Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [2017] FWCA 325 of Commissioner Gregory at Melbourne on 17 January 2017 in matter number AG2017/45.

Introduction

[1] The Construction, Forestry, Mining and Energy Union (CFMEU) has lodged an appeal, for which permission to appeal is required, against a decision issued by Commissioner Gregory on 17 January 2017 1 (Decision) to approve the TR Construction Services Pty Ltd Enterprise Agreement 2016 (Agreement). The Commissioner’s reasons in the Decision for approving the Agreement were brief. Relevantly, he found as follows:

“[2] I am satisfied that each of the requirements of ss.186, 187 and 188 as are relevant to this application for approval have been met.”

[2] TR Construction Services Pty Ltd (the Respondent) initially contended that the CFMEU lacked constitutional coverage of the employees to be covered by the Agreement and that as a result it was not “a person aggrieved” by the Decision and lacked standing to bring the appeal. During the course of the hearing before us, we asked the Respondent to consider the High Court decision in Re Coldham: Ex Parte Australian Workers Union 2 (Re Coldham) in the context of whether the CFMEU did in fact have constitutional coverage of the employees to be covered by the Agreement. The Respondent was given the opportunity to provide further written submissions. In those submissions the Respondent conceded that if the approach in Re Coldham was accepted by us, then the CFMEU would be eligible to represent the industrial interests of at least one of the occupations listed in clause 6.1 of the Agreement.

[3] We see no basis upon which to depart from the approach taken by the High Court in Re Coldham and accordingly we find that the CFMEU has standing to bring this appeal, it being a “person who is aggrieved by a decision” for the purposes of s.604(1).

Grounds of appeal

[4] The CFMEU’s grounds of appeal, as contained in its amended notice of appeal, were as follows:

1. The Commissioner erred in failing to give any reasons for his decision not to allow the Appellant to be heard on the Respondent's application for approval of the TR Construction Services Pty. Ltd. Enterprise Agreement 2016 (the 'TR Agreement').

2. The Commissioner erred in failing to afford the Appellant procedural fairness by not giving any reasons for his decision not to allow the Appellant to be heard in relation to the Respondent's application for approval of the TR Agreement.

3. The Commissioner erred in failing to afford the Appellant procedural fairness by not giving the Appellant an opportunity to be heard as to why the Commissioner should hear from the Appellant pursuant to s 590 of the FW Act.

4. The Commissioner erred in being satisfied that the Respondent had met the pre-approval steps in s 180(5) of the FW Act and to that extent the TR Agreement had been genuinely agreed as per s 188(a)(i) of the FW Act.

5. The Commissioner erred in being satisfied that the TR Agreement had met the Better Off Overall Test in s 186(2) of the FW Act.

6. The Commissioner erred in being satisfied that the TR Agreement had been genuinely agreed as per s 188(c) of the FW Act.

7. The Commissioner erred in approving the TR Agreement.

8. The Commissioner erred in being satisfied that the TR Agreement did not contain any unlawful terms [s.186(4)].

[5] Grounds 1 and 2 were ultimately not pressed.

Consideration

Permission to appeal

[6] An appeal under s.604 of the Fair Work Act 2009 (FW Act) is an appeal by way of rehearing and the Commission’s powers on appeal are exercisable only if there is error on the part of the primary decision maker. 3 There is no right to appeal and an appeal may be made only with the permission of the Commission. Subsection 604(2) requires the Commission to grant permission to appeal if satisfied that it is “in the public interest to do so”. Permission to appeal may otherwise be granted on discretionary grounds.

[7] The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment. 4 The public interest is not satisfied simply by the identification of error, or a preference for a different result.5 In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of the Commission identified some of the considerations that may attract the public interest:

“... the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters...” 6

[8] Other than the special case in s.604(2), the grounds for granting permission to appeal are not specified. Considerations which have traditionally been treated as justifying the grant of permission to appeal include that the decision is attended with sufficient doubt to warrant its reconsideration and that substantial injustice may result if leave is refused. 7

[9] In determining whether permission to appeal should be granted we have reviewed and considered all material filed by the parties including all submissions, correspondence and relevant authorities.

[10] As earlier set out, the CFMEU’s notice of appeal contained eight grounds of appeal, two of which were not pressed. For the reasons set out below, we have decided to grant permission to appeal and uphold the appeal in relation to appeal ground 5, which contended that the Commissioner erred in being satisfied that the Agreement met the Better Off Overall Test (BOOT) requirement in s.186(2)(d) of the FW Act. In respect of the other grounds of appeal, we have determined that permission to appeal should not be granted.

