[2018] FWCFB 5773  Note: Refer to the Federal Court decision of 2 May 2019 for the result of this matter.
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009

s.604 - Appeal of decisions

Construction, Forestry, Maritime, Mining and Energy Union
v
CPB Contractors Pty Limited
(C2018/2635)

VICE PRESIDENT HATCHER
SENIOR DEPUTY PRESIDENT HAMBERGER
COMMISSIONER SIMPSON SYDNEY

26 SEPTEMBER 2018

[1] The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) has lodged an appeal pursuant to s 604 of the Fair Work Act 2009 (FW Act), for which permission to appeal is required, against a decision issued by Commissioner Riordan on 9 May 2018 1 (Decision) to approve the CPB Contractors NSW Civil Works Enterprise Agreement 2017-2021 (Agreement) on the basis of the acceptance of a number of undertakings. The CFMMEU had sought to be heard in opposition to approval of the Agreement before the Commissioner, but its application in that respect was refused by the Commissioner in an interlocutory decision issued on 29 March 20182 (interlocutory decision). The CFMMEU contends in its further amended notice of appeal that the Commissioner erred in approving the Agreement on the following grounds:

Relevant provisions of the Agreement

[2] It is necessary to set out a number of provisions of the Agreement which were the subject of the CFMMEU’s grounds of appeal. First, clause 3.3 sets out the coverage of the Agreement in the following terms:

[3] Second, there were a number of provisions which the CFMMEU contends excluded the NES. These provisions were as follows:

The Decision

[4] In the interlocutory decision, the Commissioner’s reasons for declining to permit the CFMMEU were as follows:

[5] The Decision in its entirety was as follows:

[6] There were five undertakings accepted by the Commissioner. Only the first two are relevant to the CFMMEU’s grounds of appeal. The first was that the second paragraph of clause 3.3 of the Agreement, which we have earlier set out, was to have no effect. The remaining undertakings were as follows:

“2. Regarding the application of clause 9 Abandonment of employment, CPD commits to ensuring that the Company shall make every reasonable endeavor to contact any employee concerned within three days of their first day of unscheduled absence.

Further, the Company shall in the absence of any response, advise the employee in writing of any decision by the Company to deem the employee has abandoned their employment. The date of termination shall be the date the decision is communicated, that is, no less than 7 days after the employee’s last missed shift.

3. To mitigate any question, dispute or difficulty in relation to casual employees engaged under the Agreement, the award clause 14 Casual employment shall be applied, subject the Agreement prevailing in the event of any inconsistency. Further, CPB expressly commits to:

Submissions

[7] The CFMMEU submitted that:

[8] CPB submitted that:

[9] The AWU submitted that it supported the CFMMEU’s position that the Commissioner erred in not permitting the CFMMEU to be heard in circumstances where the CFMMEU had been covered by the predecessor agreement, but otherwise submitted to any order which the Full Bench might make with respect to the substantive grounds of appeal.

Consideration

[10] We are satisfied that the Decision is attended by appealable error as contended by the CFMMEU in its fourth ground of appeal as earlier set out. The starting point for consideration is the FW Act’s provisions concerning when enterprise agreements cover and apply to employees and employers. Section 53(1) deals with the concept of coverage as follows:

Employees and employers

(1)  An enterprise agreement covers an employee or employer if the agreement is expressed to cover (however described) the employee or the employer.

[11] Section 52(1) deals with the application of enterprise agreements as follows:

When an enterprise agreement applies to an employee, employer or organisation

(1)  An enterprise agreement applies to an employee, employer or employee organisation if:

(a)  the agreement is in operation; and

(b)  the agreement covers the employee, employer or organisation; and

(c)  no other provision of this Act provides, or has the effect, that the agreement does not apply to the employee, employer or organisation.

[12] Section 52(1)(b) makes it clear a condition of an agreement applying to (relevantly) an employee or employee is that it must cover them.

[13] Section 58(1) provides:

Only one enterprise agreement can apply to an employee

(1)  Only one enterprise agreement can apply to an employee at a particular time.

[14] In the High Court decision in ALDI Foods Pty Limited v Shop, Distributive & Allied Employees Association5 it was observed, having regard to the above provisions, that the FW Act contemplated that although more than one agreement could cover employees at a particular time, only one could apply:

[33] Because an employee may be covered by more than one agreement at one time, s 58(1) of the Act provides that only one enterprise agreement can apply to an employee at a particular time. That is because only one set of rights and obligations can be in operation in relation to the work actually performed by the employee at that time in relation to particular employment. Given the terms of ss 52 and 53, it is apparent that an employee may be covered by an agreement that applies to him or her, and by an agreement that does not, at that time, apply to him or her. Furthermore, an employee may be covered by more than one agreement at any one time. To speak of an employee being covered by an agreement is to speak of the agreement providing terms and conditions for the job performed by, or to be performed by, the employee.

