Appeal by United Security Enforcement Corp Pty Ltd t/a United Security Enforcement Corporation

[2020] FWCFB 5090

[2020] FWCFB 5090

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.604 - Appeal of decisions

Appeal by United Security Enforcement Corp Pty Ltd t/a United Security Enforcement Corporation

(C2020/4078)

VICE PRESIDENT HATCHER
deputy president sams
deputy president asbury SYDNEY, 2 OCTOBER 2020

Appeal against decision [2020] FWC 2264 of Commissioner Williams at Perth on 12 May 2020 in matter number AG2019/4172.

Introduction and background

1. United Security Enforcement Corp Pty Ltd (United Security) has lodged an appeal, for which permission to appeal is required, against a decision of Commissioner Williams issued on 12 May 2020[1] (decision) in which he dismissed United Security’s application for the approval of the United Security Enforcement Corp Pty Ltd ABN 56 087 005 843 Enterprise Bargaining Agreement 2019 (Agreement). In dismissing the application, the Commissioner concluded that the Agreement did not pass the better off overall test (BOOT), as required by s 186(2)(d) of the Fair Work Act 2009 (FW Act), and that he was not satisfied for the purpose of s 189(2) of the FW Act that the approval of the Agreement would not be contrary to the public interest because of exceptional circumstances notwithstanding that it did not pass the BOOT. In its appeal, United Security accepts that the Agreement does not pass the BOOT but contends that the Commissioner erred in not approving the Agreement pursuant to s 189 of the FW Act.

1. This appeal was originally allocated to a Full Bench consisting of Vice President Hatcher, Deputy President Asbury and Deputy President Kovacic, and was the subject of a hearing on 23 July 2020. Sadly, on 31 July 2020, Deputy President Kovacic passed away. On 12 August 2020, the President of the Commission, Ross J, reconstituted the bench to consist of Vice President Hatcher, Deputy President Sams and Deputy President Asbury. The parties were informed of this the same day, and advised that Deputy President Sams would read the submissions and other materials filed by the parties, and would join in the decision-making process of the reconstituted Full Bench on that basis. The parties were given an opportunity to object to this course, but no communication of any objection was received, and accordingly the matter has been determined on the basis described.

1. The background to the matter is as follows. United Security is a business that was registered as a corporation on 2 October 2009 and operates in the security industry in Western Australia. It primarily performs crowd control work and also has contracts for static guards and mobile patrols. The work it performs is covered by the Security Services Industry Award 2010 (Security Award).

1. The Form F17 statutory declaration that accompanied United Security’s application for the approval of the Agreement stated that:

• the notification time for the Agreement was 19 September 2019;

• the Agreement was approved by employees in a vote conducted on 22 October 2019;

• six casual employees, all of whom were casual employees from a non-English speaking background, were covered by the Agreement at the time, and all of them cast a valid vote in favour of approval of the Agreement;

• the Agreement had the classification of “Crowd Controller/Security Guard” which corresponded with classifications 1-5 in the Security Award;

• the Agreement did not contain any terms or conditions that were more beneficial than the Security Award;

• the Agreement contain terms and conditions of employment that were less beneficial than the Security Award, namely “All employees are affected. One Flat rate of pay”; and

• the Agreement omitted entitlements conferred by the Security Award, namely “Allowance and Expenses”.

1. The declaration also answered “Yes” to the question “If you think that the agreement does not pass the better off overall test, are there exceptional circumstances the Commission should consider when deciding whether approving the agreement would not be contrary to the public interest?”, and identified the exceptional circumstances as follows:

“The agreement is based on a current agreement(s) already operating. Very few operators in W.A. in particular, but also in other States cannot get work as they cannot compete with these agreements. The workers who are a party to this agreement also work for other operators and get paid less than the amount offered in this agreement. The bottom line for our company and these workers is if we are unable to secure this agreement, we will have no business, and the workers will have no work, or our current work will be obtained by one of the companies mentioned above, and the workers will be paid this rate or less anyway. The workers know the position fully and are happy to talk to Fair Work if contacted.”

1. Clause 2.2 of the Agreement provides that it will apply to employees of United Security in the classifications set out in the position set out in clause 7, which clause in turn refers to the classification provided for in Schedule 2 (there is no Schedule 1).  Schedule 2 of the Agreement provides for two classifications: Crowd Controller and Security Guard. For each classification, the Schedule prescribes a “Gross Hourly Rate of Pay” of $27.38 for ordinary hours from Monday to Sunday. Clause 4.2 provides that employment under the Agreement “will be of a casual nature and that each engagement will be considered a separate contract of employment”, and clause 4.5 provides that employment is terminable by United Security on one hour’s notice or payment in lieu thereof. Clause 8 provides that the hours of work will be determined by United Security “according to client requirements and employee availability”, that ordinary hours will be a maximum of 38 per week, and may be rostered at any time throughout the 24 hours of the day and on any 7 days of the week (Sunday to Saturday). Clause 9 provides that all hours worked in excess of 38 hours per week shall be “additional hours”, that United Security may require employees to work reasonable additional hours, and that additional hours would be paid at the additional hours rate in accordance with Schedule 2; however, Schedule 2 does not provide for an additional hours rate. Clause 10.1 provides that the rates of pay under the Agreement include the casual loading of 25%, and will be adjusted in line with any adjustments to award minimum rates made by the Commission. The Agreement does not provide for a casual minimum engagement period; clause 11 provides that employees will be paid on an hourly basis and will be paid for all hours worked, but will not be paid for hours not worked. Clause 12 deals with public holidays, and clause 12.3 provides that all time worked on a public holiday will be paid the rate in accordance with Schedule 2; however, Schedule 2 does not specify a public holiday rate.

