DECISION

Fair Work Act 2009
s.604—Appeal of decision

Construction, Forestry, Maritime, Mining and Energy Union
v
McNab Constructions Pty Ltd
(C2020/5545)

Appeal against decision [2020] FWCA 3329 of Deputy President Lake at Brisbane on 25 June 2020 in matter number AG2020/892 – whether the Deputy President erred in concluding that the enterprise agreement passed the BOOT – whether there could be satisfaction that employer complied with s.180(5) – permission to appeal granted – appeal upheld – decision to approve agreement quashed – application to approve agreement remitted to the Deputy President.

[1] By its notice of appeal lodged on 16 July 2020, the Construction, Forestry, Maritime, Mining, and Energy Union (Appellant) seeks permission to appeal and appeals a decision made on 25 June 2020 by Deputy President Lake to approve a single-enterprise agreement with undertakings¹ (Decision). The agreement is titled the McNab Constructions Pty Ltd Enterprise Agreement 2020 (Agreement).

Background

[2] The Agreement was made on 27 March 2020 when McNab Constructions Pty Ltd (Respondent) requested the 41 employees employed at the time and covered by the Agreement to approve the Agreement and each of those 41 employees voted to approve it.² The Agreement covers the Respondent’s “employees undertaking on-site construction work, including apprentices”, excluding “employees who are covered by the National Training Wage Schedule in the Modern Award, employees in the role of Labourer who have less than 6 months industry experience in the role, and any salaried employee in a supervisor or management role whose remuneration and other terms and conditions of employment are contracted under a common law agreement.” 3

[3] At the time the vote took place the Respondent’s apprentices were covered by the Building and Construction General On-Site Award 2010 (Award) and the balance of the employees covered by the Agreement were covered by the McNab Constructions Pty Ltd Enterprise Agreement 2016 (2016 Agreement). Although the Agreement is based on the 2016 Agreement, it contains a number of material changes, including in relation to coverage of the Agreement, overtime, weekend penalties, night work, allowances, casual conversion, and shift work. 4

[4] The Appellant was not a bargaining representative for the Agreement. The Appellant sought to be heard in relation to the application to approve the Agreement. The Deputy President exercised his discretion pursuant to s.590(1) of the Fair Work Act 2009 (Act) to hear from the Appellant in relation to the application for approval of the Agreement. 5

[5] Both the Respondent and the Appellant filed and served written submissions in relation to the application for approval of the Agreement. 6 The Respondent also proffered written undertakings to meet concerns that the Agreement did not meet some of the requirements in ss 186 and 187 of the Act.7 Those undertakings were accepted by the Deputy President and the Agreement was approved on 25 June 2020. The Agreement commenced operation on 2 July 2020 and has a nominal expiry date of 25 June 2024.

Appeal grounds

[6] The Appellant’s notice of appeal contains 4 appeal grounds. The Appellant does not press grounds 3 or 4.

[7] The first appeal ground contends that the Deputy President erred in finding that the Agreement passed the better off overall test (BOOT) as required by s.186(2)(d) of the Act.

[8] Ground 2 contends that Deputy President erred in finding that s.180(5) of the Act had been complied with and consequently, that the Agreement was genuinely agreed to in accordance with s.188.

[9] We turn then to consider the appeal grounds.

Appeal ground 1 – whether the Deputy President erred in finding that the Agreement passed the BOOT?

[10] The Appellant contends that the Agreement is a “loaded rates” enterprise agreement because it contains some, but not all, of the penalty rates, allowances and special rates provided for by the Award. Relying on the Loaded Rates Agreements decision, 8 the Appellant contends it was necessary for the Deputy President to consider what roster patterns were actually worked by current employees and would be worked by prospective employees, in addition to what roster patterns could be worked under the Agreement. The Appellant submits that the former required evidence of the actual rosters worked in the Respondent’s business. No such material was placed before the Deputy President. The Appellant submits that the Deputy President proceeded instead on the basis of assertions contained in correspondence from the Respondent’s solicitors to the effect that various work practices, such as call-backs or short rostering on Sundays and public holidays, were not applicable to work carried out by the Respondent’s employees, or alternatively that the Respondent does not anticipate requiring employees to undertake this type of work. By relying on such assertions, the Appellant contends that the Deputy President adopted the “don’t ask, don’t tell” approach expressly rejected in the Loaded Rates Agreement decision.

