DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Construction, Forestry, Maritime, Mining and Energy Union
v
Adams Jones Pty Ltd
(C2021/631)

Appeal against decision [2021] FWCA 233 of Commissioner McKinnon at Melbourne on 19 January in matter number AG2020/3035.

[1] The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) has lodged an appeal, for which permission to appeal is required, against a decision made by Commissioner McKinnon on 19 January 2021 1 to approve the Adams Jones Pty Ltd Enterprise Agreement 20202 (2020 Agreement). The CFMMEU contends that the Commissioner erred in concluding that all reasonable steps were taken by the employer under the 2020 Agreement, Adams Jones Pty Ltd (Adams Jones), to explain the terms of the agreement and their effect to the employees who voted upon it as required by s 180(5) of the Fair Work Act 2009 (FW Act) and that the 2020 Agreement was “genuinely agreed” as required by s 186(2)(a), and consequently erred in approving the 2020 Agreement.

[2] The factual background to the matter is as follows. The predecessor agreement to the 2020 Agreement, the Adams Jones Pty Ltd Enterprise Agreement 2018 3 (2018 Agreement), took effect on 28 June 2019 and has a nominal expiry date of 31 July 2021. Clause 4.1.1.1 of the 2018 Agreement provides for initial rates of pay operative on and from 1 August 2018, and then increased rates of pay operative on and from 1 August 2019 and then 1 August 2020. The hourly rates of pay operative on and from 1 August 2020 prescribed by clause 4.1.1.1 are:

[3] The above rates of pay represent an increase of 3 percent upon the rates payable on and from 1 August 2019.

[4] The 2020 Agreement was made on 25 September 2020 - that is, well prior to the nominal expiry date of the 2018 Agreement on 31 July 2021. Clause 4.1.1.1 of the 2020 Agreement provides for the following wage rates:

[5] The rates payable under the 2020 Agreement from the date of its operation are less than the rates payable under the 2018 Agreement on and from 1 August 2020. The rates payable under the 2020 Agreement on and from 1 August 2021 are approximately one percent more than the rates payable under the 2018 Agreement on and from 1 August 2020.

[6] Section 58(1) of the FW Act provides that only one enterprise agreement can apply to an employee at a particular time. Section 58(2) provides:

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

(2)  If:

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

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

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

then:

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

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

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

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

[7] The relevant effect of s 58 in this matter is that although, upon approval, the 2020 Agreement would come into operation, it does not apply to any employee of Adams Jones (and thus have actual effect) until after the nominal expiry date of the 2018 Agreement on 31 July 2021 has passed. The 2020 Agreement would therefore commence to apply to the relevant employees of Adams Jones on 1 August 2021. The practical consequence of this for the pay of the relevant employees is that, after approval of the 2020 Agreement, they would be entitled to be paid:

(1) the rates prescribed by the 2018 Agreement as payable on and from 1 August 2020 up to 31 July 2021; and

(2) the rates prescribed by the 2020 Agreement as payable on and from 1 August 2021 from that date onwards.

[8] Section 180(5)(a) of the FW Act requires that an employer must, before requesting relevant employees to vote to approve a proposed enterprise agreement, “take all reasonable steps to ensure that … the terms of the agreement, and the effect of those terms, are explained to the relevant employees”. By virtue of s 188(1)(a)(i), compliance with s 180(5) is a required element of employees having genuinely agreed to an enterprise agreement (subject to s 188(2)). Under s 186(2)(a), the Commission must be satisfied that an agreement that is not a greenfields agreement has been genuinely agreed to by the employees in order to approve the agreement (subject to s 190).

[9] In his Form F17 declaration made in support of Adams Jones’ application for approval of the 2020 Agreement, Mr Roland Jones, Director of Adams Jones, identified the steps taken to comply with s 180(5). These included that:

•  at a meeting with employees on 14 August 2020, a “Cover letter with a tracked version of the new EBA comparing the old EBA and the new was given to all employees”;

•  “information” was posted to each employee’s home on 31 August 2020 which included “the employee’s [sic] proposal to the company and the company’s response to their items”;

•  a meeting was held with employees on 4 September 2020 at which there were further discussions, “several questions were raised and answered”, and that agreement was reached on the final amendments to the agreement which would go to the ballot. The declaration also stated that the final version of the proposed agreement was sent to each employee on 9 September 2020 together with a “Letter detailing the Ballot details”.