1. At the time the application for the Agreement was filed, the Security Award provided for the following rates of pay for casual employees (inclusive of the casual loading):

Day	Night work	Permanent night work	Saturday	Sunday	Public holiday
$	$	$	$	$	$
Security Officer Level 1	27.38	32.13	33.95	38.33	49.28	60.23
Security Officer Level 2	28.16	33.05	34.92	39.43	50.69	61.96
Security Officer Level 3	28.64	33.61	35.51	40.09	51.55	63.00
Security Officer Level 4	29.11	34.17	36.10	40.76	52.40	64.05
Security Officer Level 5	30.06	35.28	37.28	42.09	54.11	66.14

1. It is readily apparent that in no scenario is the rate of pay under the Agreement higher than the Security Award and, except in respect of an employee performing day work who would be classified as a Security Officer Level 1 under the Security Award, the rate under the Agreement is significantly lower. The Security Award also provides for a range of benefits not provided for in the Agreement, including a 4-hour minimum engagement for casual employees, overtime penalty-rate entitlements and a range of allowances.

Statutory framework

1. Part 2-4 of the FW Act contains a scheme for the making and approval by the Commission of enterprise agreements. Enterprise agreements can be made between employers and their employees in the various scenarios identified in s 172. For an employer to make an enterprise agreement, it must be a “national system employer” as defined in s 14. In respect of private sector employers in any State, the relevant effect of s 14 is that a “national system employer” must be a “constitutional corporation” – that is, a corporation to which s 51(xx) of the Constitution applies. Sections 30D and 30N of the FW Act contain extended meanings of “national system employer” in respect of States which have referred industrial relation powers to the Commonwealth. Relevant to this appeal, Western Australia is not a “referring State”, with the consequence that non-incorporated private sector employers in that State are not national system employers. Part 2-4 of the FW Act does not apply to such employers, nor (for the same reason) do Pt 2-2, The National Employment Standards or Pt 2-3, Modern Awards. Such employers are generally regulated in respect of employment and industrial relations matters by the Industrial Relations Act 1979 (WA) (WA IR Act).

1. Section 186 provides that if an application for approval of an enterprise agreement is made, the Commission must approve the agreement under the section if the requirements of the section and s 187 are met. One of the requirements, in s 186(2)(d), is that the Commission must be satisfied that the agreement passes the BOOT. Section 193(1) provides when a non-greenfields agreement passes the BOOT as follows:

(1)  An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.

1. The “relevant modern award” is the award that would cover an actual or prospective employee covered by the agreement as at the “test time” (s 193(4) and (5)). The “test time” is the time the application for approval of the agreement was made (s 193(6)).

1. Section 189 provides an avenue for the approval of enterprise agreements which do not pass the BOOT. It provides:

189 FWC may approve an enterprise agreement that does not pass better off overall test - public interest test

Application of this section

(1)  This section applies if:

(a)  the FWC is not required to approve an enterprise agreement under section 186; and

(b)  the only reason for this is that the FWC is not satisfied that the agreement passes the better off overall test.

Approval of agreement if not contrary to the public interest

(2)  The FWC may approve the agreement under this section if the FWC is satisfied that, because of exceptional circumstances, the approval of the agreement would not be contrary to the public interest.

Note:          The FWC may approve an enterprise agreement under this section with undertakings (see section 190).

(3)  An example of a case in which the FWC may be satisfied of the matter referred to in subsection (2) is where the agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the enterprise of an employer covered by the agreement.

Nominal expiry date

(4)  The nominal expiry dateof an enterprise agreement approved by the FWC under this section is the earlier of the following:

(a)  the date specified in the agreement as the nominal expiry date of the agreement;

(b)  2 years after the day on which the FWC approved the agreement.

1. Two other aspects of the statutory scheme are relevant to this appeal. First, Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act) provides, relevantly, for the continued operation of identified categories of collective agreements made prior to the commencement of the FW Act as “transitional instruments”. These include workplace agreements, pre-reform certified agreements and old IR agreements which had effect under the Workplace Relations Act 1996 (WR Act). Although Schedule 3 provides “Sunsetting Rules” for various types of transitional instruments, these do not apply to the types of collective agreements referred to where the employer is a national system employer. Such preserved collective agreements exclude the operation of, or prevail over to the extent of inconsistency, modern awards (Schedule 3 item 28). They continue to operate indefinitely unless terminated after their nominal expiry date by the Commission upon application made under s 225 of the FW Act by an employer, employee or employee organisation covered by the agreement (Schedule 3 item 16).

1. Second, s 206 operates to ensure that the rates of pay in an enterprise agreement, once approved do not fall below the base rates of pay provided for in the relevant modern award. It relevantly provides:

206 Base rate of pay under an enterprise agreement must not be less than the modern award rate or the national minimum wage order rate etc.

If an employee is covered by a modern award that is in operation

(1)  If:

(a)  an enterprise agreement applies to an employee; and

(b)  a modern award that is in operation covers the employee;

the base rate of pay payable to the employee under the agreement (the agreement rate ) must not be less than the base rate of pay that would be payable to the employee under the modern award (the award rate ) if the modern award applied to the employee.

(2)  If the agreement rate is less than the award rate, the agreement has effect in relation to the employee as if the agreement rate were equal to the award rate.