[11] The Respondent submits that the Agreement contains separate penalty rates and allowances and the significantly higher ordinary rates payable under the Agreement are not “loaded rates”. The Respondent also contends that its employer statutory declaration described a typical work week for its employees as a 50 hour week, with 10 hours worked on each day Monday through to Friday, including overtime. 9 Reliance is also placed by the Respondent on its written submissions made to the Deputy President, including an explanation of its business, business practices and the fact that certain work practices did not apply. Having regard to all the material before the Deputy President, the Respondent submits that there was sufficient information to enable the Deputy President to reach the requisite state of satisfaction pursuant to s 186(2)(d) of the Act.

[12] The base rates of pay contained in the Agreement are between 24.46% and 44.68% above the relevant Award rates. Further, the Agreement provides for penalty rates to be paid in a range of circumstances, including when an employee works more than 9 hours in a day, when an employee works on a Saturday or Sunday, and when an employee works night work. 10 Save for when an employee works night work, the ordinary hours of work, for which an employee must be rostered under the Agreement, are 6am to 6pm (March to August) and 5am to 5pm (September to February) each year.11

[13] We agree with the Respondent’s submission that the Deputy President had evidence of a typical work week for employees covered by the Agreement. 12 Modelling undertaken within the Commission demonstrates that employees who work such a typical 50 hour week are at least 18.36% better off financially under the Agreement compared to the Award. No attempt was made to challenge this modelling on appeal. In fact, the Appellant could not point to any particular circumstance where employees would not be better off under the Agreement compared to the Award.

[14] It is clear from the terms of the Agreement what are the different roster patterns that could be worked under the Agreement. 13 Such rosters may include ordinary hours of day work between either 6am and 6pm or 5am and 5pm, depending on the time of the year, or night work in accordance with clause 11.4 of the Agreement. We are satisfied that the rates of pay and penalties payable under the Agreement to employees for working such ordinary hours plus any additional reasonable hours by way of overtime are sufficient to ensure employees will be better off overall than if the Award applied to them. Further, absent an arrangement being entered into in accordance with clause 11.8, the Agreement does not permit employees to be rostered on shifts such as afternoon shift or early afternoon shift. It was therefore not necessary for an undertaking to be given to address any BOOT concern in relation to an employee being rostered to work shift work.

[15] It is clear from the Decision that the Deputy President well understood the requirement to undertake the BOOT assessment on a global basis, rather than by a line by line analysis. 14 The Deputy President followed that approach by setting out the parties’ submissions, which identified relevant benefits and detriments,15 and then weighed those matters, together with the undertakings provided by the Respondent,16 in reaching his conclusion that the “employees are better off overall under the Agreement”.17

[16] In our opinion, the Deputy President did not err in either the approach he took to reach the requisite state of satisfaction under s.186(2)(d) of the Act or his conclusion that employees covered by the Agreement would be better off overall if the Agreement applied to them than if the relevant modern award applied to them. Accordingly, we reject ground 1.

[17] We turn then to consider the remaining ground of appeal.

Ground 2 – whether the Deputy President erred in finding that the Respondent complied with s.180(5)?