[10] The “Cover letter” referred to as having been provided at the meeting on 14 August 2020 appears to have been a letter dated 13 August 2020 entitled “PROPOSED ADAMS JONES PTY LTD ENTERPRISE AGREEMENT 2020 - Summary of Changes”. In respect of the wage rates in the proposed agreement, the document stated:

“Wage Rates Clause 4.1.1.1

All rates proposed to be increased by 2% and 2%”

(emphasis added)

[11] The “information” document that was sent to employees on 31 August 2020 stated, in respect of the wage rates in the proposed agreement:

“Wage Rates – While we expect to remain reasonably busy for the next 18 months or so due to the various government stimulus measures being rolled out, we do not see any prospect of us being able to increase our charge out rates during that period. Also, the highly probable economic slowdown due to the pandemic makes any prediction beyond that virtually impossible.

For those reasons we maintain our increased wages offer of 2 x 2% increases.” (emphasis added)

[12] At the hearing before the Commissioner on 18 November 2020, Mr Jones (who represented Adams Jones) was asked by the Commissioner whether anybody had asked him about the pay rates in the 2020 Agreement. The following exchange then occurred:

MR JONES: There was a fairly - we proposed 2 per cent increases within the life of this agreement. The guys came back obviously keen for a little bit more than that. In the current circumstances, we were - I think we put ours up to 2 and a half per cent for the first year, and then 2 per cent for the second, given the unpredictability of everything at the moment. And that was agreed.

THE COMMISSIONER: Did you tell them when the 2 and a half per cent would take effect? When it would be paid?

MR JONES: Pretty much as soon as we had this document finalised and ready to submit. But prior to it being endorsed.

THE COMMISSIONER: And you had it ready to submit?

MR JONES: Yes. Well, (indistinct).

THE COMMISSIONER: And have you passed on the rates?

MR JONES: Yes.

THE COMMISSIONER: Can I just ask you about the agreement rates? If you have a look at just the tables in 4.1 of this agreement and your old agreement.

MR JONES: Yes.

THE COMMISSIONER: There seems to be - and I'm sure there's an explanation, but I just don't understand it. The rates in some cases are actually lower than the rates in the current agreement. So in the old agreement there was, on and from 1 August this year, 37.50. And under the new agreement, straight away it's 37.14.

MR JONES: I don't have that 37.50.

THE COMMISSIONER: Don't you?

MR JONES: I haven't got it.

THE COMMISSIONER: What have you got?

MR JONES: 36.41.

THE COMMISSIONER: I've got that for on and from 1 August 2019.

MR JONES: Yes.

THE COMMISSIONER: And then is there, in your version, a rate for on and from 1 August 2020? In the old agreement?

MR JONES: No.

THE COMMISSIONER: Okay.

MR JONES: They don't have dates next to it. Mine's - the one I have in my hand has 12 months from date of operation and then 24 months from date of operation.

THE COMMISSIONER: What we might do, then, is I might send the agreement that the commission approved on the website to you, and I might ask you to just respond to that issue. 4 (emphasis added)

[13] We observe that Mr Jones’ reference to a revised proposal of a first increase of 2½ percent, payable upon finalisation of the new agreement, and a second increase of 2 percent, would seem to align with the 4 September 2020 meeting referred to in Mr Jones’ declaration. The issue of the Commissioner and Mr Jones having different versions of the 2018 Agreement was not taken any further prior to the Commissioner issuing her decision to approve the 2020 Agreement.

The decision

[14] In her decision, the Commissioner dealt with the issue of whether the 2020 Agreement had been genuinely agreed, as required by s 186(2)(a), as follows:

“[2] The Construction, Forestry, Maritime, Mining and Energy Union objects to approval of the Agreement, including on the basis that the 2018 Agreement has not been terminated and is still some time from reaching its nominal expiry date. It submits that the effect of this does not appear to have been explained to employees, with the result that the Agreement was not genuinely agreed to by employees.

