[2020] FWCFB 1747
FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.210—Enterprise agreement

CVSG Electrical Construction Pty Ltd
(AG2020/918)

DEPUTY PRESIDENT GOSTENCNIK
DEPUTY PRESIDENT COLMAN
COMMISSIONER JOHNS

MELBOURNE, 2 APRIL 2020

Application for variation of the CVSG Electrical Construction Enterprise Agreement - 2017-2021.

Introduction

[1] On 31 March 2020 CVSG Electrical Construction Pty Ltd (Applicant) applied pursuant to s.210 of the Fair Work Act 2009 (Act) for approval of a variation to the CVSG Electrical Construction Enterprise Agreement 2017 – 2021 (Agreement). The Applicant is covered by the agreement.

[2] The Agreement was approved on 18 April 2017 with undertakings.

[3] The primary activity of the Applicant is electrical construction. Employees whose employment is covered by the Agreement perform work that is covered by the Electrical, Electronic and Communications Contracting Award 2010 (Award). This is the relevant modern Award for the purposes of the ‘better off overall test’ in s.193 of the Act.

[4] The application seeks to vary clause 25 of the Agreement, in addition to Appendix 1 and Appendix 4. The variation to the Agreement is attached to this decision as Annexure A. Clause 25 of the Agreement, headed ‘Rate Indexation’, deals with wage increases and provides that an employee’s Actual Rate will be increased annually. The minimum increase to be applied is 3% of the employee’s Actual Rate or the Consumer Price Index, whichever is greater. ‘Actual Rate’ is a defined term, defined by clause 4 of the Agreement as ‘the all purpose hourly rate of pay paid to the Employee and set out in the Employee’s letter of offer’. Appendix 1 of the Agreement provides a schedule of wage rates effective from the first full pay period on or after 1 April each year. Appendix 4 of the Agreement provides a schedule of wage rates applicable to employees directed by the employer to work on projects with an initial electrical contract value above $7M.

[5] In short compass, the variation proposed to the Agreement would have the effect that the wage increase provided by clause 25 of the Agreement would not occur on the 2020 anniversary. The 2020 rates of pay would be removed from the schedule of wage rates in Appendices 1 and 4 to reflect the change proposed to clause 25.

[6] An explanatory document titled ‘Proposed Enterprise Agreement Variation’, dated 18 March 2020 and filed with the application, provides that the variation is “proposed due to the drastic impact of the coronavirus pandemic” and is aimed at “preserving job security and sustainability”.

[7] The matter was listed for hearing before a Full Bench of the Commission on 1 April 2020.

[8] On 1 April 2020 the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) indicated it intended to seek leave to be heard in relation to the application. The CEPU subsequently filed written submissions opposing approval of the proposed variation and a witness statement by Mr Jimmy Little, CEPU Organiser. The gravamen of the CEPU’s objection is that the Commission cannot be satisfied that the variation was genuinely agreed by the employees because the common understanding upon which the variation was approved by relevant employees has altered by reason of the Australian government’s announcement of its Job Keeper initiative.

[9] Prior to the hearing, correspondence was sent from the Chambers of Commissioner Johns noting the Commission’s concerns relating to the application, most notably in relation to compliance with ss.180(5) (explanation of terms and effect of terms) and 196 (shift worker definition) of the Act; terms which might contravene s.55 (exclusion of terms of National Employment Standards (NES)); and the better off overall test (BOOT) in so far as it related to employees engaged on a part-time basis. The correspondence also requested a copy of the agreement as varied. The Applicant provided written submissions, a response to the concerns raised by the Commission, signed written undertakings and a witness statement by Mr Noel Cosgrove, general manager of the Applicant. The written undertakings are attached to this decision as Annexure B.

Relevant statutory provisions

[10] Sections 210 and 211 of the Act sets out requirements for the Commission’s approval of a variation of an enterprise agreement.

