Application by BAE Systems Australia Limited
[2025] FWCA 934
•18 MARCH 2025
| [2025] FWCA 934 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.222—Enterprise agreement
Application by BAE Systems Australia Limited
(AG2024/4633)
BAE SYSTEMS AUSTRALIA PERISCOPE IN-SERVICE SUPPORT PROJECT ENTERPRISE AGREEMENT 2022-2024
| Manufacturing and associated industries | |
| DEPUTY PRESIDENT ANDERSON | ADELAIDE, 18 MARCH 2025 |
Application for termination of the (AG2023/708) BAE Systems Australia Periscope In-Service Support Project Enterprise Agreement 2022-2024
On 21 November 2024, BAE Systems Australia Limited (BAE, the employer or the applicant) applied under s 222 of the Fair Work Act 2009 (Cth) (FW Act) for approval to terminate the BAE Systems Australia Periscope In-Service Support Project Enterprise Agreement 2022-2024 (Agreement).
Section 222 concerns applications for termination where termination has been agreed by employees (ss 220 and 221).
The “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU or the Union) is an employee organisation covered by the Agreement. On 4 and 10 December 2024, it advised the Commission and BAE of an objection to the termination application.
On 10 December 2024 I issued directions requiring BAE to notify employees covered by the Agreement of the application and these proceedings. BAE did so.[1] The directions further required BAE and the AMWU to provide written submissions on whether the termination should be approved. Both did so.
I conducted an in-person hearing on 18 February 2025. BAE were legally represented, with permission. The AMWU was represented by an internal industrial officer.
No employees appeared or gave evidence, despite being given the opportunity to do so.
I heard evidence from Mr Michael Obst (Warship Asset Management Agreement Transition Manager, BAE).[2] No evidence was called by the AMWU, though a letter from a State Organiser Mr Paul Donnell to BAE of 6 August 2024 was admitted by consent.[3] Both BAE and the AMWU made final oral and written submissions.
I have considered all the evidence and submissions before me including the Declaration in support of termination of an enterprise agreement (Form F24A) filed by a company officer Ms Mel Dyson which accompanied the application.
Some of the evidence is hearsay. Although I have a discretion to admit hearsay and attribute to it an appropriate level of weight, unless admitted by consent or corroborated by other direct evidence, hearsay is generally unreliable because the truth of what it asserts has not been tested.
The hearsay evidence before me largely falls into two categories: firstly, portions of Mr Obst’s evidence in which he refers to discussions between another company officer (Ms Julia Curran) and relevant employees. The content of discussions between Ms Curran and the employees is hearsay. Nether Ms Curran nor any of the employees gave evidence. However, those aspects of Mr Obst’s evidence are generally not disputed. I take evidence of conversations between Ms Curran and the employees into account and give them some weight, though less than had I heard directly from the participants.
The second category of hearsay concerns email exchanges between Mr Obst and one of the employees (Mr Ferrari) purportedly sent on behalf of the four employees covered by the Agreement. Therein, Mr Obst provides the employees his witness statement and BAE’s submissions in this matter before inviting their comment or views.[4] In a response sent on 30 January 2025, Mr Ferrari purports (on behalf of the group) to express a view on Mr Obst’s statement (supportive with a qualification about the reasons why the employees voted to terminate the Agreement), and (on 31 January) agrees that the 30 January email be provided to the Commission and the AMWU.
Both BAE and the AMWU, for somewhat different reasons, seek to rely on Mr Ferrari’s email of 30 January 2025 as evidence of the reasons why the employees decided to vote to terminate the Agreement. To the extent that employer or employee reasons are relevant to the determination of this matter, and given the lack of objection by both parties, I have decided to admit the email exchange into evidence. I give the content of Mr Ferrari’s email of 30 January 2025 some weight, though less than had I heard directly from him or the other employees. I take into account that Mr Ferrari’s stated reasons untested as is the extent to which they accurately depict the views of others in the group. However, the expression of views in that email accords generally with Mr Obst’s evidence of the direct feedback he received from the employees during formal and informal discussions in the weeks prior to the vote to terminate the Agreement. Mr Obst’s direct evidence, together with the untested but undisputed content of Mr Ferrari’s email, is collectively a basis on which I make findings about employee reasons for termination.
