DECISION

Fair Work Act 2009
s.604—Appeal of decision

The Australian Maritime Officers’ Union and The Australian Institute of Marine and Power Engineers
v
ASP Ship Management Pty Ltd
(C2019/7616)

Appeal against decision [[2019] FWCA 7847] of Commissioner McKinnon at Melbourne on 22 November 2019 in matter number AG2019/2974.

Introduction and background

[1] The Australian Maritime Officers’ Union and The Australian Institute of Marine and Power Engineers (unions) have lodged an appeal, for which permission to appeal is required, against a decision issued by Commissioner McKinnon on 22 November 2019 1 (decision). In the decision, the Commissioner approved the ASP Ship Management/RTM Officers Enterprise Agreement 2017 (Agreement) on the basis of undertakings accepted pursuant to s 190 of the Fair Work Act 2009 (FW Act). The unions contend that the Commissioner erred in accepting an undertaking that clause 13.4, Compensation for Medical Inability to Revalidate Certificate of the Agreement would be of no force or effect (undertaking). The applicant for approval of the Agreement, ASP Ship Management Pty Ltd (ASP) proposed the undertaking in response to a foreshadowed finding by the Commissioner, which was ultimately made in the decision, that clause 13.4 was an unlawful term pursuant to s 194(a) of the FW Act on the basis that it was a discriminatory term as defined by s 195 of the FW Act.

[2] Clause 13.4 has the effect of facilitating the payment of a one-off amount of compensation to employees unable to continue working for ASP or in the commercial seagoing industry because of an incapacity to obtain revalidation of their certificate of competency as required under the Navigation Act 2012 (Cth), rendering them unfit to work at sea. Clause 13.4 provides:

Compensation for Medical Inability to Revalidate Certificate

13.4.1 An officer who is unable to carry out the duties required by the Employer because he/she has been refused revalidation of his/her certificate of competency by the appropriate authority because of failure on examination to comply with the medical requirements prescribed by the Navigation Act 2012 or any Regulations or Orders may thereunder and has failed to satisfy the appropriate authority that he/she can, notwithstanding his/her inability to comply with such medical requirements, satisfactorily perform the duties appropriate to the certificate in question or any certificate then held and who:

● Is found by further independent medical examination to be permanently unable to carry out the said duties and to revalidate a certificate of competency; or

● Is found by further independent medical examination to comply with the said medical requirements and/or to be capable of carrying out the said duties but is still unable to satisfy the appropriate authority or revalidate his/her certificate;

shall be entitled to compensation in the manner and on the conditions herein prescribed.

13.4.2 Subject to clauses 13.4.3, 14.4.4 and 13.4.5 hereof, an officer to whom sub-clause 13.4.1 applies shall be entitled to receive on the termination of his/her employment under this agreement, a payment at his/her graded rate or, where the individual has been on higher serving rate(s) for at least 12 continuous months immediately prior, the serving rate appropriate to his/her then age in accordance with the following table:

13.4.3 Board of Administrators

This Loss of Certificate Compensation Scheme shall be administered by a Board of Administrators composed of one representative of the employee (should the employee choose one) and one representative of the Company and a Chairman, appointed by them jointly. The Board shall decide in each and every case the application of this compensation for Loss of Certificate Scheme and the extent of any benefits applicable. The Board shall meet as required. Should a representative decide that a meeting is necessary, then the Chairman is to be informed and he/she shall then convene such meeting. The Board shall not have the power to alter any provision of this Loss of Certificate Compensation Scheme.

13.4.4 Where an officer suffers an illness or injury entitling him/her to any compensation, damages or other benefits (called “benefits”) from his/her Employer and/or any third party under any applicable legislation (whether Federal or State) and/or at common law and/or equity and/or under any contract, deed or other arrangement but not including any superannuation pension or like deed scheme or arrangement and such benefits include a component referable to loss of earnings, then the value of that component shall be deducted from the amount payable to the officer under subclause 13.4.2 hereof. The Board of Administrators shall value the amount of any such component so to be taken into account.

The Board in determining the entitlement to benefit and the amount of any payment under sub-clause 13.4.2 shall take into account all relevant circumstances provided however that the Board shall not take into account:

• Resignation benefits including withdrawal benefits;

• Benefits for total and permanent incapacity;

• Benefits for retirement on age grounds including early retirement; or

• Benefits covering the foregoing concepts however defined; under any superannuation, pension or like scheme.