[11] Section 210 deals with who may make an application to vary an agreement, and how and when it must be made:

210 Application for the FWC's approval of a variation of an enterprise agreement

Application for approval

(1) If a variation of an enterprise agreement has been made, a person covered by the agreement must apply to the FWC for approval of the variation.

Material to accompany the application

(2) The application must be accompanied by:

(a) a signed copy of the variation; and

(b) a copy of the agreement as proposed to be varied; and

(c) any declarations that are required by the procedural rules to accompany the application.

When the application must be made

(3) The application must be made:

(a) within 14 days after the variation is made; or

(b) if in all the circumstances the FWC considers it fair to extend that period--within such further period as the FWC allows.

Signature requirements

(4) The regulations may prescribe requirements relating to the signing of variations of enterprise agreements.”

[12] Section 211 sets out the circumstances in which the Commission must approve a variation and makes provision for a modified operation of certain statutory preapproval provisions concerning the approval of an enterprise agreement in their application to the variation of an agreement. Under that section, we must approve the variation of the Agreement if we are satisfied that, had an application been made, in the instant case under s.185 of the Act, for the approval of the Agreement as proposed to be varied (Amended Agreement), we would have been required to approve the Amended Agreement under s.186. The secondary consideration as to nominal expiry date does not arise in this application. We are not required to approve the Amended Agreement if we are satisfied that there are ‘serious public interest grounds’ for not approving the variation.

[13] The remaining provisions (ss.212-216) deal with undertakings, circumstances in which the Commission may refuse to approve a variation, and the operative date of a variation.

[14] We now turn to consider the statutory considerations.

Consideration

[15] The Applicant has filed, in support of its application for approval of a variation, a statutory declaration made by Ms Tegan McFarlane (the McFarlane Declaration).

[16] Subject to what is set out at [18] below, we are satisfied that the Applicant has complied with ss.210(1), (2), (3) and (4).

[17] Clause 3 of the Amended Agreement provides that the Applicant is a party to the Amended Agreement. We are satisfied that s.210(1) of the Act has been complied with.

[18] Section 210(2)(b) of the Act requires that a signed copy of the variation and a copy of the agreement as proposed to be varied accompany an application. As noted above, correspondence was sent to the Applicant prior to the hearing requesting a copy of the agreement as varied be provided to the Commission. This was provided prior to the hearing. Pursuant to s.586 we waive the irregularity in the manner in which the application was made because it was not accompanied by an agreement as described in s.210(2)(b).

[19] The response to question 2.5 of the McFarlane Declaration provides that the variation was made on 27 March 2020 and, as noted above, the application was lodged on 31 March 2020. We are satisfied that the Applicant has complied with s.210(3) of the Act.

[20] Regulation 2.09A of the Fair Work Regulations 2009 (Regulations) provides:

“2.09A Requirements for signing variation of enterprise agreement

(1)  For subsection 210(4) of the Act, this regulation prescribes the requirements for the signing of a variation to an enterprise agreement.

(2)  For paragraph 210(2)(a) of the Act, a copy of a variation to an enterprise agreement is a signed copy only if:

(a)  it is signed by:

(i)  the employer covered by the agreement as varied; and

(ii)  at least 1 representative of the employees covered by the agreement as varied; and

(b)  it includes:

(i)  the full name and address of each person who signs the variation; and

(ii)  an explanation of the person’s authority to sign the variation.

Note:          Paragraph 210(2)(a) of the Act requires an application for approval of a variation to an enterprise agreement to be accompanied by a signed copy of the variation.

(3)  Unless the representative of the employees covered by the agreement as varied is an employee in a class of employees who will be bound by the agreement as varied, the representative’s signature is not taken to indicate that the representative intends to be bound by the agreement as varied.”

[21] The requirements in Regulation 2.09A for the signing of a variation to the enterprise agreement have been met.