. . .

1. The expression “base rate of pay” is assigned a “general meaning” in s 16(1) of the FW Act as follows:

General meaning

(1)  The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:

(a)  incentive-based payments and bonuses;

(b)  loadings;

(c)  monetary allowances;

(d)  overtime or penalty rates;

(e)  any other separately identifiable amounts.

1. The general exclusion of “loadings” in s 16(1)(b) would appear to mean that, for a casual employee, the casual loading is not included in the base rate for the purpose of s 206.

1. Item 13 of Schedule 9 of the Transitional Act contains a provision equivalent to s 206 of the FW Act applicable to agreement-based transitional instruments.

United Security’s case at first instance

1. United Security submitted at first instance that:

• it had seen a marked decline in business turnover, profit and employees numbers;

• this decline was directly related to adverse economic indicators, agreements approved by the Commission that do not pass the BOOT, the carryover of WorkChoices agreements into the Fair Work system that do not pass the BOOT, sham contracting, and the use of overseas students to avoid compliance with the Security Award and other legislative employment and taxation obligations;

• the current system creates an unlevel playing field, particularly in the Western Australian market, by not allowing United Security to compete for contracts at a rate that allows it to comply with the Security Award and make a fair return for assets deployed;

• the situation has arisen because of inconsistent decisions made by the Commission when approving agreements, which has undermined the entitlements of workers and the commercial competitive ability of United Security;

• the employees covered by the Agreement are aware of the environment in which United Security operates and support the Agreement;

• United Security and the employees covered by the Agreement acknowledged that the Agreement does not pass the BOOT;

• the intent of the FW Act is not being met and the balancing of the interests of the employer and employee has failed;

• it is in the public interest to maintain a level playing field amongst employers in the industry;

• if the FW Act is “completely messed up” and a chasm between competing entities has been created, this has to be regarded an exceptional circumstance, and accordingly approval of the Agreement would not be contrary to the public interest; and

• although the approval of the Agreement might “open up the floodgates” in terms of other enterprise agreements being made which undercut the Security Award, that would make it more likely that a solution will be found to the identified problems.

1. United Security referred to a number of agreements as major examples of the difficulties it faced, including in particular:

• the Labourplus Security Staff Agreement 2007 (2007 Labourplus Agreement), a preserved WorkChoices-era agreement which was, by a decision issued on 24 December 2019, terminated by the Commission effective from 1 July 2020;

• the VenuesWest General Agreement 2019 (VenuesWest Agreement) approved by the Western Australian Industrial Relations Commission on 26 March 2019, the employer party to which was a corporate entity owner by the Western Australian Government, and which provided for a casual hourly rate of $27.28; and

• The National Security Services Australia Enterprise Agreement 2014 (NSSA Agreement), an agreement made and approved under the FW Act which, it was contended, never passed the BOOT;

The decision

1. After referring to the contentions advanced by United Security, the legislative framework and the principal features of the Agreement, the Commissioner said that he was not satisfied that the Agreement passed the BOOT and, accordingly, it was necessary for him to consider United Security’s case that the Agreement was capable of approval under s 189. The Commissioner accepted that United Security had suffered a decline in its turnover, profits and employee numbers, and further that this was due to a combination of factors including: (1) there are agreements approved under the WR Act which continue to operate but would not pass the BOOT if the test time was today; (2) there are agreements previously approved by the Commission under the FW Act which continue to operate but would not pass the BOOT if the test time was today; and (3) adverse economic circumstances. The Commissioner then said:

“[103] The first two factors I have referred to above are the real-world consequences of the legislative scheme for enterprise agreements established by the Parliament in the FW Act and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Provisions Act).

[104] The explanatory memorandum for the Transitional Provisions Act explains that existing WR Act instruments specifically including all types of collective agreements will continue to apply to employers, employees and unions, where relevant. Collective agreements made under the previous legislation upon the FW Act coming into operation would be subject to the FW Act as if they were agreements made under the FW Act.

[105] In summary this legislative transitional scheme was that collective agreements made under the previous legislation, after 2009 when the current legislation commenced, continued to operate as if they had been made under the FW Act. As such these collective agreements made prior to 2009 continue to operate indefinitely, as is the case for any enterprise agreement made under the FW Act. In addition, as is the case for agreements made under the FW Act these pre-2009 collective agreements only cease to operate because they are replaced by a new enterprise agreement approved by the Commission, are terminated by agreement between the employer and a majority of employees or are terminated by the Commission on application by the employer or an employee.

[106] What these transitional provisions did was to recognise the existing rights and entitlements of employees, employers and unions as they were then prescribed in collective agreements and preserve these under the new, now current, FW Act.

[107] The practical effect of this, which now negatively impacts the Applicant, is that any collective agreement made prior to the current legislation which has neither been replaced by making a new enterprise agreement, nor been terminated by agreement between the employer and employees, nor been terminated by the Commission on application, continues to legally apply and will continue to do so as is the case for any enterprise agreement made under the FW Act.

[108] Consequently, collective agreements predating 2009 that have rates of pay which are now well below those provided under current modern awards continue to operate under the current legislation.

[109] The second factor about which the Applicant complains is a variant of the scheme of the current legislation that provides that enterprise agreements approved by the Commission under the FW Act continue in force indefinitely unless they are replaced by a newly approved agreement, terminated by agreement with the other parties or terminated by the Commission on application of one of the parties.

