[2017] FWCFB 651

The attached document replaces the document previously issued with the above code on 31 January 2017.

Endnotes 10 and 15 are amended.

Associate to Vice President Catanzariti

Dated 1 February 2017

[2017] FWCFB 651

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

United Voice - Queensland Branch
v
MSS Security Pty Limited T/A MSS Security Pty Limited
(C2015/3752)

VICE PRESIDENT CATANZARITI
SENIOR DEPUTY PRESIDENT DRAKE
COMMISSIONER SPENCER

SYDNEY, 31 JANUARY 2017

Appeal against decision [2015] FWCA 1559 of Commissioner Gregory at Melbourne on 9 April 2015 in matter number AG2014/10202.

[1] On 9 April 2015, Commissioner Gregory issued a Decision 1 which approved the MSS Security QLD Enterprise Agreement 2014-2018 (Agreement) with an undertaking. On 30 April 2015, United Voice (Appellant) lodged a Notice of Appeal appealing the Commissioner’s Decision. The Appellant and MSS Security (Respondent) are covered by the Security Services Industry Award 2010 (Award) and at the heart of the appeal was whether employees of the Respondent were better off under the Award or the Agreement.

[2] We heard the appeal and, on 12 November 2015, issued a decision (First Quashed Decision) which granted permission to appeal, upheld the appeal, and concluded that the Agreement would be approved with an amended undertaking. 2 On 1 December 2015, Vice President Catanzariti issued a decision (Second Quashed Decision) which recorded that Commissioner Gregory’s Decision had been set aside and, that the Agreement, with the new undertaking, is approved.

[3] On 23 August 2016, a Full Court of the Federal Court of Australia quashed both the First Quashed Decision and the Second Quashed Decision. 3 The Full Court of the Federal Court of Australia issued a writ of mandamus requiring us to rehear and decide the union’s appeal according to law.4 As such, we heard the matter on 5 December 2016. We informed the parties that our decision would be published in due course.

[4] At the hearing on 5 December 2016, Mr W. Friend of Queen’s Counsel and Mr R. Reed of Counsel sought permission to appear for the Appellant. Mr M. Follett of Counsel sought permission to appear for the Respondent. Given the complexity of the matter, and having regard to s.596 of the Fair Work Act 2009 (the Act), permission was granted to both parties to be represented. 5

Permission to Appeal

[5] The FWC will grant permission to appeal only if it is in the public interest to do so. 6 The test of assessing whether a matter is in the public interest is discretionary and involves a broad value judgement.7 In GlaxoSmithKline Australia Pty Ltd v Colin Makin,8 the Full Bench summarised the test for determining the public interest as follows:

“[26] Appeals have lain on the ground that it is in the public interest that leave should be granted in the predecessors to the Act for decades. It has not been considered useful or appropriate to define the concept in other than the most general terms and we do not intend to do so. The expression ‘in the public interest’, when used in a statute, classically imports a discretionary value judgment to be made by reference to undefined factual matters, confined only by the objects of the legislation in question. [Comalco v O’Connor (1995) 131 AR 657 at p.681 per Wilcox CJ & Keely J, citing O’Sullivan v Farrer (1989) 168 CLR 210]

[27] Although 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, it seems to us that none of those elements is present in this case.”

[6] Alternately, the second ground for granting permission to appeal is that the decision is attended with sufficient doubt to warrant its reconsideration or that substantial injustice may result if leave is refused. 9

[7] 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.

[8] We find that permission to appeal should be granted in this matter. We are of the view that the appeal raises important questions concerning the application of the BOOT in circumstances where the Commissioner’s discretion to determine whether employees were better off under the Agreement is an issue in the dispute. We consider this to be an important matter regarding the Commissioner’s approach in making such a determination and, therefore, the dispute arising in this case is a matter of public interest. It is on this basis that permission to appeal is granted.

The Appeal

[9] At the heart of the dispute was whether the Commissioner erred by accepting that the Agreement passed the better off overall test (BOOT).