[22] Section 211(1) of the Act requires that the Commission approve a variation if the Commission is satisfied that, had an application been made under ss.182(4) or 185 of the Act for the approval of the agreement as proposed to be varied, the Commission would have been required to approve the agreement under s.186.

[23] Section 186(1) of the Act provides that if an application for the approval of an enterprise agreement is made, relevantly in this case, under s.185, the Commission must approve the agreement if the requirements set out in ss.186 and 187 are met.

[24] The first of these requirements is that the Commission must be satisfied that the variation has been genuinely agreed to by the employees covered by the Amended Agreement. Section 188(1) as modified by s.211(3) provides that the variation has been genuinely agreed to by the employees covered by the Amended Agreement if the Commission is satisfied that:

“ . . .

(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the variation:

(i) subsections 180(2), (3) and (5) (which deal with pre approval steps); and

(b) the agreement was made in accordance with whichever of subsection 209(1) or (2) applies (those subsections deal with the making of different kinds of enterprise agreements by employee vote); and

(c) there are no other reasonable grounds for believing that the variation has not been genuinely agreed to by the employees.

…”

[25] As earlier noted, the CEPU contended that we cannot be satisfied that the variation was genuinely agreed to by relevant employees. The contention advanced proceeded on the basis that there were other reasonable grounds for believing that the variation has not been genuinely agreed to by the employees.

[26] As to these reasonable grounds, the CEPU contended that, since the employees voted to approve the variation, there has been a substantial change in circumstances. The Australian government has announced its Job Keeper initiative, pursuant to which eligible employers will receive $1500 per fortnight per employee. The CEPU said that this has significantly altered the economic predicament faced by the Applicant, and that neither it nor its employees knew that this major initiative would be adopted. The CEPU contended that this matter was of transformative significance, such that one could draw an analogy between the present circumstances and a situation of common mistake vitiating a contract at common law. It said that the Applicant’s explanation to employees of the proposed variation was in effect a misrepresentation, albeit an innocent one. The explanation addressed what the Applicant believed at that time would be the financial impact of the COVID-19 pandemic on it, however the Job Keeper initiative will now significantly redress that impact, and therefore the rationale for removing the 2020 wage increase from the Agreement no longer exists or is substantially reduced.

[27] The CEPU submitted that employees had voted to forego their 2020 wage increase in light of circumstances that are no longer applicable or have at least radically changed. Employees did not genuinely agree to give up their wage increase in the circumstances that have since come to pass, and therefore the Commission should refuse to approve the variation to the Agreement.

[28] Alternatively, the CEPU contended that in the circumstances, the Commission should be satisfied that there are ‘serious public interest grounds’ for not approving the variation, for the purpose of s.211(1) of the Act.

[29] We are not persuaded that there are reasonable grounds for believing that employees did not genuinely agree to the variation. It is not correct to characterise the Applicant’s explanation of the circumstances as an innocent misrepresentation. It was an accurate and reasonable explanation at that time. Further, we do not see any valid analogy between the change of circumstances in this case and a common mistake of fact in contract law. There was no mistake at all. A variation was put to the vote based on circumstances that applied at the time. Those circumstances then changed.

[30] In our opinion, the question of whether employees have genuinely agreed to an agreement or its variation must be considered at the time they gave their agreement, taking into account the circumstances at that time. Matters which are known to an employer and which may impact the decision-making process of employees should plainly be disclosed. Events occurring subsequently to an approval of a variation which are not known to an employer at the time the variation is being considered by employees cannot be disclosed nor do they vitiate the genuineness to the employees’ approval of the variation. If subsequent events were relevant to the analysis of the genuineness of the agreement, it would mean that employees’ approval could be genuine at one time, but later cease to be genuine. This cannot have been intended, and there is nothing in the text of s.188, or Part 2-4 of the Act generally, that would favour such a conclusion.