[110] This indefinite life of enterprise agreements, coupled with the fact that the BOOT is applied once only to an agreement at the time it is approved, has a similar potential outcome because an agreement registered for example in 2010 continues to operate notwithstanding it would not pass the BOOT compared to the applicable modern award rate that apply today.”

1. The Commissioner then referred to s 206 of the FW Act, which he said “addresses these issues in part”, but noted the definition of the expression “base rate of pay” in s 16 upon which s 206 operated and said:

“[114] The effect of not including loadings, allowances, overtime or penalty rates and other amounts in the base rate of pay in section 16 of the FW Act is that section 206 of the FW Act is limited to providing employees with a base rate of pay not less than the award but no similar protection for loadings or penalty rates.

[115] It is entirely inappropriate for the Commission, as at tribunal itself established by the legislation, to editorialise on the merits or lack thereof of the scheme of either the Transitional Provisional Act or the FW Act.

[116] Whilst the Commission does recognise the real-world consequences about which the Applicant quite reasonably now complains, this is however looking at the legislation through a lens of a particular set of circumstances in isolation, when the reality is the Transitional Provisions Act and the FW Act must deal with an endless range of different circumstances individual employers and employees find themselves in and multiple, often conflicting, public policy aims. Unfortunately, it is inevitable in some instances that the legislation is found wanting.

[117] Ultimately the difficulties the Applicant is experiencing in large part are a consequence of the design of the Transitional Provisions Act and the current FW Act. These provisions apply universally to all national systems employers and national systems employees and so their deficiency in this situation is not in my view exceptional circumstances.

[118] Similarly, businesses having to face adverse economic circumstances is unfortunately not exceptional given the vagaries of our economy and the variable fortunes of individual industries.

[119] Whilst I am sympathetic to the plight the Applicant faces and applaud their open and genuine attempt to deal with this cooperatively with their employees I am unable to find that in this case because of exceptional circumstances the approval of this Agreement, which does not pass the BOOT, would not be contrary to the public interest. Consequently, this enterprise agreement cannot be approved, and this application is dismissed.”

Appeal submissions

1. United Security submitted that:

• the decision was in error, not all the evidence had been taken into account in the decision, and the fact that there was no definition of “exceptional” in the FW Act must inevitably lead to a very narrow view and conflicting determinations of what circumstances constitute exceptional circumstances;

• the decision was unreasonable and plainly unjust;

• in paragraphs [116]-[118] of the decision, the Commissioner recognised the real world issues United Security was facing and acknowledged the faults in the Transitional Act and the FW Act;

• s 189 gave the Commission the freedom to make decisions in situations which are not covered by the legislation, and s 189(3) provided merely an example of such a situation with the operation of the section not being confined to a “short term crisis”;

• the decision of O’Callaghan SDP in The Andrew Crawford Group Pty Ltd t/a Crawford Security & Investigations[2] interpreted the section incorrectly to place undue emphasis on a short-term crisis, while in this case there was a long-term crisis caused by the acknowledged faults in the legislation;

• the effect of the decision was to lock United Security out of the market in Western Australia, and United Security had a right to free and fair competition;

• the VenuesWest Agreement, which was negotiated by the State Government and relevant unions, flattened casual rates for crowd controllers, cleaners, entertainers, attendants and the like, and set a benchmark price to be paid to  employees;

• the correct approach was to recognise the deficiencies of the legislation and use s 189 for its intended purpose, so long as evidence can be provided that what United Security is seeking is not outside the current expectations of the industry segment which United Security operates in;

• the Commissioner erred in his construction of s 189 by taking a “textbook” approach in his decision rather than an evidence-based approach, and failed to find in favour of United Security because its position was not the same in structure and with the same characteristics as the example proffered in s 189(3);

• in a market with disparate labour costs, business would do what  they needed to do to survive, and this led to “underground” operations using payment by cash, sub-contracting arrangements, non-payment of tax, superannuation and workers’ compensation;

• workers are no worse off, because United Security’s current workforce considers that it will be better off under the Agreement, and future workers have a choice to accept the work in circumstances where the “bar” for pay rates had already been set; and

• the Commissioner had not considered that the process of bargaining was undertaken in good faith, that the employees consider they will be better off, or the real-world wage levels in the industry and the benchmark which had been set by the VenuesWest Agreement.

1. At the hearing of the matter, United Security referred to a decision issued by the Western Australian Industrial Relations Commission (WAIRC) on 13 July 2020[3] to approve the Labourplus Security and United Voice (WA) Union Labour Hire Agreement 2020 (2020 Labourplus Agreement), in which the employer was identified as “The Partnership of the Trustee of the Labourplus Security Trust and the Trustee of the Labourplus Facilities Trust”, as another example of an agreement which undercut the Security Award and established a benchmark for the industry in Western Australia.

Consideration

1. United Security’s appeal raises issues about the labour market in the security industry which are, regrettably, not unfamiliar to the Commission. A Full Bench of this Commission recently made two important findings about the industry in a decision concerning an application to vary the Security Award.[4] The first was that, for businesses in the industry, direct wage costs typically constitute about 75 percent of total costs, and labour costs inclusive of on-costs constitute about 90 percent of total costs.[5] This means that the wage rates which security industry businesses pay their employees are the prime determinant of the prices they charge their clients and are thus critical to the capacity of business to remain competitive and to gain and retain clients.