[15] Section 58(2) establishes a “general rule” for the determination as to which of an earlier and later agreement that are both expressed to cover a particular employee applies at a particular time. It provides:

General rule--later agreement does not apply until earlier agreement passes its nominal expiry date

(2)  If:

(a)  an enterprise agreement (the earlier agreement ) applies to an employee in relation to particular employment; and

(b)  another enterprise agreement (the later agreement ) that covers the employee in relation to the same employment comes into operation; and

(c)  subsection (3) (which deals with a single-enterprise agreement replacing a multi-enterprise agreement) does not apply;

then:

(d)  if the earlier agreement has not passed its nominal expiry date:

(i)  the later agreement cannot apply to the employee in relation to that employment until the earlier agreement passes its nominal expiry date; and

(ii)  the earlier agreement ceases to apply to the employee in relation to that employment when the earlier agreement passes its nominal expiry date, and can never so apply again; or

(e)  if the earlier agreement has passed its nominal expiry date--the earlier agreement ceases to apply to the employee when the later agreement comes into operation, and can never so apply again.

[16] It is clear, we consider, that the final paragraph of clause 3.3 of the Agreement, properly construed, offends s 58(2)(d)(i). In the terms in which the paragraph is expressed, it operated before as well as after the nominal expiry date of the Agreement. It provides that a later enterprise agreement approved by the Commission will cover CPB and its employees at a particular project or site “to the exclusion of this Agreement”. The provision is premised on the proposition that such a project or site is one which falls within the coverage of the Agreement as set out in the first paragraph of clause 3.3, since the rationale of the provision is plainly to resolve a situation in dual coverage. The final paragraph purports to exclude the coverage of the Agreement (being the earlier agreement) in favour of the later agreement for a specific project or site. As earlier explained, an agreement cannot apply to employees unless it covers them. The intended effect of the final paragraph of clause 3.3 is therefore that the later agreement will apply and the Agreement will not at the specific project or site in question. While the Agreement remains within its nominal term, that is a result which is directly contrary to that mandated by s 58(2).

[17] It follows, we consider, that the final paragraph of clause 3.3 is rendered unlawful by s 194(ba), which provides:

194 Meaning of unlawful term

A term of an enterprise agreement is an unlawful term if it is:

. . .

(ba)  a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement; ..

[18] Section 194(ba) could not, of course, be understood as proscribing a term which merely contemplates the making, in accordance with the FW Act, of a new enterprise agreement which overlaps in coverage with an existing agreement and has application after the nominal term of the existing agreement has passed in accordance with s 58 of the FW Act. That would not constitute a method for an election not to be covered by an agreement, but simply the taking of a course expressly permitted by the FW Act under which an existing agreement may wholly or partially be replaced in its operation by a new agreement made in accordance with the FW Act once its nominal expiry date has passed. However, the final paragraph of clause 3.3 does something different: it uses the mechanism of the making and approval of a new project or site/specific enterprise agreement as a means by which CPB and a subset of employees covered by the Agreement may cease to be covered by the Agreement before its nominal expiry date. This would clearly involve a mutual election not to be covered on the part of CPB and the relevant employees (effected, in the case of CPB, by proposing a new agreement and, in the case of the relevant employees, by voting to approve the new agreement). That an election under a method proscribed by s 194(ba) may be mutual is made clear by the words “unilaterally or otherwise” in the provision.

[19] Section 186(4) provides, as a condition of approval of an agreement, that the agreement not contain any unlawful terms. There could not be the requisite satisfaction under s 186(4) where, as here, the Agreement contained a provision which was plainly unlawful under s 194(ba).

[20] As earlier stated, CPB pointed out in its submissions that the enterprise agreement which was the subject of consideration in the Federal Court Full Court decision in CFMEU v John Holland Pty Ltd 6 contained a coverage term very similar to the final paragraph of clause 3.3 of the Agreement here. John Holland involved an agreement which was the subject of an application for approval lodged on 13 February 2012 and was approved by a single member of Fair Work Australia on 22 May 2012. Section 194(ba) was added to the FW Act by Schedule 5 of the Fair Work Amendment Act 2012 (Cth), which took effect on 1 January 2013. Accordingly s 194(ba) was not applicable to the approval of the agreement under consideration in John Holland. Nor did the Full Court give any consideration to the relevant coverage term vis--vis s 58 of the FW Act. Accordingly we do not consider that John Holland is inconsistent with or precludes the conclusion that we have reached.