13.4.5 An officer shall not be entitled to the benefit of sub-clause 13.4.2 hereof where: a) He/she dies;

b) His/her failure to comply with the prescribed medical requirement arises from anyone of the following:

• Self-inflicted or self-induce illness or injury; or

• An illness or injury suffered whilst he/she is voluntarily involved in or in connection with any activity for financial reward or gain or which unnecessarily subjects him/her to risk of injury and which activity is substantially unrelated to his/her employment under this agreement;

c) He/she is offered reasonably suitable alternative employment provided however that the Board may in any such case notwithstanding that it decides that such employment has been offered and that it has been accepted by the employee defer for a period of twelve months from the date of acceptance of the employment any question of entitlement to compensation under this Scheme. If, after discussion with his/her Employer, the officer decides that the alternative employment offered is not reasonably suitable, the matter shall be referred to the Board for resolution.

13.4.6 An officer shall not be entitled to receive the benefits under this clause more than once. For the purposes of this sub-clause:

‘Officer’ shall mean and include a person currently employed under this Agreement other than an officer engaged in a temporary or relieving capacity only.

‘Illness or injury’ shall include but not be limited to a disease, disability, disorder or incapacity.

[3] The statutory framework in which the decision was made is as follows. Section 186(1) of the FW Act establishes a “basic rule” that the Commission must approve an enterprise agreement for which an application for approval has been made if the requirements in ss 186 and 187 are met. One of those requirements, in s 186(4), is that the Commission must be satisfied that the agreement does not include any “unlawful terms”. Section 194(a) provides, relevantly, that a term of an enterprise agreement is an unlawful term if it is a “discriminatory term”. Section 195(1) defines “discriminatory term” in the following way:

Discriminatory term

(1)  A term of an enterprise agreement is a discriminatory term to the extent that it discriminates against an employee covered by the agreement because of, or for reasons including, the employee's race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin.”

[4] Section 195(2) and (3) provide that certain specified types of terms are not discriminatory (notwithstanding the definition in s 195(1)). The only one of these exceptions which is potentially relevant to this appeal is s 195(2)(a), which provides that a term of an enterprise agreement does not discriminate against an employee “if the reason for the discrimination is the inherent requirements of the particular position concerned”.

[5] Section 253(1)(b) provides that a term of an enterprise agreement has no effect to the extent that it is an unlawful term.

[6] Section 190 provides that if the Commission has a concern that any approval requirement in ss 186 or 187 (including that in s 186(4)) is not met, it may nonetheless approve the agreement with undertakings that address the concern. The section relevantly provides:

190 FWC may approve an enterprise agreement with undertakings

Application of this section

(1)  This section applies if:

(a) an application for the approval of an enterprise agreement has been made under subsection 182(4) or section 185; and

(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings

(2)  The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.

Undertakings

(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; or

(b)  result in substantial changes to the agreement.

. . .

[7] Section 191 provides that where an enterprise agreement is approved with an undertaking, the undertaking is taken to be a term of the agreement.

The decision

[8] In the decision the Commissioner first briefly reviewed the industrial history underlying clause 13.4 of the Agreement as follows:

“[3] The arrangement has a long history in the maritime industry. It emerged at a time when both airline pilots and maritime officers were facing the introduction of new health testing regimes as a condition of continuing employment.

[4] Early iterations of the arrangement were found in the Maritime Industry Seagoing Award 1981 Compensation for Loss of Certificate of Competency Agreement and later in the Shipping Industry Loss of Certificate of Competency Award 2003, one year before the federal Age Discrimination Act 2004 (Cth) became law. The 2003 Award was terminated in 2011. There is no equivalent provision in the Seagoing Industry Award 2010 but arrangements of this kind are commonly found in maritime industry enterprise agreements. The purpose is to provide financial support for seafarers who are no longer fit to work at sea, having regard to loss of earning capacity and propensity for retraining.”

[9] The Commissioner then summarised the prerequisites for compensation under clause 13.4 and said “The amount of compensation depends on the age of the person...”. 2 The Commissioner then set out the principles identified in the Full Bench decision in Budd v Australian Federal Police3 in respect of the identification of direct discrimination. The Commissioner then said:

“[10] In applying this approach to clause 13.4, it is illustrative to consider the position of two employees covered by the Agreement who are 29 and 30 years of age. Each has the same medical condition and is unable to obtain their certificate of competency on medical grounds. Each has been approved for compensation under clause 13.4. The employee who is 29 years old is entitled to three months more compensation than the 30 year old employee, even if the age difference between them is a single day. In other words, the 30 year old employee receives less favourable treatment than the 29 year old employee under the Agreement. The difference arises solely by reason of their age because under the Agreement, the amount of compensation is determined by age.