1. The second finding was as follows:

“The evidence before us was that many employers in the contract security industry either operate on preserved pre-FW Act “zombie” agreements which undercut the Security Award 2020, or simply do not comply with the award and/or pay their employees unrecorded cash payments.”[6] 

1. For this reason, award-compliant companies may be rendered non-competitive and lose clients and work at the hands of competitors which, lawfully or otherwise, do not pay the terms and conditions of the Security Award.

1. Because the appeal raises these same issues, albeit in a different context, which are of general importance and wider application, we consider that the grant of permission to appeal would be in the public interest. Permission to appeal must therefore be granted in accordance with s 604(2).

1. Before we turn to these issues, it is necessary to give consideration to the submission made by United Security that the Commissioner erred in the construction of s 189 adopted and applied by him in the decision. We reject the submission. The Commissioner correctly understood that his task involved making an evaluative judgment as to whether, because of “exceptional circumstances”, the approval of the Agreement would not be contrary to the public interest. In previous decisions made pursuant to s 189,[7] with which we agree, the expression “exceptional circumstances” has been given the meaning assigned to it in CEPU v Australian Postal Corporation,[8] namely:

“To be exceptional, circumstances must be out of the ordinary course, or unusual, or special, or uncommon but need not be unique, or unprecedented, or very rare. Circumstances will not be exceptional if they are regularly, or routinely, or normally encountered. Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional. It is not correct to construe ‘exceptional circumstances’ as being only some unexpected occurrence, although frequently it will be. Nor is it correct to construe the plural ‘circumstances’ as if it were only a singular occurrence, even though it can be a one off situation. The ordinary and natural meaning of ‘exceptional circumstances’ includes a combination of factors which, when viewed together, may reasonably be seen as producing a situation which is out of the ordinary course, unusual, special or uncommon.”

1. Reference is made in United Security’s submissions to error in the proper construction of s 189 having arisen from the approach taken in the Andrew Crawford decision, whereby the “example” in s 189(3) is said to have been taken as determinative of the existence of special circumstances. It may be accepted that the types of circumstances which be characterised as “exceptional” for the purpose of s 189(2) are not defined or circumscribed by the s 189(3) example, and it would be erroneous to approach the provision otherwise. However, whether or not any such error was made in the Andrew Crawford decision, there is no indication in the decision under appeal that the Commissioner made any error of this nature.

1. The principal issue raised in United Security’s appeal is that the Commissioner erred in his consideration of whether the requisite exceptional circumstances existed by failing to properly take into account the destabilisation of the labour market in the security industry in Western Australia caused by the existence of agreements covering businesses which allow them to lawfully provide terms and conditions of employment which are inferior to those contained in the Security Award. Because of the public interest which we consider attaches to this contention, we propose to give it detailed scrutiny.

1. As earlier stated, United Security supported this contention by reference to agreements in three categories. The first category consisted of the 2007 Labourplus Agreement and the 2020 Labourplus Agreement.

1. The 2007 Labourplus Agreement was entered into in 2007, at a time when the WorkChoices emanation of the WR Act was in force and there was no requirement for an agreement to pass any equivalent of the current BOOT or the previously applicable “no disadvantage” test. The 2007 Labourplus Agreement identified the parties to the agreement as being Australian Workplace Solutions (WA) Pty Ltd t/a Labourplus (Labourplus) and the employees engaged in the classifications set out in Schedule 2 (as with the Agreement, there is no Schedule 1). Schedule 2 sets out two classifications: Crowd Controller and Security Guard, and provides a flat rate for each classification of $16.16 and $17.40 respectively. These rates are payable for ordinary hours from Monday to Sunday, additional hours and public holidays and, under clause 10.1, are inclusive of a casual loading of 20%. The 2007 Labourplus Agreement (upon which the Agreement in this matter was plainly modelled) provided that employment under the agreement was of a casual nature (clause 5.1), that the employment was terminable on one hours’ notice (clause 5.4), that the hours of work would be determined by Labourplus according to client requirements and employee availability (clause 8.1), that ordinary hours were 38 per week and could be rostered at any time throughout the 24 hours of the day and on any 7 days of the week (clauses 8.2 and 8.3), that employees may be required to work reasonable additional hours over 38 per week (clauses 9.1 and 9.2) and that employees would be engaged on an hourly basis, would be paid for all hours worked and would not be paid for hours not worked (clauses 11.1 and 11.2).

1. By virtue of Schedule 3 of the Transitional Act, the 2007 Labourplus Agreement continued in effect after the repeal of the WR Act and the commencement of the FW Act. The Security Award commenced operation on 1 January 2010, and either immediately or at some time thereafter, as rates in in the award were increased as a result of Annual Wage Review decisions (dependent on how an employee under that agreement would be classified under the award), s 206 of the FW Act operated to require employees covered by the agreement to be paid the base rates in the Security Award (calculated in accordance with s 16).

1. On 26 May 2019, an employee of Labourplus applied to the Commission for the 2007 Labourplus Agreement to be terminated. The application was the subject of a decision by the Commission (Commissioner Williams) issued on 24 December 2019[9] (termination decision). As at that date, the base hourly wage rates under the Security Award, calculated in accordance with s 16, were as follows:

Classification

Security Officer Level 1

$ per hour

21.90

Security Officer Level 2

22.53

Security Officer Level 3

22.91

Security Officer Level 4

23.29

Security Officer Level 5

24.05

1. By virtue of the operation of s 206, these were the base rates of pay payable to employees covered by the 2007 Labourplus Agreement for any hours worked (including at night, on weekends, public holidays or overtime). These rates may be compared to the then-applicable rates of pay for casual employees to whom the Security Award applied (which were the same as the rates set out in paragraph [7] above. They are also lower than the flat rate provided for in the Agreement. Arguably, because of clause 10.1 of the 2007 Labourplus Agreement, the 20% casual loading referred to in that provision would need to be added to the above rates, although this is far from clear since the agreement does not establish any separate obligation as such to pay a casual loading. Even if the loading is added, the rates are well below the Security Award rates at the time and below those in the Agreement for the lower classifications.

