Agreement were explained to the employees but that the issue of meal or rest breaks was not raised with employees before they made the Agreement as the issue of meal or rest breaks was not an item in the Log of Claims.

[11] The Applicant has never implemented the provisions of clause 9.4 but rather it has, at all times since the Agreement was made, applied the practice in place at the time the Agreement was made, namely to provide employees with one 30 minute paid meal break or two 15 minute paid breaks to those employees whose work requirements did not permit them to take a single 30 minute paid meal break.

The Applicant’s Contentions

[12] The Applicant contends that Clause 9.4 is understood by the parties and intended to make provision for the current break practice in accordance with the mutual intention of the parties at the time the Agreement was entered into. The mutual intention of the parties was for the Clause to give effect to the current break practice.

[13] There was no common intention between the parties negotiating the terms of the Enterprise Agreement that the Clause would establish a change from the existing practice.

[14] The Applicant contends that the mutual intention of the parties to the Agreement was that clause 9.4 gave effect to the current break practice. The Applicant also contends that the interpretation of clause 9.4 of the Agreement is arguable and in direct opposition to the Union’s literal contention. The Applicant’s contention is spelled out in its outline of submissions as follows:

“20. That the rival contentions are in play is sufficient to establish that clause 9.4 of the Enterprise Agreement is uncertain or ambiguous.

21. Where there is evidence that there is a real difference between what is recorded in the written document and what was agreed between the Applicant and Respondent, there is an ample basis for finding that there is ambiguity and uncertainty that ought to be removed. This is put on the basis that the written document at clause 9.4 does not represent the agreement reached. The fact that the document was certified is not evidence of agreement in relation to clause 9.4. This is because the Commission does not make an agreement.

26. The Applicant acknowledges that what has been communicated to mass meetings of employees, directly or through an agent, may assist in establishing a common understanding: Re Tenix Defence Systems Ply Limited Certified Agreement 2001-2004 (2002) AIRCFB PR917548, at [112]; APESMA v Oceanic Coal Australia Ply Ltd [2011] FWA 3146 at [7]. A common understanding cannot be established based solely on the absence of an explanation required by s. 180(5): RACV Road Service Ply Ltd v AMWU [2014] FWCFB 1629 at [33].

27. However, a failure to adequately discharge the obligation under s. 180, if found, does not prevent the Commission from discerning a common understanding on the basis of other factors. Accordingly, the Applicant submits that in this matter a common understanding is established through the surrounding circumstances and that s. 180 has no further application in relation to whether the Commission ought to exercise its discretion under s. 217.”

The Respondent’s Contentions

[15] The Union contended as follows:

“2. The company’s application is misconceived. Clause 9.4 of the Enterprise Agreement is perfectly clear, and is capable of only one meaning. Accordingly, there is no “ambiguity or uncertainty” within the meaning of s 217.

3. Agreements cannot be varied for mistake, even a mistake shared by multiple parties, where the resulting text is clear.

4. In any event, the “mistake” in this case was unilateral. Neither the union nor the employees ever agreed with the company, in negotiations, that the breaks clause should provide for two 15-minute breaks per shift.

16. The evidence of prior negotiations is only relevant and admissible to the extent that it shows some common intention of “all parties” to the agreement2 as to what the text was supposed to mean.

17. However, this common intention must be identified objectively, that is, not according to what the parties subjectively intended, but rather according to what reasonable person in the position of the parties would have, jointly, intended.

19. … The parties’ conduct subsequent to making an agreement is not relevant to its construction as a matter of logic, or of law.

21. The starting point of the analysis of the text of clause 9.4. It has one clear meaning: that employees are entitled to a 30 minute paid meal break plus a 15 minute paid rest break.

22. The clause is clear on its face. Accordingly, if there is any ambiguity or uncertainty, it must be “latent ambiguity”, in the sense that when applied to the facts of the workplace, the clause reveals itself to be ambiguous or uncertain in its operation.5

23. However, the company does not rely on evidence of the prior negotiations for this reason. Instead, it relies on those negotiations to show that (it is alleged) clause 9.4 does not reflect the true intention of the parties. That is not a case of ambiguity or uncertainty. If anything, it is a case of mistake.