Ground 5 – better off overall test

[11] Section 186(2)(d) of the FW Act provides:

(2)  The FWC must be satisfied that:

…

(d)  the agreement passes the better off overall test.

[12] The BOOT, in respect of non-greenfields agreements, is explicated in s.193(1) as follows:

(1)  An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.

[13] Satisfaction under s.186(2)(d) is a jurisdictional prerequisite for the approval of any enterprise agreement.

[14] The CFMEU contended that the Commissioner could not have been satisfied that this requirement had been complied with because the wage rates in the Agreement incorporated an all-purpose allowance that would otherwise apply under the Mining Industry Award 2010 (the Award) without providing for any sufficiently compensating benefit.

[15] The outline of submissions filed by the CFMEU in this regard included the following:

“15. The wage rates in the Agreement incorporate ‘all allowances, penalties that would otherwise apply under the Mining Industry Award 2010 (the Award), unless specifically set out otherwise in this Agreement’. On that basis, if the industry allowance in the Mining Award, being an all-purpose allowance of $28.98 per week, is added to the wage rate in the Award, then the wage rates in the Agreement are less than the wage rates in the agreement (sic). This can be seen in the following table.

……

17. In any event, the table shows that at each level an employee under the Agreement would be paid a wage rate that is less beneficial to that employee if he/she was employed under the Mining Award.”

[16] On the basis of the analysis in the above table and other matters referred to in its submissions, the CFMEU argued that the Commissioner could not be satisfied that the Agreement passed the BOOT.

[17] In its submissions, the Respondent contended that:

• the BOOT is not a line by line comparison, which was the substance of what was asserted by the CFMEU;
• in exercising his discretion, the Commissioner was satisfied that the employees would be better off overall under the terms of the Agreement as compared to the Award, and that there were a number of other favourable terms in the Agreement when compared to the Award;
• the Commissioner’s conclusion that the Agreement did pass the BOOT was a discretionary decision; and
• contrary to the CFMEU submission, the mere absence of a particular loading, penalty rate or other Award condition did not of itself result in a failure of the BOOT.

[18] The Respondent did not dispute the accuracy of the table in the CFMEU’s submissions which we have earlier set out. In its written submissions, the Respondent made reference to “a number of other favourable terms in the Agreement when compared to the Award”. The Respondent then included a table of other allowances including Leading Hand, First Aid, Meal allowance, Underground, Drilling, Tool Allowance, and Licence Electrical and the rates of pay for those allowances under the Award compared to the Agreement. The table showed that for each of these allowances, the Agreement provided a slightly higher rate.

[19] A Statutory Declaration (Form F17) made by Mr Andres Tamleht, Director of the Respondent, was provided in support of the approval of the Agreement. In response to question 3.4, which asks whether the Agreement contains any terms or conditions of employment that are more beneficial than the equivalent terms and conditions in the reference instrument (in this case, the Award), Mr Tamleht answered yes, and identified the more beneficial terms as “Clause 6 Classification and Wage Rates, the rates of pay”. In response to question 3.5, which asks whether the Agreement contains any terms that are less beneficial than the equivalent terms and conditions in the Award, Mr Tamleht answered “no”. He did not disclose the absence of the industry allowance.

[20] The BOOT is a global comparison. In Armacell Australia Pty Ltd 8, a Full Bench of Fair Work Australia relevantly stated that:

“[41] The BOOT, as the name implies, requires an overall assessment to be made. This requires the identification of terms which are more beneficial for an employee, terms which are less beneficial and an overall assessment of whether an employee would be better off under the agreement.”

[21] In this case, it is necessary to consider whether there are other beneficial terms which may offset the diminution of the rates of pay effected by the absorption of the industry allowance such as to permit satisfaction that the Agreement passed the BOOT.

[22] As set out above, the Form F17 identified the more beneficial terms and conditions of the Agreement as “Clause 6 Classification and Wage Rates, the rates of pay”. No other terms or conditions of the Agreement were identified as being more beneficial than the Award.

[23] While we agree with the submission of the Respondent that the mere absence of a particular loading, penalty rate or other Award condition does not of itself result in a failure of the BOOT, it could not be the case that the slight increases in the allowances set out in the Respondent’s table balance out the loss of the all-purpose industry allowance such as to leave all employees better off overall. This is because the allowances to which the Respondent refers do not have general application, but only apply to persons who perform specific functions or in relation to particular circumstances which might exist from time to time. For example, it is not likely that all employees will be eligible for the Leading Hand allowance, and underground work will presumably only be performed on an occasional basis. We consider it plain that the Agreement was incapable of passing the BOOT, and the Commissioner erred in concluding otherwise. Because this was an error which pertained to a jurisdictional prerequisite for the approval of the Agreement, we consider that permission to appeal should be granted, and the appeal is upheld with respect to ground 5. Consequently it will be necessary for the Decision to be quashed and the application for approval of the Agreement to be re-determined. At that hearing the Respondent will have the opportunity to proffer an undertaking for the Commission’s consideration to resolve the identified BOOT deficiency.