[11] A similar scenario would play out across a range of age groups under the Agreement, where two employees who otherwise share the same attributes are required to be treated differently under the Agreement – one less favourably than the other – because of their age.

[12] There is a relationship between the inherent requirements of the position and the discrimination found in clause 13.4, because the compensation scheme only operates where an employee can no longer gain their certificate of competency which is an inherent requirement for seafarers. However, inability to achieve a certificate of competency is not the reason for the discrimination found in clause 13.4. The reason for discrimination is the age of the person concerned.

[13] In my view, clause 13.4 discriminates against employees on the basis of age. None of the exemptions in section 195 apply.”

[10] The Commissioner then turned to the question of whether the discriminatory effect she had identified in clause 13.4 was appropriate to a relevant difference. In this respect the Commissioner said:

“[14] ... I am not persuaded that there is any relevant difference here that would make different treatment based on age appropriate, accepting of course that there will invariably be differences in the cases which come under clause 13.4 for consideration. There is, for example, no statistically likely scenario that would help explain why age alone is an appropriate discrimen. The need for compensation in a particular case will depend on a range of matters, including the characteristics of the individual, their support network and their environment.

[15] If the purpose of compensation under clause 13.4 was directly related to the age of the beneficiary group, one might expect some common or likely characteristic of the group to emerge such that age discrimination could be said to be appropriate. However, the purpose of the provision is to support employed seafarers of any age who are affected by loss of competency. It is not because of, or for reasons generally pertaining to, a certain age or age group that some seafarers may gain access to the entitlement where others would not. Age is a secondary consideration, determinative only of the value of the benefit conferred.

[16] There are a range of medical conditions that might render a person unfit to work at sea, from serious cardiac conditions to asthma and hepatitis. Many such conditions would not prevent a person from engaging in meaningful employment in a different environment. As the Australian Maritime Officers’ Union submits, seafarers are often required to work at sea for long periods in confined settings, with limited access to medical attention. Their relative isolation means they must be capable of responding to emergencies at sea. While not unique to the maritime environment, these are features and expectations of work that do not pertain to all or even most Australian workplaces.

[17] In a similar vein to what might be considered appropriate discrimination, section 33 of the Age Discrimination Act 2004 deals with positive discrimination. This protected form of discrimination is defined as an act that provides a bona fide benefit to persons of a particular age, or one that is intended to meet a need that arises out of the age of persons of a particular age, or that is intended to reduce disadvantage experienced by people of a particular age. The legislative example given in the latter regard is of additional notice of termination on retrenchment for older workers, which is intended to reduce the disadvantage older people are more likely to experience in finding alternative employment.

[18] As discussed above, the discrimination in clause 13.4 affects employees across ages – from under 30 to over 60. It is not targeted at a particular demographic because of characteristics that are likely to pertain to that group. To the extent that it might be said to be akin to a longer period of notice for older workers, the mechanism in clause 13.4 is the opposite - it provides a benefit that reduces with age.”

[11] The Commissioner concluded on the basis of the above reasoning that she was not satisfied that clause 13.4 manifested positive discrimination or discrimination that was appropriate to a relevant difference. 4 The Commissioner then went on conclude that the discrimination was not reasonable in the circumstances5 and was not covered by a relevant exemption in s 195(2) or (3).6

[12] Finally, the Commissioner considered whether the discrimination could be cured by an undertaking. The Commissioner first found that the undertaking proposed by ASP would not be likely to result in substantial changes to the Agreement. 7 Then, in considering whether the undertaking would be likely to cause financial detriment to employees, the Commissioner rejected the proposition that this consideration could be disregarded on the basis that claims for compensation under clause 13.4 were statistically unlikely, and said that the provision had to be taken to have some intended operative effect.8 However the Commissioner then said:

“[33] However, section 190(3) of the Act allows an undertaking to be accepted if I am satisfied that the effect of doing so is not likely to cause financial detriment to any employee covered by the Agreement. The unchallenged submission from ASP Ship Management is that only one employee has made a claim under clause 13.4 in the past 5.5 years. There is no evidence of any other pending or anticipated claims. There is no evidence of any employee who will, or is likely to, suffer financial detriment if the undertaking is accepted.