1. The application to terminate the 2007 Labourplus Agreement ultimately proceeded by consent. The termination decision records that there was an agreed statement of facts and joint submissions as between Labourplus, the applicant and the United Workers’ Union (UWU) which included the following propositions:

• Labourplus had approximately 4000 security guards and crowd controllers on its books covered by the 2007 Labourplus Agreement;

• Labourplus has contracts to provide security guards and crowd controllers with some 23 different firms;

• these contracts were generally for extended periods of time;

• the contracts were generally based upon employees being paid in accordance with the 2007 Labourplus Agreement;

• dependent upon the work being done and the hours and rosters worked, some of the employees were paid less than they would be entitled to under the Security Award;

• Labourplus and the UWU intended to negotiate a new enterprise agreement to replace the 2007 Labourplus Agreement prior to or by 1 July 2020;

• the negotiation of a new enterprise agreement or, if those negotiations were unsuccessful by 1 July 2020, the application of the Security Award to the employees’ employment, would address the issue of some employees being paid less than the Security Award; and

• the parties had agreed that the 2007 Labourplus Agreement should be terminated with effect from 1 July 2020.

1. The termination decision contained the following consideration and conclusion concerning the application:

“[5] Considering the facts in this matter I am satisfied that it will not be contrary to the public interest to terminate the Agreement.

[6] Taking into account the views of the employees and the Respondent and taking into account the circumstances of these employees and the employer, and also the likely effect that termination of the Agreement will have on them, I do consider in the circumstances that it is appropriate to terminate this Agreement.

[7] A unique circumstance in this matter is that the parties having agreed to a transition period such that the date the Agreement will be terminated would be 1 July 2020. The reason for the delayed termination of the agreement is to provide a stable environment in which to negotiate a replacement agreement, to mitigate against a sudden change in the terms and conditions of employment which could result in the termination of contracts upon which the employees are currently working and thus jeopardise their employment and finally to provide a period for the Respondent to put in place administrative arrangements to cope with the inevitably different terms and conditions of employment provided in either a new agreement or the award whichever applies on termination of this Agreement.

[8] The parties agreement on this transitional period is entirely sensible. The specified date for the termination of the Agreement will be 1 July 2020. An order to this effect will be issued in conjunction with this decision.”

1. We infer that, following the termination of the 2007 Labourplus Agreement, the Labourplus business established or utilised non-corporate employing entities in order to access the Western Australian industrial relations system, and that the approval of the 2020 Labourplus Agreement by the WAIRC pursuant to the WA IR Act was the consequence of this. Section 41 of the WA IR Act provides for the making of agreements between organisations or associations of employees and employers and, where an application is made to the WAIRC for registration of the agreement, the WAIRC must register it (subject to certain technical requirements). There is no equivalent of the BOOT. It may additionally be noted that, in any event, the ordinary rates of pay and the casual loading under the WA Security Officers’ Award are lower than under the Security Award. The ordinary hourly casual rates of pay in that award are currently:

Classification

Security Officer Level 1

$ per hour

24.93

Security Officer Level 2

25.45

Security Officer Level 3

25.80

Security Officer Level 4

26.16

1. The 2020 Labourplus Agreement states, in clause 1, that “...it is estimated that this agreement will cover approximately 3000 workers upon registration”. The ordinary hourly rates of pay for casual employees provided for by the agreement (inclusive of the casual loading) in clause 9 are:

Security Officer/Crown Controller

Level 1

$ per hour

27.01

Level 2

27.57

Level 3

27.95

Level 4

28.34

1. The 2020 Labourplus Agreement does not provide for weekend penalty rates or night shift loadings, but it does provide for overtime penalty rates (based upon a 35-hour week), public holiday penalty rates and a 4-hour minimum engagement. From the perspective of employees, the 2020 Labourplus Agreement is clearly superior to the 2007 Labourplus Agreement. The position vis-a-vis the WA Security Officers’ Award would require analysis since, although the ordinary rates of pay in the agreement are higher, the award provides for weekend penalty rates. The 2020 Labourplus Agreement is, overall, significantly superior to the Agreement under consideration in this appeal. Although the Level 1 rate is lower, the other rates are higher and the additional conditions we have referred to are absent in the Agreement. However, there can be no doubt that the wages and conditions in the 2020 Labourplus Agreement are significantly inferior to those in the Security Award. Consequently it is clear that the 2020 Labourplus Agreement did not achieve the objective referred to in the agreed statement of facts and joint submissions recorded in the termination decision of addressing the problem of employees being paid less than under the Security Award.

1. United Security’s case at first instance concerning the 2007 Labourplus Agreement and its effect on the market in the Western Australian security industry had substance, as the Commissioner recognised. It can readily be inferred that the low rates of pay and inferior conditions of employment in that agreement have given Labourplus a competitive advantage in that market, and its size as measured by the number of its employees suggest that it has achieved a substantial if not dominant position in that market. However, we consider that the Commissioner was correct to recognise that because the continued and indefinite operation of pre-FW Act agreements is an express feature of the legislative scheme, subject only to the operation of s 206, the existence of an agreement such as the 2007 Labourplus Agreement could not be characterised as an exceptional circumstance. Further, the weight to be given to the 2007 Labourplus Agreement in the consideration of whether the Agreement should be approved was necessarily diminished because of the termination decision, which meant that the 2007 Labourplus Agreement would not be an ongoing feature of the security industry market in Western Australia.

