DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Mechanical Maintenance Solutions Pty Ltd
(AG2018/1899)

MMS LATROBE VALLEY ENTERPRISE AGREEMENT 2018

Application for approval of the MMS Latrobe Valley Enterprise Agreement 2018.

[1] On 2 October 2019, I decided that I was not satisfied the MMS Latrobe Valley Enterprise Agreement 2018 (the Agreement) had been genuinely agreed. 1 The background to the matter is set out in my earlier Decision.2

[2] Undertakings as well as further submissions and a fourth witness statement of Ryan Murphy have been received in response to the concern. I expressed a preliminary view on 25 November 2019 that the opportunity for parties to lead evidence in relation to the application has now passed. I confirm that view. The fourth witness statement of Mr Murphy is not admitted.

[3] The question is whether, having regard to the materials now before me, I am satisfied that the Agreement has been genuinely agreed such that the Agreement must be approved.

What is the scope of the deficiency?

[4] The Decision of 2 October 2019 sets out my concern that Mechanical Maintenance Solutions had not taken all reasonable steps to ensure the explanation given to employees under section 180(5) was adequate. In summary, I held:

1. It was a material omission that there was no discussion with employees about how the Agreement would displace the various instruments incorporated by reference in two existing greenfields agreements.

2. Given the omission, I was not satisfied that employees were put in a position to fully appreciate the effect on their existing conditions of employment in voting to approve the Agreement.

[5] The Agreement displaces the Mechanical Maintenance Solutions Pty Ltd (MMS) Latrobe Valley (Victoria) Power Industry Electrical (ETU) Greenfields Enterprise Agreement 2013. 3 The Greenfields Electrical Agreement incorporates the terms of the Electrical, Electronic and Communications Contracting Award 2010, except in relation to the model dispute resolution, award flexibility and consultation terms. To the extent that there is an inconsistency between the two, the Greenfields Electrical Agreement prevails over the incorporated award term.

[6] The Agreement also displaces the the Mechanical Maintenance Solutions P/L (MMS) Latrobe Valley Power Stations (AMWU and CFMEU) Greenfields Enterprise Bargaining Agreement 2012-2016 4. It is instructive to set out clause 5 of the Greenfields Manufacturing Agreement in full:

“5 RELATIONSHIP BETWEEN PARTS 1 AND 2

5.1 The provisions of the Metal, Engineering and Associated Industries Award 1998 - Part I - Metal, Engineering and Associated Industries Employees (the "Award"); Metal, Engineering and Associated Industries Award 1998 - Part IV Long Service Leave and the Metal, Engineering and Associated Industries (Accident Pay, Victoria) Award 1998 (together, "the Awards"), as they stood on 1 March 2006 are incorporated into this Agreement. Where there is any inconsistency between an express provision of this Agreement and a provision in the Awards, the provisions of this Agreement shall prevail to the extent of any inconsistency. Further, existing over award payments and conditions of employment shall continue to apply except where the terms of this Agreement expressly provide otherwise. This clause shall not operate so as to reduce wages or conditions of employees.

5.2 The Terms of the Manufacturing and Associated Industries and Occupations Award 2010, or its successor award(s) ("Award"), as varied from time to time, are incorporated into this Agreement. However, variations to the Award that are detrimental to the employees covered by this Agreement will not be incorporated.

5.3 Other than expressly provided for in this Agreement, any facilitative arrangements or Award flexibility clause in the Award shall not be used.

5.4 The Metal, Engineering and Associated Industries (Accident Pay, Victoria) Award 1998, Metal, Engineering and Associated Industries (Superannuation) Award 2000 (together, varied after this date in a manner beneficial to employees, in which case the beneficial variations supersede what applied on 1 March 2006, are hereby incorporated into this Agreement.

5.5 In this Agreement, references to the Award shall mean the Award as incorporated into the Agreement unless the context requires otherwise.

5.6 Upon incorporating Award terms into the Agreement the incorporated Award terms are to be read as altered with the appropriate changes to make them provisions of the Agreement rather than provisions of an award. So, for example, the loadings, penalties and allowances in the Award apply to the rates of pay due under the Agreement, not the Award rate.