[34] So far as the limitation on accepting undertakings applies to the future circumstances of employees, section 253 of the Act renders clause 13.4 of no effect - with or without an undertaking that it will not apply. In those circumstances, the only effect of accepting the undertaking is to remove an impediment to approval because I can now be satisfied that the Agreement does not include unlawful terms.

[35] I am satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to an employee covered by the Agreement.”

Appeal grounds and submissions

[13] The unions’ amended notice of appeal contained three appeal grounds. Those grounds, and the submissions made in support of them, may be summarised as follows:

● the Commissioner erred in determining that clause 13.4 of the Agreement was an unlawful term for the purposes of s 194(a) of the FW Act on the basis that it was a discriminatory term under s 195 of the FW Act;

● the Commissioner erred in finding that clause 13.4 discriminated against any employee in circumstances where it conferred an entitlement not otherwise provided for in the National Employment Standards or the relevant modern award;

● in construing clause 13.4 of the Agreement, the Commissioner failed to hold that the clause provided for the discretionary payment of compensation to employees, and failed to take into account the purpose and object of the clause which was to provide compensation to seafarers who had lost the capacity to work in the seafaring industry;

● the Commissioner erred in failing to take into account that the clause 13.4’s conferral of different entitlements based on age was appropriate to a relevant difference, namely the greater potential loss of earnings from being unable to continue working in the industry on the part of younger seafarers as compared to older seafarers;

● the Commissioner’s analysis of clause 13.4 of the Agreement by reference to the provisions of the Age Discrimination Act 2004 (Cth) and the Equal Opportunity Act 2010 (Vic) was erroneous and deflected her from applying the words of s 195(1) of the FW Act;

● the Commissioner erred in construing and applying s 190(3)(a) of the FW Act by accepting an undertaking that clause 13.4 of the Agreement would have no force or effect in circumstances where the undertaking would likely cause financial detriment to employees covered by the Agreement;

● in the alternative, the Commissioner erred in accepting an undertaking that the entirety of clause 13.4 of the Agreement be “of no force and effect” when s 195(1) of the FW Act only applies to terms of enterprise agreements “to the extent” they discriminate against employees;

● the only aspect of clause 13.4 that was potentially discriminatory was the table in clause 13.4.2 and that the Commissioner failed to consider whether an undertaking could have ameliorated its potential discriminatory effect; and

● in assessing whether the undertaking would be likely to cause financial detriment, the Commissioner erred by taking into account that there were no extant claims without considering future claims by existing or prospective employees.

[14] ASP Ships supported the unions’ submission that clause 13.4 was not a discriminatory term under clause 13.4 and that the Commissioner erred in finding otherwise. In particular, it agreed with the submission that clause 13.4 was directed at compensating seafarers for the loss of a career and career earnings suffered by losing their Certificate of Competency, and that the loss of a younger seafarer in that connection would be greater than for an older seafarer. The sliding scale of compensation in clause 13.4, it submitted, was not an adverse distinction but rather a distinction appropriate to a relevant difference that is reasonable in the circumstances. Conversely, a scheme which gave the same benefit regardless of age would discriminate against younger seafarers, because they would receive a much lower benefit per year of their career loss than an old seafarer.

[15] ASP however opposed the unions’ appeal grounds and submissions relating to the Commissioner’s acceptance of the undertaking. The question of whether there was likelihood of financial detriment arising under s 190(3)(a) of the FW Act required the making of an evaluative judgment akin to the exercise of a discretion. No appealable error in the exercise of that discretion had been demonstrated, it was submitted, because the unlikelihood of a person making a claim, in circumstances where there had only been one claim in the last 5.5 years, was clearly relevant to the likelihood of financial detriment. Further, clause 13.4.2 was not severable from the rest of the clause, so it was not available to the Commissioner to accept an undertaking which only dealt with that part of the clause, nor could that part of the clause be rectified to the extent it was discriminatory without giving a disproportionate windfall to older seafarers.

Consideration

[16] We consider that the Commissioner erred in approving the Agreement with the undertaking because we do not consider that clause 13.4, properly characterised, is a discriminatory term within the meaning of s 195. The Commissioner reached the contrary conclusion on the basis of a narrow examination of clause 13.4.2 only without considering the clause as a whole and its purpose in the context of the statutory scheme applying to the certification of seafarers.