24. To the extent the common law principles of mistake are relevant, at common law a mistake by one or both parties as to the meaning of a written contract did not affect the construction of the contract; the contract would stand on its terms.6 However, if it was shown that the written document did not reflect the intention of all parties, a court of equity had a discretion to rectify (that is, correct) the document to reflect the common intention.

25. However, nothing in s 217 suggests that any of the common law or equitable rules relating to mistake have been imported into the Act. Indeed, if s 217 was intended to allow the Commission to correct agreements in cases of mistake, the Parliament could have made that clear, as has been done in relation to awards (s 160), minimum wage orders (s 296), and with Commission decisions (s 602).

26. In any event, the evidence does not show any common mistake.” 1

Consideration and Conclusion

[16] The Applicant is correct in contending that the Full Bench decision in AMIEU v Golden Cockerel Pty Limited 2 (Golden Cockerel) must be followed. As the Full Bench said in Golden Cockerel at [30]:

“Regard may therefore be had to evidence of the surrounding circumstances before the existence of ambiguity in an agreement is identified as an aide to interpreting the agreement for the purposes of determining whether an ambiguity exists.”

[17] The Applicant contended that the surrounding circumstances included that neither the Applicant nor the Union bargained over meal breaks and that neither sought clause 9.4 in its current form.

[18] The Applicant relied upon the decision of the Full Bench in Tenix Defence Systems P/L 3 (Tenix) at [32] to contend that regard should be had to the mutual intention of the parties at the time the agreement was made.

[19] The Union contended that in the absence of any explanation as to the terms of the Agreement or the effects of the terms of the Agreement that all that the employees who made the Agreement had before them was the text of the Agreement –and the text is unambiguous.

[20] In RACV Road Service Pty Ltd v AMWU 4 (RACV) a Full Bench considered the issue of the interaction between the explanation given to employees of the terms of an agreement and determining the meaning of the same clause. The dispute before the Commission concerned the proper meaning and application of clause 13.6(b) of the RACV Metropolitan Patrol Services Agreement 2011-2014 which contained the following clause:

“13.6 Alteration of Hours of Work and Shifts

(b) The time of commencing and finishing hours of work may be changed by seven days’ notice of the alteration given by RACV to employees.”

[21] Relevantly the Full Bench said:

“[33] We now turn to the specific grounds of appeal advanced by the Appellant and make some observations that are not already addressed above. We agree with the Appellant that the Commissioner erred in relying on evidence of past conduct of the Appellant in construing the meaning of cl.13.6(b) of the Agreement. The evidence relied upon fell well short of establishing a common understanding of the meaning of the provision or the common intention of the parties to the Agreement. In this context the Commissioner’s reliance on the obligations of the Appellant to explain the terms of the Agreement during the approval process is also misplaced. The Commissioner said:

‘Where as in the present case, no specific explanation was given by the RACV to employees as to the term or the effect of the term of clause 13.6(b) of the current Agreement then objectively the intent and meaning of clause 13.6(b) given by both the RACV and employees and the AMWU must be the same as it had prior to the current Agreement.’

[34] It will be rare that a common understanding or objectively ascertained common intention will be shown by the absence of words. This might show a common inadvertence, however that is not the same thing. Even less so, when combined with the clear and unambiguous language of cl.13.6(b). The question whether the Appellant adequately explained the terms of the agreement to employees during the approval process does not result in a common understanding or common intention in relation to the application of cl.13.6(b) of the Agreement. Moreover, the fact that the Respondent made limited use, or no use at all, of the provision in the past, is not a basis for reading down the operation of cl.13.6(b).

[35] Furthermore there is nothing ambiguous about cl.13.6(b) that would have compelled resort to the evidence and the evidence should not have been relied upon by the Commissioner to contradict the ordinary plain meaning of cl.13.6(b).”