[3] I do not accept the submission. The nominal expiry date is set out a term clearly in the Agreement, just as the nominal expiry date of the 2018 Agreement has been set out in that instrument. Whatever the legal position might be, Adams Jones and its employees have operated on the basis that the terms of the Agreement will be given practical effect once the Agreement is approved. Indeed, the very reason for the Agreement having been made when it was that the company reviews rates of pay in August/September each year having regard to a longstanding arrangement with its employees that pay rises will be passed on each September. The first pay rise under the Agreement has already been passed on to employees, at a time when the Agreement had not yet been approved.

[4] This is not a case where employees were told one thing in the making of the Agreement and given something quite different. The company is a small business and the vast majority of its employees have been employed for more than 10 years. This is the fourth enterprise agreement in largely similar terms and employees are familiar with its content.

[5] The Agreement was explained to employees with changes to the earlier agreement highlighted both in the document itself and in a cover letter. Evidence of the steps taken to explain the Agreement and its effect is provided both in the statutory declaration of Roley Jones, Director, and in supporting materials filed with the application both at the time it was made and after that time. The Agreement was approved unanimously by employees who participated in the voting process.

[6] I am satisfied that the Agreement has been genuinely agreed.”

Appeal submissions

[15] The CFMMEU submitted that the evidence was incapable of supporting a conclusion that s 180(5) had been complied with and, hence, it was not reasonably open to conclude that the requirement for genuine agreement in s 186(2)(a) had been satisfied. Adams Jones had, in explaining the proposed 2020 Agreement to employees, been working off an incorrect copy of the 2018 Agreement which did not contain the increased rates payable from 1 August 2020 and, as a consequence, misrepresented the quantum of the wage increases for which the 2020 Agreement would provide. Nor, it was submitted, did Adams Jones explain to the employees that, notwithstanding that clause 1.6 provided that the 2020 Agreement would come into effect from the date of operation determined by the Commission, the effect of s 58 of the FW Act was that the 2020 Agreement would not apply to employees until 1 August 2021.

[16] The CFMMEU further submitted that the practice adopted by Adams Jones in respect of pay could not alter the legal effect of the 2020 Agreement and the requirement to explain that legal effect, nor could the failure to properly explain the 2020 Agreement be cured by an undertaking.

[17] Adams Jones accepted at the hearing before us that it had made an erroneous representation concerning the pay increases that the 2020 Agreement provided for. It said that at the time it had an incorrect copy of the 2018 Agreement which did not contain the higher rates payable on and from 1 August 2020, with the result that when it explained the pay rates in the 2020 Agreement, it erroneously compared them to the lower 2019 rates in the 2018 Agreement. We were informed that when Adams Jones became aware of this error as a consequence of the hearing before the Commissioner, it then back-paid employees the amounts owing under the 2018 Agreement.

Consideration

[18] We consider, regrettably, that permission to appeal should be granted and that the appeal must be upheld. The facts which we have set out above, and which are not in contest, make it pellucidly clear that Adams Jones made misrepresentations to employees about the quantum of the wage increases to which they would be entitled under the 2020 Agreement when it sought to explain the agreement to them prior to them voting to approve it. A correct explanation of the effect of clause 4.1.1.1 of the 2020 Agreement would have required employees to be told that, once the effect of s 58 of the FW Act was taken into account, it provided them with a wage increase of approximately one percent over the life of the agreement compared to the wage rates they were legally entitled to under the 2018 Agreement at the time the explanation was given. Instead, they were told they would receive a first wage increase of 2 percent, or perhaps 2½ percent, and a second wage increase of 2 percent. Contrary to what the Commissioner said in paragraph [4] of the decision, it transpires that this was in fact a case where employees were told one thing in the making of the 2020 Agreement and given something quite different. Nor was it the case, contrary to the finding of the Commissioner in paragraph [3], that the “first pay rise” under the 2020 Agreement has been passed on to employees; all that has been passed on to them is the payment of the third pay rise payable under the 2018 Agreement.