Appellant’s Submissions

[10] Firstly, the Appellant submitted that the application of the BOOT required the Commissioner to conduct an assessment of the Agreement, determine which clauses were more and less beneficial than the Award, and then make an overall assessment of whether an employee would be better off under the Agreement. 10

[11] The Appellant contended that when clause 21.1 (the ordinary hours provision) and clause 23.3 (the overtime provision) are read together, it is apparent that hours in excess of 304 hours over an 8 week roster cycle are to be treated as overtime under the Award and are to be paid at the differential rates set out in clause 23.3. That is, it cannot be said that an employee is working overtime until he or she has worked more than 304 hours during the 8 week cycle. The Appellant noted that, pursuant to clause 4.3.5 of the Agreement, overtime hours would be notionally assigned to Sunday work, regardless of when in the roster those hours fell. Therefore, as overtime was notionally worked on a Sunday, no additional penalty over that which applied to Sunday work would be payable. In this regard, the Appellant noted that a maximum of 12 hours overtime could be attributed to Sunday work.

[12] The Appellant posited that, under the Award, overtime is payable when the maximum number of ordinary hours in the roster cycle (304 hours over 8 weeks) has been worked. However, by shifting those hours from the end of the roster to Sundays earlier in the roster, the Agreement reduces the number of overtime hours for which a loading would be payable. Therefore, non-aggregated wage employees working the 8 week roster cycle would suffer a significant diminution in entitlement as a result of the operation of clause 4.3.5(a) of the Agreement. In this regard, the Appellant asserted that the difference between ordinary time pay rates in the Agreement and the Award were so small as not to offset for the loss of overtime entitlements.

[13] Therefore, the Appellant contended that the Commissioner erred in failing to appreciate the effect of clause 4.3.5(a) of the Agreement and argued that he should not have been satisfied that the Agreement passed the BOOT. In particular, the Appellant asserted that the Commissioner erred in relying on the decision of Harland & Ors v MSS Security 11 (“Harland”) as authority for the proposition that the Award allowed the Respondent to construct its roster in the same way as that provided for in clause 4.3.5 of the Agreement.

[14] The Appellant contended that the Commissioner erred in relying on Harland as the facts before Commissioner Williams in Harland and Commissioner Gregory were entirely different. The Appellant highlighted the following distinguishing features between the cases:

(a) Commissioner Gregory was dealing with the application of the BOOT to a proposed enterprise agreement;

(b) There was no dispute as to the makeup of rosters which were set in accordance with the operation of an 8 week cycle before Commissioner Gregory;

(c) The real issue before Commissioner Gregory was the operation of clause 4.3.5(a) of the Agreement on the set roster, compared with the operation of the Award provisions on the roster before Commissioner Williams;

(d) The issue before Commissioner Gregory concerned the effect of the purported “allocation” of overtime to Sundays, when some or all of the overtime had actually been worked on other days, rather than the situation in Harland where the roster had apparently been configured so that the overtime fell on a Sunday; and

(e) There was no provision in the Award equivalent to clause 4.3.5(a) of the Agreement in the matter before Commissioner Williams.

[15] Secondly, the Appellant contended that the Commissioner erred by approving the Agreement while it contained clause 4.3.6 and in accepting the undertakings offered by the Respondent. The Appellant noted that clause 4.3.6 is a “voluntary overtime” provision, which allows permanent employees, by written agreement, to work overtime at casual rates of 125%. 12 The Appellant asserted that the voluntary overtime rates in clause 4.3.6 were inferior to the overtime rates in the Award.13 The Appellant highlighted that section 190 of the Act allows the Commission to approve an enterprise agreement with undertakings. In this regard, the Appellant posited that the section only applies if the Commission has a concern that the agreement does not meet the requirements set out in sections 186 and 187 (the BOOT). The Appellant contended, therefore, that a concern was evidently held by the Commissioner in light of the submissions by the Respondent14.