[22] In the present matter the parties to the Agreement are the Applicant and the employees of the Applicant who will be covered by the Agreement.

[23] In the present matter it is clear that neither the Applicant nor the Union intended to have employees’ entitlements to meal breaks specified as they are in clause 9.4 of the Agreement. Therefore it may be concluded that the mutual intention of the Applicant and the Union was to have a meal breaks provision in the Agreement which did not provide for a total of 45 minutes paid breaks.

[24] However, as the Full Bench decision in RACV makes clear, whether the Applicant adequately explained the terms of clause 9.4 of the agreement to employees during the approval process does not result in a common understanding or common intention in relation to the application of clause 9.4(b) of the Agreement. In the present matter where no explanation of any of the terms of the Agreement was given by the Applicant to employees then no common understanding or common intention could exist as between the Applicant and the employees as to the terms of the Agreement, unless it could be established that the employees who approved the Agreement came to the view that clause 9.4 did not mean what it said but instead meant that employees were entitled to no more than 30 minutes paid break.. There is nothing before the Commission which establishes that employees had this understanding when they approved the Agreement. Rather employees had nothing before them in relation to meal breaks and the meaning of clause 9.4 other than the plain words of clause 9.4.

[25] The Applicant relies on the common understanding existing between the Applicant and the Union yet the Agreement is not made, nor can it be made, with the Union. The Agreement can only be made with the employees who will be covered by the Agreement. Although the Full Bench in Tenix referred to the mutual intention of the parties the concept of ‘parties’ must have regard to the legislative regime. In Tenix the Full Bench was dealing with an agreement made under s.170LJ of the Workplace Relations Act. Such an agreement was made by the employer with an employee organisation. The Agreement in the present matter was not made with the Union but was made with the employees who would be covered by it. Therefore in applying the decision in Tenix regard would need to be had to any mutual intention existing between the Applicant and the employees who made the Agreement. (Counsel for the Applicant conceded that Tenix should be applied this way.) 5 As has been discussed no such mutual intention existed.

[26] Implicit in the contentions of the Applicant is the premise that the intentions behind the conduct of the Union in bargaining for an enterprise agreement and in drafting the proposed enterprise agreement are the intentions of the employees who voted for the Agreement. In other words because the Union concedes that it did not intend to alter the meal break provisions in existence at the workplace, both in the bargaining process and in the drafting process, then the employees must be considered to have made the Agreement with the same intention in mind.

[27] The contentions of the Applicant call into question the relationship that exists between the Union and employees during the process of making an enterprise agreement that is not a greenfields agreement.

[28] The Act provides a specific role for the Union in the bargaining process where the Union has a member or members who will be covered by the enterprise agreement.

[29] The Union is by default a bargaining representative of some employees for the bargaining process (s.176(1)(b)). The members of the Union do not have to do anything to enliven the rights of the Union as a default bargaining representative. The Act provides the initial right of the Union to be the default bargaining representative for its members. A member of the Union can revoke the Union’s status as the members’ bargaining representative but this requires a positive action on the part of the member (s.178A).

[30] Bargaining representatives whether for employees or the employer do not make an enterprise agreement. Employee bargaining representatives, including unions, do not control the terms of the enterprise agreement that is put to employees for their approval. It is the employer who requests employees to approve a particular enterprise agreement. The Union as a bargaining representative for employees cannot make the request under the Act for employees to approve a particular enterprise agreement.

[31] An enterprise agreement can only be made when the employees who will be covered by the enterprise agreement approve the enterprise agreement under s.182. The enterprise agreement that is made under s.182 is made between the employees who will be covered by it and their employer. A union, even when acting as the bargaining representative of employees, is not a party to the making of an enterprise agreement and is not a party to the enterprise agreement that is made between the employees and the employer.

[32] Only after an enterprise agreement has been made (the employer requested employees to vote to approve the enterprise agreement (s.181) and the employees voted to approve the enterprise agreement (s.182) can a union give notice to the Commission that the union wants to be covered by the enterprise agreement (s.183). If such a notice is given then only after the Commission has decided to approve the enterprise agreement can a union become covered by the agreement. It is the decision of the Commission to approve an enterprise agreement that must note that the agreement covers a union (s.201(2)).