Facts
BAE
BAE has a contract with the Commonwealth (Department of Defence) for the engineering and maintenance of ships and submarines for the Australian Navy.
BAEs ‘Periscope Project’ provides for the engineering and maintenance of periscopes on Collins Class submarines. Maintenance of those submarines, including of periscopes, is conducted at docks in South Australia and Western Australia depending on where a vessel is berthed by naval officers.
BAE employs 26 people on the periscope project. Eight are maintenance employees. The maintenance employees are geographically separated; four in Western Australia and four in South Australia.
The Agreement
The South Australian maintenance employees are employed under an enterprise agreement (the Agreement).
The Agreement is a single enterprise agreement. It only covers work in Adelaide, South Australia. It was approved by the Commission on 6 April 2023. It operated from 13 April 2023 and has a nominal expiry date of 31 December 2024 (eighteen months).
When the Agreement was made it was voted on (and voted up) by four employees comprising the South Australian maintenance group. It was negotiated by that group with the assistance of the AMWU. The AMWU is an employee organisation covered by the Agreement.[5]
The Agreement and at least two generations of earlier agreements have applied to the South Australian maintenance employees on the periscope project since 2016. The AMWU claims that two earlier agreements operating between 2009 and 2016 also applied, a proposition not conceded by BAE and unnecessary to decide for present purposes.
In contrast, the Western Australian maintenance employees are not covered by an enterprise agreement. They are salaried employees.
The four maintenance employees in South Australia are the only employees (of the 26 on the periscope project) that are not salaried employees (the balance of the 26 beyond maintenance employees are engineers, supervisors and managers).
According to Mr Obst’s evidence, the group of four South Australian maintenance employees include technical officers and one apprentice (in his third year during 2024; now in his fourth year).
The work of maintenance employees in both South Australia and Western Australia is covered by an award (the Manufacturing and Associated Industries and Occupations Award 2020) (Manufacturing Award) and by the National Employment Standards in the FW Act (NES). However, under the terms of the Agreement, the Manufacturing Award is wholly displaced in respect of the South Australian employees whilst the Agreement is in operation.[6]
Initial discussions to move to salaried employment
In around May 2024, discussions commenced between BAE and the South Australian maintenance employees on a possible transition to becoming salaried employees.
Those discussions initially involved a manager (Mr Richards and subsequently Mr Obst), Ms Curran (Employee Relations), Mr Mullarkey (Maintenance Supervisor) and the maintenance employees.
It is not clear from the evidence who initiated the discussions (BAE or the employees). The relevant finding I make is that the discussions were initially exploratory and informal with both sides willingly participating and the employees doing so both individually and as a group. At that early stage, the AMWU was not notified by BAE nor, it would appear, by the employees.
At a meeting on 18 July 2024 attended by Mr Obst, it was agreed that the proposal be further developed, with BAE to prepare a comparative table of how conditions would be affected should a salaried arrangement be agreed and the Agreement terminated.
From at least July 2024 and at all times thereafter, the proposal that employees move to a salaried arrangement was developed on a joint understanding that the Agreement would need to cease to apply, and that this was BAEs position.
AMWU request to commence bargaining
With the Agreement scheduled to reach its nominal expiry on 31 December 2024, on 6 August 2024 Mr Donnell of the AMWU wrote to BAE “as the bargaining agent for its members” giving notice of its intention to commence bargaining for a new agreement.[7]
Agreement to move to salaried arrangement
In August 2024, a Comparative Table was prepared jointly by Ms Curran and Mr Obst. That table was provided to employees and discussed at a meeting on 29 August 2024 (and given to an employee not in attendance a week later on 5 September and discussed with him on or about 11 September). The employees were also provided copies of a company policy on ‘Flexible Work’ that would apply in lieu of certain provisions of the Agreement.
During September 2024, Ms Curran and Mr Obst held informal discussions with the employees. This included responding to questions and issues raised such as by providing information about what a total remuneration package (salaried arrangement) would likely be, how hours and rostered days off would work and how overtime would apply, and how these arrangements applied to the salaried Western Australian maintenance employees.
On 23 September 2024, BAE separately supplied each employee with an indicative total remuneration package should a salaried arrangement be put in place (but not a formal offer).
In early October 2024, the employees informed BAE that, having considered the materials supplied, they were supportive of moving to a salaried arrangement and of the company taking the next steps to put that arrangement in place, which would include a vote by ballot for termination of the Agreement.