5.7 Further, existing over Agreement payments and conditions of employment will continue to apply unless varied by this Agreement.”

[7] Mechanical Maintenance Solutions says that only a small number of Award terms and conditions were actually incorporated by the greenfields agreements and not explained in making the Agreement. It says the net effect of express exclusions, direct inconsistencies, more favourable terms in the greenfields agreements, terms irrelevant to the voting group and overlap between modern awards is that the only matters not actually explained were:

1. (arguably) a small number of mostly irrelevant allowances; and

2. accident pay.

[8] It says the overlap between the Electrical and Manufacturing Awards negated the need to explain terms of the Electrical Award which would be displaced.

[9] A comprehensive analysis of how terms and conditions are likely to be affected by the Agreement was provided by Mechanical Maintenance Solutions. The unions provided some additional analysis of their own.

Displaced terms of the Electrical, Electronic and Communications Contracting Award 2010

[10] The fact that employees who voted for the Agreement had no direct connection to work covered by the Greenfields Electrical Agreement does not mean an explanation about the effect of the Agreement on its terms was unnecessary. Employees were voting both for themselves and with an eye to the position of future employees who will be covered by the Agreement, including those undertaking electrical work.

[11] That said, there is substantial similarity between the Electrical and Manufacturing Awards. To the extent that terms of the Manufacturing Award were adequately explained to employees, little turns on the absence of an explanation in relation to equivalent terms in the Electrical Award. The differences between the two modern awards are more significant in terms of what was explained to employees.

[12] Terms of the Electrical Award that are less beneficial than the Manufacturing Award are set out in the table below. For these terms, the absence of explanation is of limited significance because more beneficial terms in the Manufacturing Award were explained and it was those terms against which the Agreement was benchmarked. In other words, there is no detriment to employees if the terms and conditions that will apply to them under the Agreement are more beneficial than the terms and conditions they stand to lose. The position effectively “renders moot the omission”. 5

[13] The table below sets out terms of the Electrical Award that are more beneficial than the Manufacturing Award. For these terms, it is important to consider what the Agreement provides – also set out below.

[14] As can be seen, the Agreement deals with many of the displaced terms of the Electrical Award in an equivalent or more beneficial way. However, in three respects, it does not – in relation to maximum 8 hour shifts for continuous shiftworkers; notice of annual shutdown and minimum shutdown periods; and the taking of annual leave over extended periods by agreement. The restriction on shift lengths to 8 hours can be put to one side because it was displaced by clause 18.5.5 of the Greenfields Electrical Agreement which permits shifts of more than 8 hours. The remaining three terms had continuing operation under the Greenfields Electrical Agreement.

[15] The undertakings given by Mechanical Maintenance Solutions would revive these terms to the extent that they are not inconsistent with the Agreement and in doing so, would overcome the absence of explanation of such detriments. The effect of the undertakings in each respect is likely to benefit employees. The confined nature of these issues means that the undertaking is not likely to result in substantial changes to the Agreement.

[16] There are also industry specific terms in the Electrical Award that are necessarily different from terms in the Manufacturing Award, including the classification structure and relevant apprentice qualifications, training packages and conditions. There is some overlap in default superannuation funds but the list in each case is mostly different. The Agreement has its own classification structure and is directly inconsistent with each of the modern awards in this respect. The Agreement does not deal in detail with apprenticeship arrangements except in relation to rates of pay. These are matters regulated comprehensively at the State and Territory level and in relation to allowances, are addressed by an undertaking given by Mechanical Maintenance Solutions. The Agreement nominates Cbus as the default superannuation fund which is also a default option under each of the modern awards. Employees otherwise have choice of fund under federal legislation. In my view, the likely effect of the Agreement in relation to superannuation was adequately explained to employees and did not fall within the scope of what I have otherwise found to be a material omission in the explanation provided.

Displaced terms of Part I of the Metal, Engineering and Associated Industries Award 1998

[17] This pre-reform award contains a number of terms that are inconsistent with the Greenfields Manufacturing Agreement either partially or in whole. Many of those terms are dealt with in the greenfields agreement in a way that seeks to ‘cover the field’ – such as in relation to leave entitlements under the National Employment Standards which are also incorporated as terms of the Agreement. In my view, these terms do not have continuing operation under the greenfields agreement.