Other grounds of appeal

[24] In relation to the other grounds of appeal, grounds 1 and 2 were not pursued by the CFMEU.

[25] To the extent to which the Commissioner erred (as a result, it appears, of an administrative error in overlooking correspondence sent by the CFMEU) in failing to give the CFMEU an opportunity to be heard in relation to its application to participate in the hearing for the approval of the Agreement (ground 3), we do not consider that it would serve any useful purpose to grant permission to appeal in respect of this ground. The hearing of the appeal has given the CFMEU the opportunity which it did not have at first instance to advance its case against the approval of the Agreement. Further, the requirement to re-determine the application for approval of the Agreement will give the CFMEU the opportunity to advance, and be heard upon, a further application to be heard in relation to the matter.

[26] In relation to ground 4, we are not satisfied that there is an arguable case that reasonable steps were not taken to explain the Agreement and its effect of it to employees such as to justify the grant of permission to appeal. The Form F17 outlined the steps taken by the Respondent to explain the terms of the agreement including the effect of those terms. The Commissioner was entitled to rely upon what was stated in that respect in the absence of any contradicting material. No appealable error has been demonstrated by the CFMEU in relation to this ground such as to justify the grant of permission to appeal.

[27] Ground 6 asserts that the Commissioner erred in concluding that the Agreement had been genuinely agreed as required by s.188(c) of the Act. The CFMEU argued that the Agreement was confusing and/or misleading in a number of respects which meant that employees could not have given informed consent. While we have considered the matters to which the CFMEU referred, no appealable error has been demonstrated by the CFMEU in relation to this ground such as to justify the grant of permission to appeal.

[28] Ground 7 asserts that the FWC erred in approving the Agreement, for the reasons set out in the other grounds of appeal. This ground does not raise any new matters for us to consider.

[29] The final ground asserts that clause 2.2 of the Agreement offends s.194(ba) (and accordingly s.186(4)) of the FW Act, because it operated as an “opt out” clause from the coverage of the Agreement and therefore should not have been approved. Clause 2.2 provides as follows:

“Any future project or site specific arrangement entered into under the Fair Work Act 2009 (FW Act) by the Company or by any Joint Venture or similar business arrangement of which the Company is a part, will cover and apply to the Company and any employees at that particular project or site to the exclusion of this Agreement.”

[30] The Respondent argued that the clause mirrored the clause approved in CFMEU v John Holland Pty Ltd & Anor 9 (John Holland). It contended that clause 2.2 does not permit variation of the Agreement nor is it an “opt out” clause, and contrary to the CFMEU’s submissions, clause 2.2 was consistent with s.58 which was upheld in John Holland. The Respondent contended that the clause did not permit it, or the employees, to unilaterally or otherwise “opt out” of the Agreement, and that any new agreement would require approval by the Commission in accordance with Part 2-4 of the Act.

[31] The CFMEU submitted that while the terms of clause 2.2 of the Agreement are similar to that in John Holland, it was not identical, and in any event the decision in John Holland was not relevant to a consideration as to whether clause 2.2 of the Agreement was an unlawful term, because the agreement in John Holland was approved before the insertion of s.194(ba) of the FW Act.

[32] Clause 2.2 is drafted in terms that lack clarity. The Respondent’s submission appears to be that the reference in the clause to “any future project or site-specific arrangement entered into under the Fair Work Act” is to be understood as meaning a future enterprise agreement entered into under the FW Act, so that the clause in effect restates what the legal effect of the approval of any such future enterprise agreement would be. If so, the clause does not accurately state the effect of s.58 of the FW Act, which identifies, when two enterprise agreements cover an employee, which agreement applies to the employee. Section 58(2)(d) provides that the earlier of the two agreements applies until its nominal expiry date has passed. Accordingly, on one view, the clause does purport to allow an “opt out” contrary to the provisions of the FW Act. As submitted by the CFMEU, this issue did not arise for consideration in John Holland.

[33] We think that in all the circumstances it is preferable not to grant permission to appeal in relation to this issue. As earlier stated, as a result of the appeal being upheld in respect of ground 5 of the appeal, the application for approval of the Agreement will have to be heard afresh and re-determined. That will give the Respondent an opportunity to address any concerns that arise with respect to this clause through the provision of an undertaking. That makes it unnecessary to resolve the issue now. Permission to appeal is therefore refused in relation to ground 8.