[33] This legislative context stands in stark contrast to previous legislative regimes.

[34] When the award was king, awards were made by the Commission in part settlement of disputes between unions and employers and the employees who were to be bound by the awards were simply carried along in the process as passengers along for the ride.

[35] At the Commonwealth level industrial agreements were a feature of the Conciliation and Arbitration Act since its enactment in 1904 (Part VI of the 1904 Act). Such industrial agreements were made between the employer and the union and again the employees who were to be bound by the agreement were simply passengers along for the ride.

[36] It was not until the introduction of enterprise flexibility agreements under the Industrial Relations Reform Act 1993 that employees were given a direct role in agreement making and where unions were very much relegated to being back seat passengers – although quite vocal ones at that. The Workplace Relations Act 1996 (before WorkChoices) further altered the status of employees in relation to collective agreements. Firstly, where an agreement was made between an employer and a union (s.170LJ) the status of employees was altered from merely being passengers along for the ride to backseat passengers who had voice. The employees did not make the agreement with the employer but the employees had to approve the agreement made between the union and the employer. Secondly, where the agreement was made with employees (s.170LK) the employees were put into the front seat where they had equal control of the brake and accelerator but no control over the direction in which they were heading. The employer controlled the content of the agreement but the agreement could only be made if the employees voted to approve it. Where unions were involved in s.170LK agreements they were very much back seat passengers.

[37] The Fair Work Act further significantly altered the relationships and the process. During the bargaining phase both the employee and employer bargaining representatives (and this includes a union as default bargaining representative) are both driving a dual control vehicle and fortunately without passengers. The good faith bargaining requirements and the several statutory entitlements available to the parties are intended to keep both parties driving the vehicle in the same direction. Once an agreement has been reached (or where the employer simply abandons the vehicle) it is the employer and the employees who get into a new vehicle as co-drivers to make an enterprise agreement. At this stage the union is not even a back seat passenger.

[38] In this legislative context there may be occasions where the intentions of the union as bargaining representative can be visited upon the employees who voted to approve the enterprise agreement, but to do so would require some compelling evidence to enable such a conclusion to be drawn.

[39] In the present matter the surrounding circumstances include the intentions of the Applicant and the Union in the bargaining process and in respect of the terms of the enterprise agreement that would be put in place. Equally the surrounding circumstances include the fact that the Applicant gave to the employees the enterprise agreement that the employees were being asked to approve and that enterprise agreement contained clause 9.4 and no one from the Applicant or the Union explained to the employees what was or wasn’t intended by clause 9.4 and the employees approved the enterprise agreement with clause 9.4 in it – just as they were requested to do.

[40] In the present matter there is such a disconnect between the Union and the employees that it would be wrong to visit the intentions of the Union onto the employees who at all times were ignorant of the intentions of either the Applicant or the union in relation to the subject of meal breaks and the particular wording of clause 9.4.

As counsel for the Union put it:

“…in my submission, in this case people, to the extent that they sought to inform themselves and we don't know about 18 of the 20, but all they could know, in my submission, is what is in the text of the agreement.  That's all that was given to them.” 6

[41] The surrounding circumstances in relation to the bargaining process for the Agreement and the approval process for the Agreement do not permit a conclusion that there is ambiguity in the language of clause 9.4. Of course the Applicant did not want clause 9.4 in the Agreement, but the Agreement with clause 9.4 in it was given to employees, without explanation, and the employees were asked to approve the Agreement with clause 9.4 in it and they did so!

[42] Clause 9.4 is unambiguous. The plain meaning can be discerned without having to struggle to identify a meaning. The clause has a single meaning. The very simplicity of the words used means that any employee of the Applicant could understand that each employee is to get a paid 15 minute break after the first two hours of work and a paid 30 minute meal break after five hours of work.

[43] There is no ambiguity in clause 9.4. The application must therefore be dismissed.