[18] The Appellant contends the Deputy President erred because there was no material before the Commission as to the content of any explanation given to employees concerning the terms of the Agreement or the effect of those terms. It follows, so the Appellant submits, that there was no basis for the Deputy President’s finding that “the explanatory material provided to employees was sufficient to explain its effect in detail”. 18

[19] The Respondent contends that s.180(5) of the Act focuses attention on the steps it took to ensure the terms of the Agreement, and the effect of those terms, were explained to the relevant employees. To that end, the Respondent points to the detailed information contained in the employer statutory declaration filed in support of the application for approval of the Agreement in relation to the steps it took to explains the terms of the Agreement, and the effect of those terms, to the relevant employees. 19 Those steps included holding meetings with relevant groups of employees and providing employees with a summary of the Agreement compared to the 2016 Agreement and (for apprentices) a summary of the Agreement compared to the Award. However, neither summary was attached to the employer statutory declaration or otherwise provided to the Deputy President. That was so notwithstanding the following note beneath question 2.7 in the employer statutory declaration (Form F17):

“2.7 What steps were taken by the employer to explain the terms of the agreement, and the effect of those terms, to the relevant employees?

See section 180(5(a) of the Fair Work Act 2009. The employer must take all reasonable steps to ensure the explanation is given to relevant employees.

Do not simply state that the terms of the agreement were explained to relevant employees. Describe the steps taken and what was explained, and provide the date on which each step was taken. Also lodge copies of any materials that were used to explain to employees the terms of the agreement and the effect of those terms.” [emphasis added]

[20] Section 186(2) of the Act relevantly provides:

“(2) The FWC must be satisfied that:

(a) if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement;” 

[21] Section 188 of the Act provides:

“When employees have genuinely agreed to an enterprise agreement

(1) An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:

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

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

(ii)  subsection 181(2) (which requires that employees not be requested to approve an enterprise agreement until 21 days after the last notice of employee representational rights is given); and 

(b) the agreement was made in accordance with whichever of subsection 182(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 agreement has not been genuinely agreed to by the employees.

(2) An enterprise agreement has also been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:

(a) the agreement would have been genuinely agreed to within the meaning of subsection (1) but for minor procedural or technical errors made in relation to the requirements mentioned in paragraph (1)(a) or (b), or the requirements of sections 173 and 174 relating to a notice of employee representational rights; and

(b) the employees covered by the agreement were not likely to have been disadvantaged by the errors, in relation to the requirements mentioned in paragraph (1)(a) or (b) or the requirements of sections 173 and 174.”

[22] Section 180 of the Act sets out several pre-approval steps that must be undertaken before employees who will be covered by an agreement are asked to approve the agreement. It relevantly provides:

Employees must be given copy of the agreement etc.

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

(a) during the access period for the agreement, the employees (the relevant employees) employed at the time who will be covered by the agreement are given a copy of the following materials:

(i) the written text of the agreement;

(ii) any other material incorporated by reference in the agreement; or

the relevant employees have access, throughout the access period for the agreement, to a copy of those materials.

. . .

(4) The access period for a proposed enterprise agreement is the 7-day period ending immediately before the start of the voting process referred to in subsection 181(1).

. . .

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

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

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

[23] It is apparent from these provisions that in order for the Commission Member dealing with an application for approval of an enterprise agreement to reach the necessary state of satisfaction that the agreement has been genuinely agreed to by the employees covered by it, the Member must be satisfied, inter alia, that the employer complied with subsections 180(2) and (5) in relation to the enterprise agreement. 

[24] In Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd (One Key Workforce (No 1)) Flick J considered the scope and substance of an employer’s obligation under s.180(5) of the Act.²⁰ We adopt the following analysis of his Honour’s reasons in Construction, Forestry, Maritime, Mining and Energy Union v Ditchfield Mining Services Pty Ltd: 21

“[64] Without repeating his Honour’s analysis, it seems to us that the following general propositions may be derived from One Key Workforce (No 1).

[65] First, the question whether an employer has complied with the obligation in s.180(5) depends on the circumstances of the case.

[66] Secondly, the focus of the enquiry whether an employer has complied with s.180(5) is on the steps taken to comply, and then to consider whether:

•  the steps taken were reasonable in the circumstances; and

•  these were all the reasonable steps that should have been taken in the circumstances.