[18] Putting those matters aside, terms of the pre-reform award that appear to operate as terms of the Greenfields Manufacturing Agreement are as follows:

[19] The Construction, Forestry, Maritime, Mining and Energy Union also submits that clauses 7.1.7-7.1.10 of the pre-reform award dealing with annual leave have continuing operation. Clause 7.1.7 provides for annual leave to be taken in one or more separate periods, including at least one seven consecutive day block each year. Clause 7.1.8 requires annual leave to be taken rather than cashed out. Clause 7.1.9 gives employers the right to fix the time of taking annual leave within six months of accrual and the right to direct the taking of leave with four weeks’ notice. By agreement, leave can be taken within two years of accrual. Clause 7.1.10 provides for annual leave in advance.

[20] The Greenfields Manufacturing Agreement deals only briefly with annual leave other than by way of incorporation of the pre-reform award, the National Employment Standards and the Manufacturing Award (excepting variations to that award that are detrimental to employees 6). It is not intended to displace the Standards in a manner that is less beneficial to employees. Nor could it, because terms that exclude the Standards contravene section 55 of the Act and have no effect.7

[21] Clauses 7.1.7-7.1.8 of the pre-reform award appear to contravene section 55. Clause 7.1.7 excludes the Standards to the extent that it prevents Mechanical Maintenance Solutions and its employees from reaching agreement on the period of annual leave to be taken. Clause 7.1.8 prohibits the cashing out of annual leave, rather than “providing for” it. The term may not be one that can be included in an enterprise agreement.

[22] Clauses 7.1.9 is a term contemplated by the Standards, which permit enterprise agreements to include terms requiring an employee, or allowing for an employee to be required, to take paid annual leave in particular circumstances. Along with clause 7.1.10, however, it is arguably detrimental to employees compared to operative terms of the Manufacturing Award which more strictly regulate the taking of annual leave in advance and limit an employers’ capacity to direct the taking of annual leave. To the extent that clauses 7.1.9 and 7.1.10 can be said to operate concurrently with incorporated terms of the Manufacturing Award, it is likely that the more beneficial term for employees would prevail because the terms are likely to be construed as intended to operate beneficially for employees.

[23] In a similar vein, most of the matters set out in the table above are also dealt with in the Manufacturing Award. The issue of casual conversion is dealt with in the Manufacturing Award but in a less comprehensive way than clause 4.2.3(c)(ii) of the pre-reform award (which requires certain casual employees to be given information about the terms of their employment). For the reasons set out in my earlier Decision, I am satisfied that the effect of these terms was adequately explained to employees by virtue of the explanation in relation to the Manufacturing Award. It was not necessary to explain every word and subclause of the Manufacturing Award or the pre-reform award, but rather to take all reasonable steps to explain the terms and their effects. In relation to casual employment, the Agreement provides for employees to have a written contract of employment which will necessarily cover the range of information required by clause 4.2.3(c)(ii) of the pre-reform award. As far as standing to raise disputes, each of the relevant disputes procedures permits employees to have a representative of their choice while in dispute, consistent with the statutory scheme.

[24] Some pre-reform award terms set out in the table are not dealt with in the Manufacturing Award but relate to subject matter now regulated by legislation independently of the modern award system, including anti-discrimination, stand down, continuity of service and minimum employment periods. I do not accept the submission of the Construction, Forestry, Maritime, Mining and Energy Union that displacement of a 3 month probationary period in the pre-reform award is a relevant detriment to employees. A more favourable minimum employment period of at least 6 months now applies after which employees have access to the unfair dismissal regime and continuity of service is preserved by section 22 of the Act. Notice of termination is not affected by the length of a probationary period. In circumstances where historical award terms may have technically been displaced but are now separately dealt with in legislation, the effect of the omission is negligible.