[17] Clause 3 of the Agreement, read together with clause 2, makes it clear that the Agreement covers employees of ASP who are members or are eligible to members of either of the unions who are employed on the vessels RTM Wakmatha, RTM Twarra, RTM Piiramu or RTM Weipa, or any other vessel agreed between the parties. To be employed to work on any of these vessels, an employee must hold a “seafarer certificate” issued by the Australian Maritime Safety Authority pursuant to s 31 of the Navigation Act. Under s 35 of that Act, it is an offence to perform duties or functions in relation to a “regulated Australian vessel” if the regulations require the person to hold a seafarer certificate and the person does not hold such a certificate. The expression “regulated Australian vessel” is defined in s 15 of the Navigation Act, and refers in summary to registered non-recreational vessels proceeding on any voyage beyond Australia’s exclusive economic zone. This encompasses most commercial vessels at sea. Marine Order 70, made pursuant to the Navigation Act, requires that all masters, deck officers, ratings, engineers, radio operators and marine cooks hold the relevant type of seafarer certificate. A person applying for or seeking revalidation of their seafarer certificate must hold a certificate of medical fitness issued in accordance with Marine Order 76.

[18] Any failure by an employee of ASP covered by the Agreement to obtain revalidation of their seafarer certificate for medical reasons therefore not only means that the person can no longer fulfil the duties of their employment with ASP, but also that the person for all intents and purposes cannot be employed in the commercial seagoing industry. Clause 13.4 is concerned with employees who are in that situation (noting that there is no dispute that the reference to a “certificate of competency” in the clause means a seafarer certificate under the Navigation Act) - that is, employees who as seafarers face the end of their career. Thus the purpose of the compensation for which clause 13.4 provides is necessarily directed to employees in the position so described.

[19] The Commissioner approached the clause on the basis that the sliding scale in clause 13.4.2 determines the amount of compensation that is payable to the employee, and her analysis of whether the clause was discriminatory proceeded on that basis. However that ignores the fact that clause 13.4.2 expressly states that it operates subject to clauses 13.4.3, 14.4.4 (sic, presumably meaning 13.4.4) and 13.4.5. Clause 13.4.3 provides that the compensation scheme is to be administered by a Board of Administrators which has the function to “decide in each and every case this application of the compensation for Loss of Certificate Scheme and the extent of any benefits applicable”. Clause 13.4.4 requires that, subject to certain exceptions, any compensation, damages or benefits for injury or illness must be valued by the Board and deducted from the amount payable under clause 13.4.2. Clause 13.4.5 disqualifies the employee from the benefits in clause 13.4.2 in specific situations, including where the relevant illness or injury is self-induced or self-inflicted or arises from remunerative or risky activity substantially unrelated to employment with ASP or where the employee is offered reasonably suitable alternative employment.

[20] We interpret the clause read as a whole to mean that the Board of Administrators is to determine the amount of compensation payable, if any, to any qualifying employee by starting with the amount payable under clause 13.4.2, deducting any amounts to which clause 13.4.4 refers, and then determining whether any of the disqualifying factors in clause 13.4.5 apply. Taken as a whole, this methodology has the readily-apparent purpose of fairly compensating the employee with the payment of an amount which is proportionate to the loss of a seagoing career suffered consequent upon the failure of the employee to obtain a revalidated seafarer certificate. Thus clause 13.4.4 has the evident purpose of avoiding double compensation being paid to the employee for the illness or injury which led to the loss of the seafarer certificate, and clause 13.4.5 prevents compensation being paid where the employee is substantially responsible for the illness or injury or has been offered alternative employment which would avoid monetary loss. The clause therefore does not operate in the mechanistic way described by the Commissioner in paragraph [10] of the decision.

[21] Once it is understood that clause 13.4 is concerned with fair compensation for the loss a seagoing career because of the lack of a seafarer certificate, the purpose of the sliding scale based on age in clause 13.4.2 becomes apparent. We accept the submissions of the unions and ASP that clause 13.4.2 contains a declining scale of compensation as the age of the employee increases because the older the employee, the shorter will be the period of the career lost. This rationale is evident in the mathematical construction of the scale. Assuming a career commencement at age 25 and a retirement age of 65, the scale provides (at each five-year increment) compensation of 0.6 months’ pay for each remaining year of the seagoing career which has been lost. Once this underlying logic is understood, it is clear that the clause is not discriminatory at all, but rather seeks to treat fairly and equally employees of different ages who have suffered different periods of career loss. The five-year age increments act as a proxy for blocks of career years lost that could have been served until the premised retirement age (of 65) but for a refusal (on medical grounds) to revalidate an employee’s statutorily required certificate of competency. And, we repeat, this scale is not determinative since the deduction provisions in clause 13.4.4 and the disqualification provisions in clause 13.4.5 must then be applied in a further endeavour to ensure that the final outcome fairly compensates for the career loss suffered.