The Elephant in the Room

[44] The Commission needs to make an observation in relation to this matter and in relation to the dispute proceedings in matter no. C2015/3406. During the proceedings in this matter it became very obvious to the Commission that there was an extremely large elephant in the room. The Commission drew the attention of the parties to this very large elephant but the parties chose to ignore the very large elephant and because the very large elephant wouldn’t leave the room, the parties proceeded as if it wasn’t there. The difficulty of having a very large elephant in a small court room is that it is extremely hard to pretend that it is not there. Being a well behaved very large elephant it did not disrupt proceedings and permitted both parties to run their respective cases on the s.217 application and allowed the Commission to focus on that application.

[45] The very large elephant in the room was that the evidence from both the Applicant and the Union established that the Agreement had never been validly made and that approval of the Agreement by the Commission was a nullity.

[46] The Act requires through s.180(1) that before the employer requests employees to approve an enterprise agreement the employer must take all reasonable steps in relation to three specific matters:

● Providing employees with access to a copy of the proposed enterprise agreement and to a copy of any other material which is incorporated into the enterprise agreement. (s.180(2))
● Notifying employees of the time, place and method of voting for the vote to approve the enterprise agreement. (s.180(3))
● Explaining the terms of the enterprise agreement and the effect of the terms of the enterprise agreement to the employees in a manner which is appropriate to the particular needs and circumstances of the employees. (s.180(5))

[47] Only after this has occurred can the employer ask the employees to vote to approve the enterprise agreement (s.181).

[48] Only after both the two preceding steps have been taken can employees vote to approve an enterprise agreement (s.182).

[49] The evidence in the present matter makes it absolutely certain that there was no compliance with the requirement in s.180(5) and that it is almost certain that there was no compliance with s.180(2)(a)(ii) and that it is likely that there was no compliance with s.180(3). The evidence also strongly suggests that a vote was not taken of employees in which case the Agreement wasn’t made pursuant to s.182(1).

[50] The non-compliance with s.180(5) is sufficient to render all actions purportedly taken to request employees to approve the Agreement futile. The Agreement was never made and the Agreement could not have been approved by the Commission. The Commission was simply misled by the employer’s statutory declaration into believing that the requirements of the Act had been met when in fact they weren’t.

[51] In the present circumstances where both parties ignored the elephant in the room the Commission had no power or authority to do otherwise than to continue to hear the application. Section 603 makes it very clear that the Commission does not have a general power to vary or revoke a decision to approve an enterprise agreement. Powers to vary or terminate an enterprise agreement are specifically provided for in the Act and are limited to the circumstances provided in those specific provisions. An application to vary an enterprise agreement to remove ambiguity or uncertainty is one such specific provision. It is also relevant to note that apart from s.603 there are no specific provisions within Part 2-4 of the Act which provides a specific power to revoke a decision to approve an enterprise agreement.

[52] The Commission pointed out to the parties there were at least two very clear ways in which the decision to approve the Agreement could be undone. Firstly, if either party appealed the approval decision and if a Full Bench permitted the appeal to proceed, it was open to the Full Bench to find that the statutory requirements for making an enterprise agreement had not been met and the Full Bench could overturn the original approval decision. (see R J Marks et or v SDA re White’s Discounts Pty Ltd t/as Everybody’s IGA Everyday and Broken Hill Foodland). 7 Secondly, if either party or any employee sought to enforce the Agreement through the Federal Circuit Court or the Federal Court then the court could determine that the Agreement had not been validly made and the court could effectively set aside the approval decision (CFMEU v FWA).8

COMMISSIONER

Appearances:

A. McNabb of Counsel for the Applicant

J. Fetter of Counsel for the Respondent

Hearing details:

2015

Melbourne

October 12

 1   Respondent’s outline of submissions.

 2   [2014] FWCFB 7447.

 3   PR917548.

 4   [2014] FWCFB 1629.

 5   Transcript at PN790 – PN791.

 6   Ibid at PN680.

 7   [2003] AIRC 1151

 8   [2011] FCA 719

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