[25] What remains of Part I of the pre-reform award is a handful of definitions specific to the pre-reform award, the obligation to ensure a notice board is available for union use, consultation obligations where redundancies are contemplated, a dispute arises and there are 15 or more employees, as well as a commitment to training. These fall in the category of minutiae in the context of what is reasonably necessary to explain to employees. An undertaking has been given in relation to provision of a union notice board. At the time the Agreement was made, there were only five employees and the additional redundancy consultation obligation did not arise. While there is no express commitment to training in the Agreement, it is implied through the obligation it places in clause 2 on employees to participate in required training and through a commitment to reimburse training costs.

Part IV of the Metal, Engineering and Associated Industries Award 1998 (long service leave)

[26] Part IV of the pre-reform award provides an entitlement to long service leave including the amount of leave, how to calculate service and when leave can be given and taken. The Greenfields Manufacturing Agreement displaces Part IV in favour of contributions to CoInvest, which are to be paid at a prescribed rate of pay with other service-related accruals to continue during the period of leave. The greenfields agreement also operates subject to state long service leave legislation including the Victorian Construction Industry Long Service Leave Act 1997 8 which requires employers to provide for long service leave through contributions to CoInvest. The legislative scheme includes rules in relation to continuous service and specifically in relation to stand down due to slackness of trade. In my view, Part IV of the pre-reform award has no continuing operation through the Greenfields Manufacturing Agreement.

[27] The Agreement similarly provides for long service leave “under and subject to” applicable legislation, which would encompass the CoInvest-related obligations described above. In those circumstances, the failure to explain the effect of the Agreement to employees did not extend to a failure to explain its effect in relation to long service leave or specifically in relation to Part IV of the pre-reform award.

Metal, Engineering and Associated Industries (Accident Pay, Victoria) Award 1998

[28] This former federal award confers an entitlement to accident pay on employees. There is no equivalent provision in the Agreement or either modern award except in relation to machinery terms such as the disputes procedure. If accepted, an undertaking given by Mechanical Maintenance Solutions will ensure employees who otherwise stand to lose an entitlement to accident pay under the Agreement will have that entitlement maintained. In other words, it cures the potential for detriment to employees in relation to accident pay.

Metal, Engineering and Associated Industries (Superannuation) Award 2000

[29] This former federal award deals with superannuation including by:

•  defining “ordinary time earnings”;

•  providing for voluntary employee contributions;

•  nominating relevant superannuation funds; and

•  maintaining superannuation contributions during certain absences from work.

[30] Ordinary time earnings is defined in the Greenfields Manufacturing Agreement. The definition displaces that contained in the former federal award.

[31] Voluntary employee contribution terms are largely machinery in nature. Some are potentially capable of operating concurrently with the Greenfields Manufacturing Agreement, such as the requirement for contributions to be expressed in whole dollars, but for the most part terms of the former federal award are displaced by express provision that “any employee voluntary contribution shall be in accordance with the funds scheme’s Trust Deed and the company’s policy.”

[32] The Greenfields Manufacturing Agreement requires superannuation contributions to be made to Cbus. To this extent, it is directly inconsistent with and displaces the former federal award.

[33] Terms dealing with whether superannuation is payable during unpaid leave and work-related injury or illness are similar in each instrument except that the Greenfields Manufacturing Agreement is more favourable to employees. To the extent that there is direct inconsistency between the two instruments, the Greenfields Manufacturing Agreement prevails and the former federal award is displaced.

[34] In summary, the former federal award is largely displaced by the Greenfields Manufacturing Agreement in relation to superannuation contributions. To the extent that it remains operative at all, it is in matters of such minutiae that the differences were not reasonably necessary to explain. In any event, the Agreement also deals with superannuation. Cbus is the default fund and employees also have choice of fund. The Agreement allows for salary sacrifice in accordance with Australian Taxation Office requirements. Each of these matters were adequately explained to employees. 9

Existing over award payments and conditions of employment

[35] The Greenfields Manufacturing Agreement contains a ‘catch all’ term preserving existing “over Agreement payments and conditions of employment” except those varied by its terms. The Agreement preserves existing over conditions of employment in relation to meal and rest breaks at clause 4.12.5 and this was explained to employees in making the Agreement. It does not otherwise preserve unspecified “over conditions of employment”.