[16] The Appellant contended that, in approving the Agreement, the Commissioner accepted undertakings from the Respondent for quarterly audits of employees who worked voluntary overtime under clause 4.3.6 in excess of minimal amounts per quarter, with a payment within 7 days of the end of the quarter of any shortfall in wage payments to the employee, compared with amounts which would have been paid under the Award.

[17] The Appellant asserted that the Commissioner erred in accepting the above undertakings offered by the Respondent for the following reasons:

1. By requiring an undertaking at all, the Commissioner recognised that the Agreement did not pass the BOOT;

2. The Commissioner should not have accepted undertakings, the effect of which would require an employee who was worse off as a result of the operation of clause 4.3.6 having to wait up to 3 months to be properly remunerated for work performed. Such an undertaking would offend section 190(3)(a) of the Act;

3. Circumstances where employees received further remuneration as a result of the quarterly audit would in most cases contravene section 323 of the Act, which requires remuneration to be paid in full at least monthly. As section 323 is a civil remedy provision exposing a contravener to a possible pecuniary penalty, the Commissioner should have considered exercising discretion to refuse to approve the Agreement pursuant to section 192; and

4. No modified undertaking which reduced the timing of the audits to, say, 1 month would be satisfactory. 15

Respondent’s Submissions

[18] The Respondent addressed each of the grounds of appeal outlined by the Appellant.

[19] In relation to the first ground of appeal, the Respondent contended that the combined effect of clauses 4.3.1 and 4.3.5 is that the Respondent is permitted to allocate and roster any overtime worked within an 8 week roster cycle on a Sunday. 16 In this regard, the Respondent disputed the Appellant’s contention that overtime cannot be allocated to a specific day within the rotating roster in this manner and, therefore, does not pass the BOOT. The Respondent asserted that this argument was put before the Commissioner and the Full Bench and was rejected, and likewise, the argument should be rejected in this appeal.

[20] The Respondent submitted that within an 8 week cycle, maximum ordinary hours under the Award are 304 hours. In this regard, under the Award, overtime is payable for any additional hours worked within that cycle, which is exactly the same position under the Agreement.

[21] The Respondent noted that the factual scenario in question related to employees of the Respondent who performed 336 rostered hours within an 8 week cycle made up of 12 hour shifts on a “four days on, four days off” pattern. The Respondent highlighted that the Appellant relies on two foundational premises:

1. Under the Award, if an employee worked the same roster pattern, the first 304 sequential hours worked over that 8 week cycle must be ordinary hours and the last 32 hours must be overtime; and accordingly

2. Under the Award, overtime within a rotating roster cycle cannot be allocated by an employer in the manner which is provided for in the Agreement.

[22] Following on from these premises, the Respondent submitted that the Appellant asserted that allocating more than 12 hours of overtime to a Sunday under the Agreement disadvantages employees by eliminating other overtime penalties that would otherwise apply.

[23] The Respondent contended that if the two premises outlined above were correct, there may be a theoretical disadvantage to these employees if the Respondent chose to allocate overtime to Sundays as permitted by clause 4.3.5(a) of the Agreement. However, the Respondent asserted that neither of the above premises are correct and, therefore, the provisions do not trigger any BOOT concerns.

[24] The Respondent submitted that no provision of the Award determines how or when the “averaged” 304 hours are to be worked within that 8 week cycle roster. Further, the Respondent asserted that no provision of the Award prohibits or prevents an employer allocating overtime within the 8 week roster on any day it sees fit. 17 On this basis, the Respondent contended that, having regard to the factual scenario above, no provision of the Award necessitates that only the last 32 hours worked in the 8 week roster cycle must be regarded as overtime and allocated (and paid) as such. Therefore, the Respondent asserted that, provided the employer allocates and pays for 32 hours of overtime within the 8 week roster cycle, the requirements of the Award are fully met.

[25] In relation to the second ground of appeal, the Respondent addressed each of the four reasons outlined by the Appellant in contending that the Commissioner erred in accepting the undertakings offered by the Respondent.