[67] Thirdly, the object of the reasonable steps that are to be taken is to ensure that the terms of the agreement, and their effect, are explained to relevant employees in a manner that considers their particular circumstances and needs. This requires attention to the content of the explanation given.

[68] Fourthly, an employer does not fall short of complying with the obligation in s.180(5) merely because an employee does not understand the explanation provided.” [emphasis added]

[25] In One Key Workforce (No 2)^,22 the Full Court of the Federal Court explained why the content of the explanation given is an important consideration in assessing whether all reasonable steps were taken for the purposes of s.180(5):

“112 It is common ground that the Commission was never told what was said to the relevant employees. It was simply told that they had been given an explanation of the terms of the Agreement and the effect of those terms. In effect, this amounted to little more than a self-serving statement that the employer had complied with its obligation under the Act. OKW contended that the fact that it made such a statement in a statutory declaration was significant. It is not. As the CFMEU argued, whether all reasonable steps were taken to ensure that the effect of the terms of the Agreement was explained in an appropriate manner is a question of substance, not form. The recital of a conclusion on the very question the Commission was required (through an evaluative process) to determine is not, without more, a sufficient basis for the satisfaction of the statutory test. In other words, a bare statement by an employer that an explanation has been given is an inadequate foundation upon which to reach a state of satisfaction. OKW submitted that if the Commission had erred in this respect, it was an error in fact finding or an error in process, which would be an error within its jurisdiction. We reject this submission. In order to reach the requisite state of satisfaction that s 180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement. It is true that the Act does not expressly say that. But the question of whether an administrative decision-maker is required to consider a matter is not determined only by the express words of the Act; it may also be determined by implication from the subject-matter, scope and purpose of the Act: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39–44 (Mason J).

113 A consideration of the subject-matter, scope and purpose of the relevant provisions of the Fair Work Act indicates that the content of the explanation and the terms in which it was conveyed were relevant considerations to which the Commission was bound to have regard. The absence of that information meant that the Commission was not in a position to form the requisite state of satisfaction. Put differently, without knowing the content of the explanation, it was not open to the Commission to be satisfied that all reasonable steps had been taken to ensure that the terms and their effect had been explained to the employees who voted on the Agreement or that they had genuinely agreed to the Agreement.

114 The following considerations point inexorably to that conclusion.

115 The Commission was required to be satisfied that OKW had taken “all reasonable steps to ensure” that both the terms and the effect of the terms had been explained to the relevant employees as an element in the inquiry as to whether “genuine” agreement had been obtained from them. The agreed purpose of the obligation imposed on employers by s 180(5) is to enable the relevant employees to cast an informed vote: to know what it is they are being asked to agree to and to enable them to understand how wages and working conditions might be affected by voting in favour of the agreement.

116 In order for the employer to comply with the obligation it must take into account the particular circumstances and needs of those employees, including their cultural and linguistic backgrounds, their youth, and the absence of a bargaining representative. That is made explicit in s 180(6). How could the Commission decide whether the steps the employer had taken were “all reasonable steps” unless it knew what the employees had been told before they cast their votes? Without knowing the terms in which the explanation had been conveyed how could the Commission form an opinion on the sufficiency of the explanation, particularly having regard to the considerations mentioned in s 180(6)? Ultimately, how could the Commission decide that a genuine agreement had been reached without having evidence upon which it could answer both these questions?

117 As there was no evidence of these matters before the Commission, it necessarily follows that the Commission purported to be satisfied that OKW’s obligations under s 180(5) had been discharged without taking those matters into account. That was a jurisdictional error because the Commission did not have authority to make the decision unless its satisfaction had been informed by them. As is often the case, there are several ways of describing the error. It could be characterised as a misconception as to what the exercise of the statutory power entails or an error “as to an important attribute of the decision to be made”: Graham at [68]. Equally it could be seen as a misunderstanding on the part of the Commission of the nature of the opinion it was required to form: Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission (2000) 203 CLR 194 at [31] (Gleeson CJ, Gaudron and Hayne JJ). Had the Commissioner applied his mind to the question of what the putative explanation entailed, he would inevitably have inquired into its content and terms.”²³