[21] A similar issue to that raised here by the CFMMEU was considered in the earlier Full Bench decision in CFMEU v TR Construction Services Pty Ltd7 In that decision the Full Bench said (footnote omitted):

“[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 (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.”

[22] The agreement under consideration in TR Construction Services was subsequently approved on the basis, among other things, of an undertaking that clause 2.2 was omitted from the agreement in its entirety. 8 The conclusion we have reached here is therefore consistent with the decision and outcome in TR Construction Services. It follows from our conclusion that the Commissioner erred in approving the Agreement while it contained the final paragraph of clause 3.3. This is an error of a nature which, we consider, requires the grant of permission to appeal. The appeal is upheld with respect to the fourth ground of appeal.

[23] Contrary to the submissions of the CFMMEU, this does not however require that CPB’s application for approval of the Agreement be dismissed. The CFMMEU contended that the identified difficulty in the final paragraph of clause 3.3 was incapable of being remedied by an undertaking to remove it from the Agreement because this would necessarily result in substantial change to the Agreement, meaning that the undertaking could not be accepted in accordance with s 190(3)(b) of the FW Act. It relied upon the following passage in the Full Bench decision in CEPU v Main People 9 in support of this proposition:

“[34] We consider that in two respects the Deputy President erred in approving the Agreement on the basis of the undertaking proposed by Main People. First, we consider that acceptance of paragraph 1 of the undertaking, which confined the coverage of the Agreement to work covered by the Metals Award, resulted in a significant change to the Agreement contrary to the requirement in s.190(3)(b) of the FW Act. It may be accepted that an undertaking which clarifies an ambiguous provision of an agreement for which approval is sought in accordance with the intention of the parties will not be likely to cause a significant change in that agreement. However, this was not a case of ambiguity. The breadth of the classifications in the Agreement, and the geographical scope of its coverage, made it apparent that it had application beyond work covered by the Metals Award. The first Full Bench made a clear finding to that effect in the Appeal Decision with which we agree.

[35] The scope of coverage of an enterprise agreement is one of its fundamental features. The coverage provision of an agreement serves to identify the class of persons who will be entitled to its benefits while it is in operation. The importance of an agreement’s coverage is signified by the fact that, under the FW Act, s.186(3) requires the group of employees covered by the agreement to be fairly chosen. For that reason an undertaking which purports to alter the coverage of an enterprise agreement by excluding classes of persons who, on the face of the agreement, would be covered by it, will always be likely to be a significant change.”

[24] That passage is not applicable here. Main People was concerned with an undertaking which would exclude classes of employees from the coverage as provided for in the agreement in question from the moment it took operation. Here, an undertaking to remove or treat of no effect the final paragraph of clause 3.3 of the Agreement would not exclude anyone from the coverage of the Agreement, but would merely remove a method by which CPB and a subset of employees could at some future time opt out of the coverage of the Agreement. We consider such an undertaking to be capable of acceptance under s 190(3)(b). We consider that the appropriate course is to quash the Decision and remit the application for approval of the Agreement to a single member for rehearing, at which CPB will have the opportunity to offer an undertaking of the type accepted in the TR Constructions matter.

[25] The CFMMEU in its seventh ground of appeal also contended that s 180(5) of the FW Act could not have been complied with in relation to the final paragraph of clause 3.3 because it may be presumed that CPB did not inform employees prior to them voting to approve the Agreement that the provision was ineffective and unenforceable. Section 180(5) provides:

(5)  The employer must take all reasonable steps to ensure that:

(a)  the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and

(b)  the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.

[26] Compliance with s 180(5) is necessary in order for a non-greenfields agreement to be approved because s 186(2)(a) requires that the Commission be satisfied that “the agreement has been genuinely agreed to by the employees covered by the agreement”, and s 188(a) requires the Commission to be satisfied that the employer has complied with, among other things, s 180(5) in order for there to have been the requisite genuine agreement.

[27] The difficulty here is that because the CFMMEU was not heard at first instance, and the issue of the final paragraph of clause 3.3 was as a result not raised in the proceedings before the Commissioner, there is simply a lack of evidentiary material as to what, if anything, was explained to employees concerning clause 3.3 beyond some generic statements to be found in paragraph [2.6] of the statutory declaration made in support of the application for approval of the Agreement. We are not prepared to presume, in the absence of any such evidentiary material, that clause 180(5) was not complied with. This is an issue which may be the subject of further attention and, if necessary, evidence, at the rehearing of the application for approval of the Agreement. The same conclusions equally apply to the other bases upon which the CFMMEU contends s 180(5) was not complied with in its seventh ground of appeal. Accordingly we will refuse permission to appeal in relation to the seventh ground of appeal.

