Scope – who will be covered? | Enterprise agreements benchbook

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Scope – who will be covered?

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Introduction

See Fair Work Act 2009 ss.186(3)–(3A)

The group of employees to be covered by a proposed agreement is chosen when the employer and the employee bargaining representatives agree on a particular scope or the bargaining representatives commence bargaining on a shared assumption as to scope.^[1]

The group of employees to be covered by a proposed agreement (ie the scope of the agreement) will typically be chosen at or shortly after the commencement of bargaining. If there is disagreement between bargaining representatives on the scope of the agreement, then the scope itself will become a matter for bargaining.^[2]

Before approving an agreement, the Fair Work Commission must be satisfied that the group of employees the agreement covers was fairly chosen.^[3]

Meaning of 'fairly chosen'

Whilst the Commission's decision as to whether or not the group of employees covered by the agreement was fairly chosen involves a degree of subjectivity or value judgement,^[4] in circumstances where an agreement does not cover all of the employees of the employer(s) covered by the agreement, the Commission must consider whether the group of employees covered by the agreement is:

geographically
operationally, or
organisationally distinct.

Geographical distinctness is concerned with the geographical separateness of the employer's various worksites or work locations, rather than a separation of workplaces within the same worksite.^[5]

Factors to be considered

Generally, the selection of the group of employees to be covered by an agreement on some objective basis (as opposed to an arbitrary or subjective basis) is likely to point to a conclusion that the group was fairly chosen.^[6]

However, depending on the circumstances of the particular case, there may be more than one way of fairly choosing the group of employees to be covered by a proposed enterprise agreement.^[7] Different scope provisions may be equally described as fair in the sense that no obvious unfairness arises from their application.

The role of the Commission is not to determine the scope of the agreement, but rather to guard against unfairness by being satisfied that the group can be described, in all the circumstances as fairly chosen.^[8]

When determining whether a group of employees has been fairly chosen, the Commission may have regard to matters such as:

the way in which the employer has chosen to organise its enterprise, and
whether it is reasonable for the excluded employees to be covered by the enterprise agreement, having regard to the nature of the work they perform and the organisational and operational relationship between them and the employees who will be covered by the enterprise agreement.

If a group of employees covered by the agreement are geographically, operationally or organisationally distinct, this would point in favour of a finding that the group of employees was fairly chosen. However, whether or not the group of employees covered by the agreement is geographically, operationally or organisationally distinct is not decisive, rather it is a matter to be given due weight, having regard to all other relevant considerations.^[9]

An illustrative example is provided in the Explanatory Memorandum:^[10]

A single employer operates five organisationally distinct units within its enterprise. The employer makes an agreement with all of the employees in two organisationally distinct units, as well as ten employees who are the only non-union members within … another organisational unit that has a total of 30 employees. The Commission is required to decide whether the group of employees covered by the agreement is fairly chosen.

In this example, the group of employees covered by the agreement is likely to be unfair, particularly as the employees were unfairly chosen.

Related information

Case examples

Employees fairly chosen

3 distinct occupational groups of employees

Re ALDI Foods Pty Ltd [2013] FWC 3495 (Boulton J, 3 June 2013).

An application was made for the approval of three single-enterprise agreements, the Minchinbury Agreement 2012, the Stapylton Agreement 2012 and the Derrimut Agreement 2012. The SDA supported the approval of each agreement. The NUW-NSW and the TWU-NSW opposed the approval of the Minchinbury Agreement. The TWU opposed the approval of the Derrimut Agreement and the Stapylton Agreement.

The objections of the TWU-NSW and NUW-NSW were mainly raised in relation to the Minchinbury Agreement, however they are also relevant to the consideration of the Stapylton Agreement and the Derrimut Agreement as all the Agreements had similar terms and conditions. It was recognised that there was sufficient commonality between the provisions of the Agreements such that if any of the objections and concerns raised prevented approval of the Minchinbury Agreement, the Commission would be bound to consider them in relation to the other agreements.

The TWU-NSW submitted that the group of employees covered by the Minchinbury Agreement was not fairly chosen. The agreement applied to three distinct occupational groups of employees: store employees, warehouse employees and transport operators. The agreement provided for some common provisions applicable to all employees (clauses 1-32) and then provided specific sets of conditions for store employees, warehouse employees and transport operators (Schedules 1-8).

Having regard to all the submissions and material, the Commission came to the conclusion that the group of employees covered by the Minchinbury Agreement was fairly chosen. The group of employees was operationally and organisationally distinct. The group was also geographically distinct from other ALDI employees in similar classifications in that they worked in ALDI’s Minchinbury Region. The selection of the group was not based on employee characteristics such as date of employment, age or gender, and was not arbitrary or discriminatory.

The Commission found that merely because it is asserted that some of the transport employees or their union might have priorities which differ from other ALDI employees or other unions involved in the bargaining process, or that those employees might have done better in negotiations for a separate agreement, does not of itself warrant a conclusion that the group of employees was not fairly chosen or that the selection of the group had the effect of undermining collective bargaining. Agreements approved.

Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd

Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd [2015] FCAFC 16 (24 February 2015).

John Holland Pty Ltd (the employer) made an application for approval of an enterprise agreement that, at the time of the application, would have covered only three employees. It contained a coverage term that specified that the agreement covered all employees of the employer, but did not cover employees covered by a project or site-specific agreement.