[36] No party has identified any additional work that the Greenfields Manufacturing Agreement has to do in this respect. In those circumstances, my concern about the failure of explanation in relation to the Agreement does not extend to matters about which I have no information.

Is the deficiency capable of remedy under section 188(2)?

[37] Section 188(2) of the Act allows the Commission to be satisfied that an enterprise agreement has been genuinely agreed despite certain minor procedural or technical errors or failures in relation to the notice of employee representational rights as long as employees were not likely to have been disadvantaged by the errors.

[38] In this case, the failure to explain the effect of the Agreement in relation to each of the matters identified above cannot fairly be characterised as a minor procedural or technical error or one that is not likely to disadvantage employees. The failure was procedural but as I noted in my earlier Decision, it was a material omission. Left alone, it would mean employees no longer had access to certain entitlements in circumstances that were not explained, most significantly in relation to accident pay and allowances. The deficiency is not within the scope of section 188(2). The question is whether undertakings can be given to remedy the concern.

Undertakings

[39] A Full Bench of the Commission has recently clarified that undertakings can be accepted in appropriate cases to deal with a concern about whether an enterprise agreement has been genuinely agreed. 10 In this case, undertakings have been given in a bid to remedy the failure to explain that certain employee entitlements would be displaced by the Agreement.

[40] The undertakings have the protective purpose of ensuring that employees are not disadvantaged by the failure to adequately explain the relationship between the Agreement and the instruments it will displace. I have already found that employees will be better off overall under the Agreement than the modern award by a significant margin. The undertakings will enhance, rather than detract from, this position. Except in relation to the nominal expiry date (which meets a separate statutory condition), each of the undertakings will operate to the benefit of employees and will have the result that the detriments which required explanation no longer exist. For these reasons, the undertakings resolve my concern about the failure to explain the effect of the Agreement in relation to the Electrical Award and incorporated terms of the Greenfields Manufacturing Agreement. I am satisfied that the effect of accepting the undertakings is not likely to cause financial detriment to any relevant employee.

[41] As to whether the effect of accepting the undertaking is likely to result in substantial changes to the Agreement, I am satisfied that the answer is no. The matters to be preserved by way of undertakings have been identified with certainty because of the extensive analysis that has now been undertaken of what remains of the incorporated agreement terms discussed above. The subject matter of the undertakings is confined in nature to matters of detail that supplement existing terms of the Agreement and as I have said, overwhelmingly for the benefit of employees. The Agreement remains substantially as it was when it was made.

Conclusion and disposition

[42] The undertakings attached at Annexure A are accepted. With these undertakings, and for the reasons set out both above and in my earlier Decision, I am satisfied that each of the requirements of the Act conditioning the power to approve the Agreement are met.

[43] The signature page of the Agreement is amended under section 586 to remove the words “bargaining repersentative” from the “Authority to Sign” section of Mr Silvester’s signature block and replace them with the word “employee”.

[44] The Agreement is approved and will operate from 20 December 2019. The nominal expiry date of the Agreement is 12 December 2023.

COMMISSIONER

Appearances:

M Follett for Mechanical Maintenance Solutions.

D Vroland for the Construction, Forestry, Maritime, Mining and Energy Union.

J Liley and S Riches for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia.

R Wainwright for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).

Hearing details:

2019.

Melbourne:

August 13;

November 25.

<AE506490  PR715291>

Annexure A

 1   Mechanical Maintenance Solutions Pty Ltd [2019] FWC 6801.

 2   [2019] FWC 6801.

 3   AE404396.

 4   AE404438.

 5   Construction, Forestry, Maritime, Mining and Energy Union & Ors v Specialist People Pty Ltd [2019] FWCFB 7919, [23].

 6   See Mechanical Maintenance Solutions P/L (MMS) Latrobe Valley Power Stations (AMWU and CFMEU) Greenfields Enterprise Bargaining Agreement 2012-2016, cl.5.2.

 7   Fair Work Act 2009, s.56.

 8   See Fair Work Act 2009, s.29.

 9   [2019] FWC 6801.

 10   [2019] FWCFB 7919.