[31] Moreover, the extent of the change in circumstances in the present case remains unknown. The Applicant submitted, and we accept, that it is not yet clear that it will be eligible for the Job Keeper programme. In particular, the Applicant did not know whether the relevant requirements would be applied at the level of the corporate group or the individual entity. We would also note that the Job Keeper initiative is to last for six months, whereas the variation to the Agreement that was approved by employees removes a wage increase applicable to a 12 month period. We also accept the Applicant’s evidence that there are other serious economic pressures associated with the pandemic that are jeopardising its business aside from the question of its wages expenditure. These include the weakening of the Australian dollar and supply chain constraints from China. There is expected to be a 50% drop in tenders over the next three to six months. It is therefore not clear to what extent the Job Keeper programme would ameliorate the Applicant’s financial and operational situation, or how, if at all, it would affect the rationale for the variation of the Agreement. Having regard to all these matters, we are not satisfied that the circumstances of this case disclose ‘serious public interest’ grounds upon which the Commission would not be required to approve of the variation.

[32] We are satisfied based on the material contained in the McFarlane Declaration together with the evidence given by Mr Cosgrove that the Applicant complied with ss.180(2), (3) and (5) as modified by s.211(3) of the Act and 209(1).

[33] Section 180(2) as modified by s.211(3) requires an employer take all reasonable steps to ensure that employees are given a copy of the variation or incorporated material during the access period or provided with access to it by the start of access period.

[34] Section 180(3) as modified by s.211(3) requires an employer to take all reasonable steps to notify the relevant employees of the date and place at which the vote will occur and of the voting method to be used by the start of the access period.

[35] Section 180(4) as modified by s.211(3) sets out the meaning of ‘access period’. It relevantly provides as follows:

“(4) The access period for a proposed variation is the 7-day period ending immediately before the start of the voting process referred to in subsection 208(1).”

[36] The response to question 2.1 of the McFarlane Declaration provides that the variation was provided to employees via email on 19 March 2020. The response to question 2.2 provides that employees were emailed a ballot notice specifying the date and time that the ballot was to occur and the method (SMS ballot) by which the ballot would take place on 19 March 2020. The response to question 2.5 states that voting for the variation to the Agreement commenced on 27 March 2020. We are therefore satisfied that the Applicant has complied with ss.180(2) and (3) as modified by s.211(3) of the Act.

[37] Section 180(5) of the Act as modified by s.211(3), requires an employer to take all reasonable steps to ensure that the terms of the variation, and the effect of those terms, are explained to relevant employees and that the explanation is provided in an appropriate manner taking into account the particular needs and circumstances of the relevant employees.

[38] The response to question 2.3 of the McFarlane Declaration states that employees were emailed an explanatory document and were provided with the direct contact details of management to address any questions that may have arisen. The explanatory document was filed with the application. Based on the information contained in the McFarlane Declaration and the accompanying explanatory document as well as the evidence given by Mr Cosgrove, we consider that the Applicant has complied with s.180(5) of the Act as modified by s.211(3).

[39] Section 209(1) of the Act requires that a majority of the affected employees who cast a valid vote approve the variation. According to the response at 2.6 of the McFarlane Declaration, at the time the Applicant asked relevant employees to vote to approve the variation, there were 65 employees who would be covered by the Amended Agreement. Of that voting cohort, 48 employees cast a valid vote and 39 employees voted to approve the variation. Plainly, a majority of employees employed at the time who cast a valid vote, voted to approve the variation. We are therefore satisfied, based on the material contained in the McFarlane Declaration, that the variation was made in accordance with s.209(1).

[40] For the reasons mentioned earlier, we a satisfied that the variation has been genuinely agreed to by the relevant employees and so the requirement in s.186(2)(a) as modified by s.211(3), is met.

[41] Section 186(2)(c) of the Act as modified by s.211(3) provides that the terms of the enterprise agreement as proposed to be varied must not contravene s.55. As earlier noted, the Commission has raised concerns about some provisions in the Amended Agreement which might contravene s.55. The Applicant has provided undertakings which we consider meet those concerns. We propose to accept the undertakings and with them we are satisfied that the requirement in s.186(2)(c) as modified has been met.