[26] In the present case it is clear that the Deputy President had evidence which demonstrated that the Respondent had taken a number of steps to explain the terms of the Agreement to relevant employees 24 but the Deputy President did not have any material before him as to the content of any explanation given to employees about the terms of the Agreement or the effect of those terms. The omission of any such material was of particular significance in circumstances where there were material differences between (a) the Agreement and the 2016 Agreement and (b) the Agreement and the Award This was not a case of a general rollover with a discrete and obvious change – for example, a simple percentage wage increase - such that a sworn statement from the deponent of the F17 statutory declaration that the employer explained the difference between the proposed and current agreements necessarily conveyed what the content of that explanation was. In the present case, the content of the explanation of the new terms and their effect was not before the Deputy President. It follows that it was not open to the Deputy President to be satisfied that all reasonable steps had been taken to ensure that the terms of the Agreement, and their effect, had been explained to the employees who voted on the Agreement. Further, without having seen the summaries of changes provided to employees or any other material disclosing the content of any explanation given to one or more employees, it was not open to the Deputy President to conclude that “the explanatory material provided to employees was sufficient to explain its effect in detail”.25 Accordingly, we uphold appeal ground 2.

Permission to appeal

[27] For the reasons given, we are persuaded that it is in the public interest to grant permission to appeal because the Appellant has identified appealable error in respect of ground 2 and there is public interest in ensuring that the enterprise agreement approval requirements about which the Commission must be satisfied are properly considered, administered and applied.

Conclusion

[28] For the reasons stated we consider that it is appropriate to uphold the appeal on the basis of ground 2 of the notice of appeal. In those circumstances it is appropriate to quash the Decision. The Respondent might wish to supplement the material filed in support of the application to assuage the concerns as to compliance with, for example, s.180(5) of the Act, to consider an undertaking or to make a submission that the Agreement was nevertheless genuinely agreed to by the employees covered by the Agreement by reason of the Commission being able to be satisfied as to s.188(2). For those reasons we propose to remit the application for the approval of the Agreement to the Deputy President.

Orders

[29] We order as follows:

1. permission to appeal is granted;

2. the appeal is upheld on ground 2 of the Notice of Appeal;

3. the decision in [2020] FWCA 3329 to approve the McNab Constructions Pty Ltd Enterprise Agreement 2020 with undertakings is quashed; and

4. the application for the approval of the McNab Constructions Pty Ltd Enterprise Agreement 2020 is remitted to Deputy President Lake for redetermination.

DEPUTY PRESIDENT

Appearances:

L Saunders of counsel for the Appellant
M Procter for the Respondent

Hearing details:

2020
Melbourne
16 September

Printed by authority of the Commonwealth Government Printer

<PR722977>

1 [2020] FWCA 3329

2 Appeal Book at p 43

 3   Agreement at clause 3.1

 4   Agreement at clauses 3.1, 11.1, 11.4, 12, 8.2 and 11.8

 5   Decision at [4]

 6   Appeal Book at pp 59-81

 7   Appeal Book at p 87

 8   [2018] FWCFB 3610

 9   Appeal Book at pp 50 and 53

 10   Agreement at clause 11

 11   Agreement at clause 11.1

 12   Appeal Book at pp 50 and 53

 13   Agreement at clause 11

 14   Decision at [8]

 15   Decision at [10]-[76]

 16   Decision at [79]-[81]

 17   Decision at [82]

 18   Decision at [77]

 19   Appeal Book at pp 40-41

20 See in particular [2017] FCA 1266, (2017) 270 IR 410 at [94] – [109]

 21   [2019] FWCFB 4022; see also The Australian Workers' Union v Rigforce Pty Ltd [2019] FWCFB 6960 at [35]

22 [2018] FCAFC 77

23 Ibid at [112]-[117]

 24   Appeal Book at pp 40-42

 25   Decision at [77]