[26] Regarding the first reason outlined by the Appellant, the Respondent asserted that the need for an undertaking arises where a “concern” exists as to the approval requirements (section 190(1)(b) of the Act), not that the Agreement did not pass the BOOT. Further, and in any event, the Respondent submitted that the purpose of the undertaking is to resolve the BOOT issue.

[27] Regarding the second reason outlined by the Appellant, the Respondent noted that, to the extent that the Full Bench concluded that this manifested an appellable error, that error remains.

[28] Regarding the third reason outlined by the Appellant, the Respondent contended that this reason was misconceived and that the full amounts required to be paid by the Agreement, including all amounts due under clause 4.3.6, would be paid in full fortnightly. 18

[29] Regarding the fourth reason, the Respondent contended that this was an assertion without foundation and it was not identified how or why such a proposition is so.

[30] Based on the above, the Respondent submitted that the Commission should, pursuant to 607(3)(b) of the Act, rehear the application to approve the Agreement, give consideration to the statutory requirements for approval and, if satisfied that the Agreement should be approved, provide sufficient reasons for reaching that state of satisfaction and approve the Agreement.

Consideration

[31] We note that a decision under appeal is of a discretionary nature and such a decision can only be successfully challenged on appeal if it is shown that the discretion was not exercised correctly. We note that it is not open for us to substitute our view on the matters that fell for determination before the Commissioner in the absence of error of an appellable nature in the Commissioner’s original Decision. As the High Court said in House v The King 19:

“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”

[32] A key consideration as to whether the Commission can approve an agreement is a determination that the agreement passes the “better off overall test”. That requirement is set out at s 186(2)(d) of the Act. The definition of the BOOT is set out at s 193(1) as follows:

“Passing the better off overall test

When a non-greenfields agreement passes the better off overall test

(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.

FWC must disregard individual flexibility arrangement

(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.

When a greenfields agreement passes the better off overall test

(3) A greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that 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.

Award covered employee

(4) An award covered employee for an enterprise agreement is an employee who:

(a) is covered by the agreement; and

(b) at the test time, is covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and

(iii) covers his or her employer.

Prospective award covered employee

(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:

(a) would be covered by the agreement; and

(b) would be covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) would cover the person in relation to the work that he or she would perform under the agreement; and

(iii) covers the employer.

Test time

(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.

FWC may assume employee better off overall in certain circumstances

(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.”

[33] As Vice President Lawler observed in NTEU v UNSW:

“Obviously enough, the BOOT calls for an overall assessment. Comparing monetary terms and conditions is, at the end of the day, a matter of arithmetic. There is an obvious problem of comparing apples with oranges when it comes to including changes to non-monetary terms and conditions into the “overall” assessment that is required by the BOOT. In such circumstances the Tribunal must simply do its best and make what amounts to an impressionistic assessment”. 20

[34] Clause 21.1 of the Award prescribes that hours in excess of 304 hours over an eight week roster are treated as overtime. Clause 23.3 of the Award prescribes that when an employee works overtime, the employer must pay the employee the ordinary time rate for the period of overtime together with the following loadings:

For overtime worked on	Loading in addition to ordinary time
Monday to Friday – first 2 hours	50%
Monday to Friday – thereafter	100%
Saturday – first 2 hours	50%
Saturday – thereafter	100%
Sunday	100%
Public Holiday	150%

[35] By comparison, clause 4.3.5(a) of the Agreement provides that overtime in a 12-hour rotating roster cycle will generally be allocated to hours that fall on a Sunday: at the end of a Saturday and a Sunday day shift. The effect of clause 4.3.5 of the Agreement is that over the period of the roster, the overtime hours are assigned to Sunday work, regardless of when in the roster those hours actually fell. Therefore, no additional penalty over that which applied to Sunday work would be payable.

[36] Pursuant to the Award, overtime is payable when the hours in excess of the maximum have been worked. By shifting those hours from the end of the roster, to Sundays earlier in the roster, the Agreement reduced the number of overtime hours for which loading would be payable. We are of the view that this is disadvantageous to the non-aggregated wage employees of the Respondent when compared to what these employees are offered under the Award. It follows that non-aggregated wage employees are better off under clause 21.1 and 23.3 of the Award than under clause 4.3.5 of the Agreement.