[42] The Agreement as proposed to be varied does not cover all of the Applicant’s employees. The Amended Agreement covers employees who perform electrical work under various classifications. The Agreement does not cover the Applicant’s salaried employees, administrative employees or apprentices. The group of employees covered is operationally distinct from other groups of the Applicant’s employees who are not covered by the Agreement identified above. There is nothing in the material before us that suggests the group of employees covered by the Amended Agreement was anything other than fairly chosen, and we are so satisfied. The requirements in ss.186(3) and (3A) as modified by s.211(3) are therefore met.

[43] On a review of the terms of the Amended Agreement, we are satisfied that the Amended Agreement does not contain any term of the kind described in s.194(baa)–(h). No one has suggested otherwise.

[44] The requirement in s.186(4A) concerns outworker terms and does not arise in respect of the Amended Agreement.

[45] Clauses 6 of the Amended Agreement specifies a nominal expiry date of four (4) years after the date of approval. This is unaltered by the variation. The requirement in s.211(1)(b) of the Act is therefore met.

[46] Clause 61 of the Amended Agreement contains a dispute resolution term. It allows the Commission to settle disputes about matters arising under the Amended Agreement and in relation to the NES. It also allows for the representation of employees covered by the Amended Agreement for the purposes of the procedure. The requirement in s.186(6) as modified by s.211(3) is therefore met.

[47] Section 187(4) as modified by s.211(3) requires the Commission to be satisfied as referred to in any of the provisions of Subdivision E of Division 4 (ss.196-200). Sections 197-200 have no application in relation to the variation.

[48] Section 196 of the Act is concerned with ensuring that a shiftwork employee covered by an enterprise agreement, who is entitled to an additional week’s leave under the NES because an award that is in operation and covers the employee describes that employee as a shiftworker for the purposes of the NES, continues to be so entitled when the agreement is in operation. When s.196 applies, the Commission must be satisfied that the Amended Agreement also defines or describes the employee as a shiftworker for the purposes of the NES.

[49] Clause 28.1(b) of the Award defines or describes the kind of employee that is a shiftworker for the purposes of the NES. It appears such an employee is covered by the Amended Agreement. Section 196 is therefore engaged. Clause 44(1)(b) of the Amended Agreement defines or describes the type of employees that are entitled to the additional week of leave provided by the NES. Clause 44.1(b) of the Amended Agreement provides that ‘for the purpose of the extra week of annual leave which is provide for under the NES, continuous shift workers shall be entitled to an additional week of leave’. The term ‘continuous shiftworker’ was not defined in the Amended Agreement. This issue was canvassed with the Applicant and it has provided an undertaking in relation to this issue. Undertaking 2 defines or describes an employee as a shiftworker for the purposes of the NES in the same terms as the Award. We propose to accept the undertaking. With that undertaking we are satisfied therefore that the Amended Agreement defines or describes an employee as a shiftworker for the purposes of the NES. The requirement in s.187(4) is therefore met.

Better off overall test (BOOT)

[50] Before the Commission may approve a variation to an enterprise agreement, it must be satisfied that the varied Agreement passes the BOOT (s.186(2)(d) as modified by s.211(3) and s.193 as modified by s.211(4)).

[51] The proper application of the BOOT requires a finding that each award covered employee and prospective employee would be better off under the variation of the enterprise agreement than under the relevant modern award. 1 The requirement that “each” such employee and prospective employee be better off overall is a rigorous one. The Act requires that every award covered employee and prospective employee be better off overall, with the corollary that if any such employee is not better off overall, the relevant variation of the enterprise agreement does not pass the BOOT.2

[52] A proper application of the BOOT also requires an overall assessment to be made. This requires the identification of terms which are more beneficial for an employee, terms which are less beneficial, and an overall assessment of whether an employee would be better off under the agreement. 3 The assessment of the BOOT for the purpose of considering whether a variation to an agreement is to be approved is not confined to the provisions that are varied. This is because the Commission must be satisfied that, had the application to vary the agreement been an application to approve the agreement, the Commission would have been required to approve it under s 186.