1. The fact that Labourplus, in conjunction with the UWU, found it necessary to adopt the device of moving to the Western Australian industrial relations system in the wake of the termination of the 2007 Labourplus Agreement demonstrates, on one view, that compliance with the Security Award is not a commercially viable proposition in Western Australia. The 2020 Labourplus Agreement, the approval of which post-dated the decision under appeal, is nonetheless a far superior arrangement to the 2007 Labourplus Agreement and the Agreement for which United Security seeks approval. It is also, of course, an entirely lawful arrangement. Its existence therefore does not give rise to revisit the conclusion reached by the Commissioner concerning his lack of satisfaction as to the existence of the requisite exceptional circumstances.

1. Like the 2020 Labourplus Agreement, the VenuesWest Agreement is one lawfully in operation under the WA IR Act. Clause 1 of the agreement states that at the time of registration it covered approximately 518 employees. This agreement covers a range of employee functions, not just security officers and crowd controllers. Its classification structure is complex and is not explained in the agreement, but United Security’s submissions concerning this agreement appear to proceed on the basis that security officers are paid under the lowest classification, which has five pay points. The 2019 and 2020 ordinary hourly casual rates for this classification (inclusive of the 30 percent casual loading provided for in clause 13.7(a)) are:

Classification level Level 2.1	$ per hour - 2019 26.62	$ per hour – 2020 27.29
Level 2.2	27.31	27.97
Level 2.3	27.91	28.57
Level 2.4	28.53	29.19
Level 2.5	29.15	29.81

1. For employees at venues, ordinary hours may be worked Monday to Sunday. However the VenuesWest Agreement provides for public holiday penalty rates (clauses 26.3-26.4), overtime penalty rates (clause 25.1) and a 3-hour minimum engagement (clause 13.5).

1. The ordinary time casual rates provided for by the VenuesWest Agreement are broadly comparable to those in the Security Award, but its lack of weekend penalty rates and shift loading applicable to casual employees makes it inferior from the perspective of employees to the Security Award. However it is clear that the VenuesWest Agreement is significantly superior to the Agreement here. Therefore the proposition advanced by United Security that the VenuesWest Agreement constitutes exceptional circumstances because it represents a   government and union-endorsed “benchmark” which it is entitled to match lacks validity.

1. The NSSA Agreement was approved by the Commission (Commissioner Gregory) in a decision issued on 5 March 2015.[10] It was made between the employer and 4 casual employees. Schedule 1 of the agreement sets out rates of pay for five classifications, of which there are four classifications of “Security Officer/Crown Controller” and one of “Event Staff”. The last classification appears to encompass a role which would be covered by the Amusement, Events and Recreation Award 2020 and not the Security Award. The Schedule sets out the casual rate of pay under the agreement compared to the award as at the time when the agreement was made in 2014, and it is readily apparent that each agreement rate is $1.00 per hour higher than the award rate. Clause 11(a) of the NSSA Agreement provides that the wage rates are inclusive of all allowances, penalties and loadings, and are payable for all hours worked unless specified otherwise. Clause 11(c) provides that the wage rates in Schedule 1 are to be increased “by any amounts granted by the Fair Work Commission in its Minimum Wages review decisions on an annual basis on the 1^st July each year”. Clause 12(a) provides for a span of hours of 6.00am to 10.00pm, Monday to Friday, with a shift penalty rate of $1.00 per hour applying where the whole shift falls outside this span of hours. Clause 11(d) provides for a 3-hour minimum engagement period. The NSSA Agreement makes no provision for overtime or public holiday penalty rates.

1. The NSSA Agreement has passed its nominal expiry date but remains in effect. Having regard to clauses 11(c) and 12(a), the current casual rates payable under the NSSA Agreement for “Security Officer/Crowd Controller” classifications would appear to be as follows:

Classification level Security Officer/Crowd Controller Level 1	Ordinary rate – $ per hour 28.53	Night, weekend and public holiday shifts - $ per hour  29.53
Security Officer/Crowd Controller Level 2	29.32	30.32
Security Officer/Crowd Controller Level 3	29.79	30.79
Security Officer/Crowd Controller Level 4	30.28	31.28

1. The current ordinary time rates under the NSSA Agreement are about 4 percent more than in the Security Award for equivalent classifications. However, the rates are significantly below the Security Award for any work outside of ordinary hours, including at nights and on weekends, public holidays and overtime. It is apparent that a casual employee working a weekend shift, a night shift or a public holiday shift, will be worse off under the NSSA Agreement than under the Security Award. Even if, for example, a casual employee works five day shifts from Tuesday to Saturday, so that only one shift in five is a penalty rate shift, they will be worse off under the NSSA Agreement than under the Security Award.