[28] In its fifth ground of appeal, the CFMMEU also contends that the presence in the Agreement of the legally ineffective final paragraph of clause 3.3 meant that the Commissioner could not have been satisfied that the relevant employees genuinely agreed to the Agreement by reference to s 188(c). Section 188(c) provides that a necessary element of such genuine agreement is that the Commission is satisfied that “there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees”. Again, there was a lack of evidentiary material before the Commissioner addressing this issue because it was not raised before him. It would not be fair, we consider, to conclude that s 188(c) was incapable of satisfaction in circumstances where CPB has not been afforded a proper opportunity to address that issue. The same conclusion applies to the other grounds upon which the CFMMEU contends that there could not have been satisfaction in relation to s 188(c). These are, again, matters which may be the subject of further attention at the rehearing. We consider that permission to appeal should be refused in relation to the fifth ground of appeal.

[29] In relation to the ninth ground of appeal, we consider the Commissioner’s acceptance of the undertaking concerning clause 9 of the Agreement constituted appealable error, and that permission to appeal should be granted and the appeal upheld in respect of this ground. We have earlier set out clause 9 of the Agreement in full. The clause is very similar in effect to clause 21 of the Manufacturing and Associated Industries and Occupations Award 2010, which provides:

21. Abandonment of employment

21.1 The absence of an employee from work for a continuous period exceeding three working days without the consent of the employer and without notification to the employer is prima facie evidence that the employee has abandoned their employment.

21.2 If within a period of 14 days from their last attendance at work or the date of their last absence in respect of which notification has been given or consent has been granted an employee has not established to the satisfaction of their employer that they were absent for reasonable cause, the employee is deemed to have abandoned their employment.

21.3 Termination of employment by abandonment in accordance with clause 21—Abandonment of employment operates as from the date of the last attendance at work or the last day’s absence in respect of which consent was granted, or the date of the last absence in respect of which notification was given to the employer, whichever is the later.

[30] Clause 21 of the Manufacturing Award has been the subject of extensive consideration in the Full Bench decisions in Boguslaw Bienias v Iplex Pipelines Australia Pty Limited 10 and 4 yearly review of modern awards - Abandonment of Employment.11 In the former decision, the Full Bench determined that clause 21, properly construed, did not bring about the automatic termination of employment in the circumstances described, but rather still required an act of the employer to bring the about the termination of the employee’s employment.12 In the latter decision, the Full Bench determined that clause 21 suffered from a number of difficulties in respect of the FW Act. Relevantly, the Full Bench held that clause 21 operated to exclude the NES, contrary to s 55, in two ways:

[31] We consider that the same conclusions are applicable to clause 9 of the Agreement here. Accordingly clause 9 as it appears in the Agreement excludes the NES contrary to s 55(1). Under s 186(2)(c), in order for an agreement to be approved, the Commission must be satisfied that the terms of the agreement do not contravene s 55. An agreement with clause 9 in it was therefore incapable of approval under the FW Act.

[32] The second undertaking accepted by the Commissioner appropriately addressed the first s 55 difficulty identified in the Abandonment of Employment decision. However it did not address the second difficulty, with the result that clause 9 remained in contravention of s 55(1). This may be addressed at the rehearing by the provision of a further undertaking in appropriate terms.

[33] We have determined to refuse permission to appeal in relation to the other grounds of appeal, for the following reasons:

Conclusion

[34] We order as follows:

scription: Seal of the Fair Work Commission with the member's signature.

VICE PRESIDENT

Appearances:

B. Rauf of counsel on behalf of CPB Contractors Pty Ltd

P. Boncardo of counsel on behalf of the Construction, Forestry, Mining, Maritime and Energy Union

Hearing details:

2018.

Sydney:

25 June.

Printed by authority of the Commonwealth Government Printer

<PR700376>

 1   [2018] FWCA 2580

 2   [2018] FWC 1796

 3   The grounds of appeal were misnumbered in the CFMMEU’s further amended notice of appeal. In this decision, we shall refer to the grounds of appeal by the numbering we have set out.

 4   [2015] FCAFC 16, 228 FCR 297

 5   [2017] HCA 53

 6   [2015] FCAFC 16, 228 FCR 297

 7   [2017] FWCFB 1928

 8   [2018] FWCA 3485

 9   [2015] FWCFB 4467; (2015) 252 IR 340

 10   [2017] FWCFB 38, 266 IR 11

 11   [2018] FWCFB 139

 12   [2017] FWCFB 38, 266 IR 11 at [36]-[43]

 13   [2018] FWCFB 139 at [27]-[30]