At first instance, the Commission approved the enterprise agreement. The CFMEU appealed that decision and the appeal was upheld by the Full Bench. In upholding the appeal, the Full Bench concluded that the group of employees was not fairly chosen, on the basis that:

it would not be possible to identify with any certainty the group of employees to be covered by the agreement, and
the 3 employees had bargained for an agreement which could potentially cover a very broad number of employees in future, and could potentially undermine those employees' rights to collectively bargain.

The employer applied to Federal Court, seeking judicial review of the Full Bench's decision. The Federal Court determined that the Full Bench had fallen into error in interpreting the relevant provisions of the Fair Work Act.

The Court took the view that, in determining if a group of employees was fairly chosen, 'the question is whether the parties that made the agreement acted fairly in choosing those employees to be covered by the agreement. The question of fairness of choice arises because those employees who are ‘chosen’ to be covered by the agreement will, ex hypothesi, be the better off overall than those employees who were not ‘chosen’ to be covered by the agreement'.

The Court also stated that the words 'was fairly chosen' should not be construed as meaning 'was chosen in a manner which would not undermine collective bargaining'. Accordingly, the Federal Court quashed the decision of the Full Bench.

The CFMEU then appealed to the Full Court of the Federal Court which upheld the decision of the Primary Judge and dismissed the appeal.

Re Stadium Australia Operations Pty Ltd T/A ANZ Stadium

Re Stadium Australia Operations Pty Ltd T/A ANZ Stadium [2010] FWAA 3758 (Lawler VP, 26 May 2010).

Stadium Australia (the employer) made an application for approval of an enterprise agreement covering casual employees who undertook hospitality, retail, customer service and food and beverage activities. Food and beverage staff comprised three quarters of the employees covered, with the remaining staff being customer service orientated.

A number of customer service employees objected to the approval of the enterprise agreement. They submitted that the agreement would result in their pay decreasing compared to existing pay levels, while food and beverage employees received pay increases. They argued that they were subject to the 'tyranny of the majority' in the sense that, even if all customer service staff voted no, the composition of the workforce was such that food and beverage staff were in a position to approve the agreement.

The Commission determined that the group chosen consisted of a series of operationally distinct subgroups all of whom work at the one geographical location. The Commission was not persuaded that the group covered was chosen with the intent of prejudicing customer service staff and therefore was satisfied that the group of employees had been fairly chosen.

The Commission stated that the appropriate remedy for the customer service staff, if they were being unfairly disadvantaged, was to apply for a scope order. The Commission noted that this was 'cold comfort’ to the customer service employees in this particular case, as scope orders are only available before an enterprise agreement has been made.

Cimeco Pty Ltd v Construction, Forestry, Mining and Energy Union

Cimeco Pty Ltd v Construction, Forestry, Mining and Energy Union [2012] FWAFB 2206 (Ross J, Hamilton DP, Spencer C, 12 April 2012), [(2012) 219 IR 139].

Cimeco made an application for the approval of the Cimeco Pty Ltd Midwest and Goldfields Regional Construction Projects Agreement 2011. The employees covered by the agreement were persons employed by Cimeco engaged to perform construction project works in a geographically distinct area. The geographically distinct area concerned was part of the Midwest and Goldfields Regions of Western Australia.

The Commission held that the practice of Cimeco was to deploy employees from site to site, finding that Cimeco wished to operate on both a site specific basis, and on a geographical basis. Given the history and practices of Cimeco, and their custom and practices for resource project construction work, the Commission considered that for Cimeco to make an agreement of a geographical nature, it should include a much more representative group of existing employees for that group to be regarded as fairly chosen. The Commission, at first instance, refused the application to approve the agreement.

On appeal the Full Bench considered the term ‘fairly chosen’ in detail and ultimately found that the first instance decision was erroneous. The Full Bench stated that whether or not the group of employees covered by the agreement is geographically, operationally or organisationally distinct is not decisive, rather it is a matter to be given due weight, having regard to all other relevant considerations. The other relevant considerations will vary from case to case.

The Full Bench also stated that, when considering the issue, it is not only the interests of employees who will be covered that are relevant, but also the interests of employees who are excluded from coverage.

Ultimately, the Full Bench determined that the Commission had fallen into error by concluding that, in order to be fairly chosen, the group should have been a much more representative group of existing employees. The Full Bench considered that the Commission should have focused on the group of employees that were covered by the agreement at the time of the vote, rather than to look at a ‘future likelihood’.

The application for approval was remitted to a Commission member for determination.

Exclusions

Enterprise agreement will not apply to employees covered by individual agreements

If an employee is covered by an individual agreement made under previous laws, such as an Australian Workplace Agreement (AWA) or an Individual Transitional Employment Agreement (ITEA), then that individual agreement will continue to apply to them.^[11] While such an individual agreement applies to an employee, or the employer in relation to the employee, an enterprise agreement does not apply to them.^[12]

For an enterprise agreement to apply to the employee, it will be necessary for the individual agreement to be terminated or conditionally terminated.

Effect of individual agreements on bargaining

Certain employees may be covered by an individual agreement made under previous legislative schemes, such as an Australian Workplace Agreement (AWA) or an Individual Transitional Employment Agreement (ITEA).

As all individual agreements made under the Workplace Relations Act 1996 (Cth) (and preserved individual State agreements) have passed their nominal expiry date, an employee who is covered by an individual agreement will be eligible to be represented in bargaining for the proposed enterprise agreement (and to vote on the proposed enterprise agreement).

However, for an enterprise agreement to apply to the employee, it will be necessary for the individual agreement to be terminated or conditionally terminated.