Additional matters

[34] Two further issues were raised during the course of the hearing before us, for which the parties were given the opportunity to provide further written submissions.

[35] The first was whether the wording of clause 2.1 of the Agreement could permit the Agreement to cover work performed by the Respondent in the black coal mining industry. The Respondent submitted, amongst other things, that the reference to the Award in clause 6.3 and the mirroring within the Agreement of the classifications in clause 6.1 of the Award, demonstrate that the Agreement only covers mining activities relevant to that of the Award. The Respondent further submitted that in applying the principles of agreement interpretation as set out in AMIEU v Golden Cockerel Pty Ltd 10 (Golden Cockerel), when the Agreement is read as a whole, and the common intention of the parties (that being that the Agreement only applied to mining activities relevant to the Award) is understood, it cannot be said that the Agreement covered black coal operations or activities. The CFMEU submitted that in its view, “this reasoning has force and accords with our view as put to the Full Bench during the proceedings”. We are satisfied, based on the submissions of the parties, that the Agreement does not apply to black coal operations or activities.

[36] The second matter was whether clause 9 of the Agreement was an unlawful term, to the extent that it could allow parties to “opt out” of the coverage of the Agreement in contravention of s.194(ba) of the FW Act. The Respondent contended that the clause did not allow parties to elect not to be covered by the Agreement. On the contrary, it simply allowed the parties to enter into flat rates of pay or annualised salary arrangements consistent with clause 9.3 of the Agreement. It contended that clause 17 of the Award provides similar annualised salary arrangements as contemplated by clause 9 of the Agreement. The CFMEU submitted that clause 9 went beyond the mere introduction of an annualised salary arrangement or flat rate payment system. It argued that the words “a different system of payment” in clause 9.2 permitted more than an annualised payment system or flat rate system. It also argued that the use of the term “may” rather than “must” in clause 9.3 demonstrated that a flat rate or annualised salary system were not exhaustive options.

[37] Having considered the submissions made by the parties, our provisional view is that clause 9 is not a term which is rendered unlawful by s.194(ba). It seeks to facilitate an alternative method of payment for employees under the Agreement, but it does not operate to remove employees from the coverage of the Agreement altogether. As we read the provision, employees on any such alternative arrangement would still be entitled to the other benefits of the Agreement apart from those identified in clause 9.2 (that is, “base hour rates for ordinary hours, overtime work & penalty rates, shift work penalties, weekend penalties and annual leave loading”). Clause 9.2 might give rise to different issues about whether such a provision could satisfy the BOOT 11, but they can be dealt with in the re-hearing of the approval application.

Conclusion and orders

[38] We are satisfied that the CFMEU has demonstrated appealable error in relation to ground 5 of the appeal. Accordingly, we grant permission to appeal, uphold the appeal and quash the Decision.

[39] We order as follows:

(1) Permission to appeal is granted.

(2) The appeal is upheld.

(3) The Decision ([2017] FWCA 325) is quashed.

(4) The application for approval of the Agreement is remitted to Commissioner Gregory for redetermination.

VICE PRESIDENT

Appearances:
A. Thomas for the Construction, Forestry, Mining and Energy Union
D. White, solicitor, for TR Construction Services Pty Ltd

Hearing details:
2017.
Sydney:
March 27.

Final written submissions:
TR Construction Services Pty Ltd further submissions, 27 April 2017.

 1   [2017] FWCA 325

 2   [1984] HCA 62; (1984) 56 ALR 149; (1984) 59 ALJR 95

 3   Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ.

 4   O’Sullivan v Farrer (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others (2011) 192 FCR 78 at [44] -[46]

 5   GlaxoSmithKline Australia Pty Ltd v Makin [2010] FWAFB 5343 at [26]-[27], 197 IR 266; Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/Warkworth [2010] FWAFB 10089 at [28], 202 IR 388, affirmed on judicial review in Coal & Allied Mining Services Pty Ltd v Lawler (2011) 192 FCR 78; NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663 at [28]

 6   [2010] FWAFB 5343, 197 IR 266 at [24] – [27]

 7   Also see CFMEU v AIRC (1998) 89 FCR 200; and Wan v AIRC (2001) 116 FCR 481

 8   [2010] FWAFB 9985

 9   [2015] FCAFC 16.

 10   [2014] FWCFB 7447

 11   See ALDI Foods Pty Ltd v Transport Workers Union of Australia [2012] FWAFB 9398; 22 IR 120 at [26]-[29]

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