[19] We readily accept that the misrepresentations were not made intentionally, but rather on the basis of a misapprehension about the existing wage entitlements of employees under the 2018 Agreement. However, that the misrepresentations were made unintentionally does not make any difference. Adams Jones had an obligation under s 180(5) to take all reasonable steps to explain the terms of the 2020 Agreement and their effect to the relevant employees. As was said by the Full Bench in AWU v Rigforce Pty Ltd 5 in relation to a very similar factual scenario:

“[39] … The existing minimum pay entitlements of the three employees immediately before they made the RFD Agreement were those contained in the ICS Agreement. Any explanation of the effect of the terms concerning the rates of pay in the RFD Agreement necessarily required the identification of how the pre-existing rates of pay in the ICS Agreement were to be altered by the RFD Agreement. It is a statement of the obvious that rates of pay are, to employees, likely to be the most fundamentally important aspect of an enterprise agreement…

[40] In the circumstances, the reasonable step required to be taken by Rigforce for the purpose of s 180(5) was to give an accurate explanation of any change in the quantum of the rates of pay that would be effected if the RFD Agreement displaced the ICS Agreement…”

[20] We similarly consider that a reasonable step required to be taken to explain clause 4.1.1.1 of the 2020 Agreement was to provide an accurate quantification of the adjustment to wage rates which the clause would effect compared to the wage rates applicable under the 2018 Agreement at the relevant time. This step was not taken. It is not necessary for us to explore how it came to be that Mr Jones was working off an incorrect version of the 2018 Agreement at the time he explained the 2020 Agreement to the employees; it is sufficient to say that it would clearly have been a reasonable step for him to have based his explanation upon a correct copy of the 2018 Agreement.

[21] Because the approval requirement in s 186(2)(a) depends upon the satisfaction of the Commission that the agreement has been genuinely agreed to by the relevant employees, it is apparent that the decision required to be made as to whether the requirement has been met is discretionary in nature and therefore that the House v The King standard of appellate review applies. 6 For the reasons stated, we conclude that the Commissioner made a factual error in concluding that there had been no misrepresentation about the pay rises under the 2020 Agreement. The misrepresentations necessarily meant that Adams Jones had not complied with s 180(5), with the consequence that it was not reasonably open to be satisfied that the genuine requirement in s 186(2)(a) was met. It was not suggested by Adams Jones at first instance or on appeal that a finding could be made that the 2020 Agreement was genuinely agreed based on satisfaction as to the matters in s 188(2). In any event, while we consider that the misrepresentations made by Adams Jones were not deliberate but were an error on its part, this error cannot on any view be characterised as a “minor procedural or technical” error such as to make s 188(2) applicable.

[22] Accordingly, for the reasons stated, the Commissioner erred in approving the 2020 Agreement on the basis of her satisfaction that the s 186(2)(a) requirement was met. Because this error pertains to the power of the Commission to approve the 2020 Agreement, we consider that granting permission to appeal and upholding the appeal is the appropriate and necessary course.

Reconsideration of the application for approval of the 2020 Agreement

[23] Having upheld the appeal, we will proceed to re-determine Adams Jones’ application for approval of the 2020 Agreement. For the reasons stated, we are not satisfied that the 2020 Agreement was genuinely agreed, as required by s 186(2)(a). Adams Jones did not propose any undertaking pursuant to s 190 to meet this concern. We have given thought to whether we should ourselves formulate an undertaking for Adams Jones’ consideration, but we have concluded that this would not be an appropriate course in all the circumstances. Accordingly, the application must be dismissed.

Orders

[24] We order as follows:

(1) Permission to appeal is granted.

(2) The appeal is upheld.

(3) The decision ([2021] FWCA 233) is quashed.

(4) The application for approval of the Adams Jones Pty Ltd Enterprise Agreement 2020 in matter AG2020/3035 is dismissed.

VICE PRESIDENT

Appearances:

Mr P Russell on behalf of the appellant.
Mr R Jones on behalf of the respondent.

Hearing details:

2021.
Sydney (via video-link).

24 March.

Printed by authority of the Commonwealth Government Printer

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 1   [2021] FWCA 233

 2   AE510128

 3   AE504069

 4   Transcript, 18 November 2020, PNs 198-219

 5   [2019] FWCFB 6960

 6   [1936] HCA 45, 55 CLR 483 at 504-505; Coal and Allied Operations Pty Ltd v AIRC [2000] HCA 47, 203 CLR 194 at [19]-[21] per Gleeson CJ, Gaudron and Hayne JJ; Minister for Immigration and Border Protection v SZVFW [2018] HCA 30, 264 CLR 541 at [35]-[50] per Gageler J