[22] The Commissioner accepted, as do we, that the principles applicable to the interpretation and application of s 195 are as stated in the Full Bench decision in Budd v Australian Federal Police. 9 In that decision the Full Bench said:

“[69] Direct discrimination is concerned with the treatment of a person less favourably in the same or not materially different circumstances because of a particular protected attribute of the person. So far as s 195 of the Act is concerned, a term of an enterprise agreement will discriminate in the sense that the term treats less favourably an employee covered by the enterprise agreement because of, or for reasons including, the employee’s protected attribute identified therein. Whether a term is a discriminatory term in that it directly discriminates against an employee, is to be assessed in our view as follows.

[70] One must first determine the position of the employee covered by the enterprise agreement with the protected attribute.  Secondly, one must determine the position of an employee covered by the enterprise agreement without the protected attribute or with a different attribute. Thirdly, there must be identified differential or less favourable treatment by or as a necessary consequence of the operation of the term of the enterprise agreement in circumstances that are the same or not materially different.  Fourthly, one must consider whether the differential or less favourable treatment is because of, or for reasons that include the first employee’s attribute. Finally, one must consider whether one or more of the exemptions identified in s.195 are applicable...”

[23] On the basis of our earlier analysis, clause 13.4.2 does not treat older employees differently because of their age; it treats them differently (in terms of the starting-point amount of compensation) because of a relevant difference in the period of the seagoing career which has been lost and for the purpose of providing an equivalent amount of compensation for blocks of five-yearly increments of the lost career period. For these reasons, the clause does not discriminate against older employees and does not constitute a discriminatory term. Indeed, as ASP submitted, if the clause provided for an equal amount of starting-point compensation regardless of age, it would discriminate against younger employees because they would receive less compensation for each year of career loss than older employees.

[24] It is not to the point that the scheme established by clause 13.4.2 contains apparent imperfections, such as the five year increments in the scale which may potentially lead to significant differences in compensation for persons close in age, or the apparent premise of a retirement age of 65 which will mean that the perfection of the mathematics is lost if a higher or lower retirement age is assumed. These features of the scheme are evidently necessary to give it practical workability in aid of the general objective of equal treatment regardless of age, and cannot be said to discriminate against any person because of the protected attribute of age. The various criticisms of the scheme made by the Commissioner in paragraphs [14]-[18] of the decision, which we have earlier set out, are not demonstrative of age discrimination but rather simply describe the scheme which the Commissioner would have preferred over that which was agreed by those who made the Agreement.

[25] Because clause 13.4 was not a discriminatory term and therefore not an unlawful term, there was no proper basis for the formation of any concern pursuant to s 190(1)(b) that the Agreement did not meet the approval requirement in s 186(4) and, consequently, no proper basis to approve the agreement with an undertaking that rendered clause 13.4 of no effect. That makes it strictly unnecessary to deal with the grounds of the unions’ appeal relating to the Commissioner’s acceptance of the undertaking under s 190 in the terms proposed by ASP. However, some brief comment is called for because, we consider, the appeal raises important issues of principle in this regard.

[26] Firstly, it is important to note that s 195(1) provides that a term of an enterprise agreement is only a discriminatory term to the extent that it discriminates on the basis of any of the identified attributes. The Commissioner’s conclusion that the Agreement contained a discriminatory term only related to the scale of compensation provided for in clause 13.4.2; there was no finding of discrimination in respect of any other aspect of clause 13.4. Therefore, at the highest, clause 13.4 could only be a discriminatory term to the extent of the scale in clause 13.4.2, and the Commissioner was therefore only entitled to accept an undertaking which addressed her concern about clause 13.4.2. Section 190 does not, we consider, authorise the acceptance of undertakings which alter provisions which are not the subject of any relevant concern. However the undertaking accepted here was not confined in its effect to clause 13.4.2, but rendered nugatory the whole of the scheme in clause 13.4.