1. This is not just a case where the NSSA Agreement would not pass the BOOT if the test time was today (as adverted to by the Commissioner in paragraph [110] of the decision). Because the rates in the NSSA Agreement have moved in line with the level of wage increases in the Security Award, the same conclusions concerning the BOOT must apply as at the actual test time for the NSSA Agreement (which was 29 October 2014). Absent an appropriate undertaking (for an example, an undertaking that no work would be performed outside ordinary hours), it is difficult to identify a rational basis for a conclusion that the NSSA Agreement passed the BOOT as at the test time. The file for the application for approval of the NSSA Agreement discloses that Commissioner Gregory requested that the applicant employer give an undertaking that casual employees would at all times be paid in excess of what an employee performing similar work under the terms and conditions of the Security Award would have received. The applicant employer refused to give this undertaking and asserted that agreements in the security industry in similar terms had previously been approved by the Commission. Notwithstanding this refusal, Commissioner Gregory proceeded to approve the NSSA Agreement. The explanation for this is not apparent from the available records of the proceeding. We note that the Commissioner’s approval of the NSSA Agreement preceded the Full Bench decision in Hart v Coles Supermarkets Australia Pty Ltd,[11] which established a more rigorous approach to the BOOT and led to the Commission establishing a process whereby an intensive BOOT analysis of enterprise agreements the subject of applications for approval is conducted by Commission staff before the applications are referred to members.

1. Our conclusions concerning the NSSA Agreement would not cause us to uphold the appeal however, for three reasons. First, there is no material before us which demonstrates that the NSSA Agreement has substantially contributed to United Security’s current business difficulties which, it contends, justify the approval of the Agreement. We note that the NSSA Agreement was only made with 4 casual employees, so it was obviously not a substantial business at that time. United Security asserted in its submissions at first instance that National Security Services Australia Pty Ltd, the employer under the NSSA, is a related entity to Labourplus. There is some support for that proposition, in that the website for a business called “Workforce Solutions” based in Perth refers to it operating through “our Labourplus and NSSA brands”. However beyond that, there is no evidentiary basis for it to be concluded that the approval and operation of the NSSA Agreement has damaged United Security’s business.

1. Second, the Agreement does not seek to match the NSSA Agreement, but undercuts it. This is not consistent with the proposition that United Security only seeks a “level playing field”.

1. Third, we consider the following reasoning of O’Callaghan SDP in the Andrew Crawford decision both relevant to the circumstances of this appeal and highly persuasive;

“[27] I am unable to regard the situation as exceptional for the purposes of s 189. The reality is that in many circumstances differing agreement provisions impact on competitive situations. If nothing else, this reinforces the importance which the FWC should attach to a consistent application of the BOOT in that, as a general statement, agreement approval decisions or refusals often have a significant commercial impact.

[28] What Crawford seek here is that an agreed and acknowledged BOOT deficiency should effectively be sanctioned on the basis that considerations of commercial equity should be applied. The effect of that would be to sanction the payment of rates of pay less than those provided for under the relevant modern award and, using the same logic, provide a precedent for this to be generally accepted in this sector of the security industry.

[29] Before finalising a conclusion in this respect I have considered the Crawford submission to the effect that, if it is unable to engage Crowd Controllers on reduced payments, so as to match the lower rates paid by its competitors, it is unlikely to win work in this area and hence its employees are more likely to transfer so as to work for businesses which already have agreements which sanction the below award wage rates. That may well be a logical proposition, but I am not satisfied that it meets the requirements of s 189(2).

[30] This section requires that I be satisfied that the approval of the Agreement would not be contrary to the public interest.
. . . .
[32] Consequently, if s 189(2) is applied so as to deliberately sanction an undermining of a modern award provision to facilitate commercial competition, it seems to me that approach is inconsistent with the function and objective of the modern award and must therefore be contrary to the public interest.

[33] In reaching this conclusion I have also taken into account that if the Agreement is approved on the basis sought, it may form the foundation for other similar arguments by businesses seeking to remain competitive in this sector so as to substantially usurp the function of the modern award to set minimum employment conditions.”

1. We likewise consider that it would plainly be contrary to the public interest to approve the Agreement to allow United Security to undercut competitors which, it asserts, have undercut it by finding lawful ways to pay their employees rates of pay and conditions inferior to those in the Security Award, The object of the FW Act in s 3(b) includes a reference to “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders”. Within the context of the current legislative framework, the approval of the Agreement would inevitably invite other businesses (within and outside of Western Australia) to seek the approval of enterprise agreements which provide even less beneficial terms of employment for employees, and the approval of such agreements on the same basis would start (or perhaps continue) a downward wages spiral which would make the Security Award irrelevant to the industry it is intended to regulate. That would be entirely contrary to the object of the FW Act.

1. We are not persuaded that United Security has demonstrated any appealable error in the decision. We consider that it was reasonably open for the Commissioner not to be persuaded that the approval of the Agreement would not be contrary to the public interest because of exceptional circumstances.

1. We order as follows:

(1)       Permission to appeal is granted.

(2)       The appeal is dismissed.

VICE PRESIDENT

Appearances:

Mr G Hutchinson accompanied by Ms S Scully for the appellant.

Hearing details:

2020.
Sydney (video-link).

23 July.

[1] [2020] FWC 2264

[2] [2013] FWC 5858

[3] [2020] WAIRC 00404

[4] [2020] FWCFB 3477

[5] Ibid at [33]

[6] Ibid at [33]

[7] Top End Consulting Pty Ltd [2010] FWA 6442 at [39]; Agnew Legal Pty Ltd [2012] FWA 10861 at [9]; TheAndrew Crawford Group Pty Ltd t/a Crawford Security & Investigations[2013] FWC 5858 at [21]

[8] [2007] AIRC 848, 167 IR 4 at [10]

[9] [2019] FWCA 8696

[10] [2015] FWCA 1476

[11] [2016] FWCFB 2887

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