[37] Clause 4.3.6 of the Agreement provides that permanent employees are allowed, by written agreement, to work overtime at casual rates of 125%. Clause 4.3.6(b) caps the overtime to be worked at 24 hours per fortnight. These clauses are inferior to the clauses in the Award, which prescribe higher overtime rates. In this regard too, it follows that certain employees are better off under the Award than the Agreement. In light of this disadvantage, Commissioner Gregory accepted undertakings from the Respondent for quarterly audits of non-aggregated wage employees who worked overtime with a payment within 7 days of any shortfall in wage payments to the employee compared with amounts which would have been paid under the Award.

[38] In our view, this undertaking would cause an employee who is worse off under the Agreement to wait up to three months to be properly remunerated for work performed. This is inconsistent with section 190(3)(a) of the Act which prescribes that:

“(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:

(a) Cause financial detriment to any employee covered by the agreement”.

[39] In light of the above, we are of the view that the undertakings did not satisfy the requirement prescribed by section 190(3)(a) of the Act. Further, the undertakings contrive section 323 of the Act, which require that employees are remunerated at least monthly.

[40] The Appellant has tendered an undertaking in which it undertakes to conduct monthly audits of employees who have worked overtime. In our previous decision 21 that the Full Court of the Federal Court quashed, we stated that by amending the undertaking from quarterly to monthly reviews, the undertaking would be satisfactory.22

[41] However, following the quashing of our decision and the comments of the Full Court of the Federal Court, we have reconsidered the appeal before us. In doing so, we have considered all material filed by the parties including all submissions, correspondence and relevant authorities.

[42] Having reconsidered the material before us, we are of the view that while monthly audits are preferable to quarterly audits, a one month delay in remuneration does not remedy the contravention of section 190(1) that resulted from the original three month delay. Whether the delay is one month or three months, the employees are financially disadvantaged under the Agreement as there is a delay in the payment of the remuneration that they are, under the Award, entitled to. While the Respondent’s undertaking, which reduces the timing of the audits to one month, is preferable to quarterly audits, we are not satisfied that these undertakings make employees better off under the Agreement.

[43] At PN51 – PN52 of the Transcript we put this to the Respondent. The Respondent asserted that it is only “potentially” to the detriment of employees to have to wait one month to receive their remuneration. We disagree with this assertion and are of the view that it is to the detriment of the employees to have to wait one month to receive their remuneration and that, as a result, the employees are not better off under the Agreement and undertaking.

[44] The Respondent submitted that five provisions of the Agreement are more beneficial to employees when compared to provisions of the Award. 23 In our view, these benefits should be taken into account. However, we agree with the Appellant to the extent that it submits that the benefits that the Respondent points to do not off-set the detrimental impact caused by the loss of overtime entitlements.

[45] We are not satisfied that there are other clauses of the Agreement that off-set the loss of overtime entitlements, or other beneficial clauses which result in non-aggregated wage employees being better off overall under the Agreement. We are, therefore, not satisfied that, pursuant to an overall assessment of the Agreement, the BOOT has been satisfied.

[46] In light of the above, we are of the view that the Agreement does not satisfy the BOOT and that this is not rectified by the undertakings. We are of the view that there are appealable errors in accordance with House v The King in the two grounds of appeal as submitted by the Appellant. We are of the view that the Commissioner erred in approving the Agreement. As such, we are of the view that the Commissioner did not properly exercise the discretion which is vested in the Commission. We are, therefore, satisfied that the appeal must be upheld and that we should quash the original Decision. As such, the Commissioner’s Decision is quashed and the Agreement is not approved.

Conclusion

[47] Permission to appeal is granted.

[48] The appeal is upheld.

[49] Commissioner Gregory’s Decision 24 is quashed.

[50] The Agreement is not approved.

Seal of the Fair Work Commission with member's signature
VICE PRESIDENT