[27] Section 195(1) has the evident purpose of protecting employees from disadvantage by reason of them having one of the prescribed attributes. The discriminatory disadvantage which was said by the Commissioner to exist in this case was that older employees received a lesser entitlement to compensation under clause 13.4.2 than younger employees. However the effect of the undertaking which the Commissioner accepted to overcome her concern in this respect is to deprive older employees of the entitlement completely, leaving them in a worse position by reason of the application of statutory provisions which are meant to protect them. This is a perverse result and one not contemplated by s 190. The position in this respect is similar to that dealt with by the Federal Court (Buchanan J) in Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2). 10 In that matter, the Court determined that a retrenchment pay scale in a redundancy pay provision in an enterprise agreement which entirely excluded employees aged 60 or more from the benefits of the scheme was a discriminatory term within the meaning of s 195(1). The question then arose as to what relief should be ordered, and the employer proposed a declaration that all the operative provisions of the redundancy term were of no effect. In this respect, Buchanan J said:

“[54] On the other hand, I can see no reason why cll 30.6 or 30.7 are thereby affected. I do not accept the applicant’s submissions that:

1. ... clause 30.8 cannot be read in isolation from cll.30.6 and 30.7. These three clauses read together give rise to the single entitlement to “retrenchment pay” ...

[55] The effect of accepting the applicant’s submissions would be to strip all other employees (in addition to those at present disadvantaged) of any entitlement to retrenchment pay in any circumstances. The appropriate course to take is to remove the unlawful discriminatory term, not take the axe to an entitlement which should not have been subject to a discriminatory limitation in the first place.

[56] I will not make the declaration sought by the applicant as Order 4. It would not be in conformity, in my view, with s 253 of the FW Act; it would be contrary to it.”

[28] For similar reasons, we consider the Commissioner erred in accepting an undertaking which “took the axe” to the entirety of clause 13.4 because of her finding that one aspect of it provided lesser entitlements to older employees by reason of their age.

[29] Secondly, we doubt that it was reasonably open to conclude that acceptance of the undertaking was not likely to financially disadvantage employees covered by the Agreement. The purpose of s 190(3)(a) is, we consider, to ensure that the acceptance of undertakings is not likely to disadvantage employees by way of comparison with the terms of the agreement they voted upon. In this case, any employee who at any time qualified for the benefits of the scheme established by clause 13.4 would obviously be financially disadvantaged by an undertaking which rendered clause 13.4 of no effect compared to the Agreement in the terms for which approval was sought. That the legal effect of s 253(1)(b) would be, on the Commissioner’s finding, to render clause 13.4.2 of no effect to the extent that it provided a lesser entitlement to older employees does not obviate this obvious financial disadvantage.

Conclusion and orders

[30] The nature of the errors we have identified make it appropriate to grant permission to appeal, and we uphold the appeal on the basis of the reasons set out above. However it is not necessary to quash the decision to approve the Agreement, since it is not in dispute that the Agreement was capable of approval under the FW Act. We consider that the appropriate course is, pursuant to s 607(3)(a), to confirm the decision to approve the Agreement effective from 29 November 2019 and to vary the decision to remove the undertaking as a term of the Agreement pursuant to s 191, with the result that clause 13.4 has full force and effect.

[31] We order as follows:

(1) Permission to appeal is granted.

(2) The appeal is upheld.

(3) The approval of the ASP Ship Management/RTM Officers Enterprise Agreement 2017 effective from 29 November 2019 is confirmed.

(4) The decision ([2019] FWCA 7847) is varied to remove as a term of the agreement the undertaking that “Clause 13.4 (Compensation for Medical Inability to Revalidate Certificate) be of no force or effect”.

VICE PRESIDENT

Appearances:

P Boncardo of counsel with J Kennedy on behalf of The Australian Maritime Officers’ Union and The Australian Institute of Marine and Power Engineers.

A Crocker of counsel with M Reiman on behalf of ASP Ship Management Pty Ltd.

Hearing details:

2020.

Sydney:

17 February.

Printed by authority of the Commonwealth Government Printer

<PR717625>

 1   [2019] FWCA 7847

 2   Ibid at [6]

 3   [2018] FWCFB 6095

 4   [2019] FWCA 7847

 5   Ibid at [20]-[25]

 6   Ibid at [26]-[28]

 7   Ibid at [29]

 8   Ibid at [32]

 9   [2018] FWCFB 6095

 10   [2015] FCA 136, 247 IR 350