[53] The material filed by the Applicant in support of the application to approve the variation sets out terms and conditions of the amended agreement which are more beneficial and those which are less beneficial when compared to the Award. Notwithstanding the effect of the variation to withhold pay increases due under the Agreement, it remains the case that the rates of pay, which are rolled up rates, are substantially higher than the corresponding rates of pay for which provision is made under the Award. Taking into account the various allowances that from time to time might be payable under the Award and which are not payable under the Amended Agreement and weighing the various benefits and detriments we are satisfied, save for the issue raised with the Applicant concerning part-time employment, that the Amended Agreement would otherwise pass the BOOT. No one has suggested otherwise. As to the issue of part-time employment under the Amended Agreement, the Applicant has provided an undertaking which we consider meets the concern raised. We propose to accept the undertaking and with that undertaking we are satisfied that the Amended Agreement passes the BOOT. The requirement in s.186(2)(d) is therefore met.

[54] As is evident from our discussion of the various matters about which we must be satisfied, the applicant has proffered certain undertakings to meet concerns which have been raised in correspondence from the Commission to the Applicant prior to the hearing. Section 212 the Act deals with undertakings in relation to a variation of an enterprise agreement. The section is engaged because there is an application for the approval of the variation of an enterprise agreement and the Commission has concerns that the variation does not meet the requirements set out in s.211.

[55] The Applicant has provided the undertakings in written form. The written undertakings meet the signature requirements set out in s.212(4) of the Act and we are satisfied that the effect of accepting the undertakings is not likely to cause financial detriment to any affected employee for the variation. We are also satisfied that the effect of accepting the undertakings is not likely to result in substantial changes to the variation. The undertakings are accepted.

Conclusion

[56] For the reasons given, subject to the undertakings referred to above, and on the basis of the material contained in the application and accompanying statutory declaration, we are satisfied that each of the requirements of ss.211 and 212 as are relevant to this application for approval of the variation have been met.

[57] The Applicant provided written undertakings to meet concerns that particular requirements of the modified provisions of ss.186 and 187 had not been met in relation to this application. Those undertakings form part of the Agreement as varied.

[58] The variation is approved and the consolidated version of the Agreement, as varied, is attached to this decision.

[59] In accordance with s.216 of the Act, the variation operates from 2 April 2020.

DEPUTY PRESIDENT

Appearances:

T Moltoni, solicitor for the Applicant
C Massey
, counsel for the Respondent

Hearing details:

2020
Brisbane, Melbourne, Sydney
1 April 2020

Written submissions:

Applicant, 1 April 2020
Respondent
, 1 April 2020

Printed by authority of the Commonwealth Government Printer

<PR717991>

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 1   Solar Systems Pty Ltd [2012] FWAFB 6397 at [11]; Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited;

Australasian Meat Industry Employees Union, The v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited [2016]

FWCFB 2887 at [6], [15]; SDAEA v Beechworth Bakery Employee Co Pty Ltd [2017] FWCFB 1664 at [11]

 2   Application by Aldi Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) & Welsh and Others

(Loaded Rates Agreements Case) [2018] FWCFB 3610 at [100]

 3   ALDI Foods Pty Limited v Shop, Distributive & Allied Employees Association [2017] HCA 53 at [92]; Armacell Australia Pty Ltd [2010] FWAFB 9985 at [41]; Application by Aldi Foods Pty Limited as General Partner of ALDI Stores (A

Limited Partnership) & Welsh and Others (Loaded Rates Agreements Case) [2018] FWCFB 3610 at [112]