BAE response and notification to AMWU
On 14 October 2024, Mr Obst wrote to Mr Donnell of the AMWU responding to the AMWU’s letter of 6 August and advising of the discussions about salaried employment which had been occurring in the workplace. It read:[8]
“ATTN: Paul Donnell
Dear Paul
BAE SYSTEMS AUSTRALIA PERISCOPES IN-SERVICE SUPPORT PROJECT ENTERPRISE AGREEMENT 2022 -2024
I write regarding the BAE Systems Australia (BAESA) Periscopes In-Service Support Project Enterprise Agreement 2022 - 2024 (Agreement), and in response to your 6 August 2024 letter to Julia Curran, People Business Partner on the same topic.
For some time, employees covered by the Agreement and BAESA management have been casually discussing the utility of an enterprise agreement that covers such a small cohort of employees and the considerable effort on both sides that negotiations create.
These discussions developed into a more detailed and tangible engagement over the course of the last 6 months, in that employees covered by the Agreement sought to understand from BAESA what a shift from waged to salaried employment may entail and look like.
In the spirit of openness and transparency with our workforce, we engaged in these discussions on a without prejudice basis, including answering various queries regarding comparative salaried arrangements and providing employees with a comparison of waged and salaried arrangements. Discussions have now progressed to a point that after a period of consideration, all four employees currently covered by the Agreement have communicated a desire to shift to salaried employment instead of entering into negotiations for a new enterprise agreement.
On this basis, BAESA intends to conduct a formal ballot of these employees to confirm their preference, and if the ballot does confirm their desire to change, we would apply to the Fair Work Commission to terminate the Agreement and then transition the affected employees on to salaried terms and conditions of employment.
We appreciate that you will no doubt wish to discuss this matter further with us, including next steps and details of the ballot. Therefore, please feel free to contact me directly on [Mobile Redacted] or at [Email ]@[redacted ] as soon as possible. Noting the communicated desire of our employees, we intend to progress to a ballot, most likely 29 to 30th October.
Yours sincerely
Michael Obst
Defence Sustainment Solutions Program ManagerBAE Systems Australia”
Despite BAE’s invitation for contact, no response was received from the AMWU.
BAE proceeded to organise a ballot, which it scheduled for 5 and 6 November 2024.
On 24 October 2024, Mr Obst again wrote to the Mr Donnell of the AMWU in the following terms:[9]
“Dear Paul,
Following up on my last email re Periscopes EA, I wanted to advise the ballot will be 5-6 November.
Please let me know if you have any questions.
Michael Obst
Defence Sustainment Solutions Program ManagerBAE Systems Australia”
Despite BAE’s further invitation for contact, no response was received.
Ballot notification
On 30 October 2024, BAE informed the employees of ballot details (including a How to Vote sheet), a covering letter (including indicative total remuneration details and a Frequently Asked Question (FAQ) sheet) and an updated Comparison Table of conditions under the Agreement compared to the proposed salaried arrangement (with employer commentary on the differences).[10]
The covering letter read:[11]
“Dear [Name Redacted]
Employee Ballot regarding the Periscope In-Service Support EA
As you know, for the past few months employees covered by the BAE Systems Australia Periscope In-Service Support Project Enterprise Agreement 2022-2024 (Agreement), including yourself, and BAE management have been engaged in discussions regarding the continued utility of the Agreement noting that it covers such a small cohort of employees, and the considerable effort on both sides that negotiations create.
As part of these discussions and to assist you in better understanding what a shift away from coverage by the Agreement might involve, we provided you with a table which compared the Agreement with BAE Systems’ salaried arrangements – an updated version of which is enclosed, and arranged a number of without prejudice discussions to answer various queries you had about a move away from coverage by the Agreement to salaried employment.
At the request of the employee workgroup, and on a without prejudice basis, we also discussed and provided you with indicative details of your expected salary grade and the total annual package (TAP) you would be eligible to receive if your employment shifted to a salaried arrangement, underpinned by the National Employment Standards (NES) and the Manufacturing and Associated Industries and Occupations Award 2020 (Award). For ease, we have summarised the key matters discussed in Appendix A, including your indicative TAP.
In addition to the above, if the Agreement is terminated prior to the end of the year:
·you will be eligible to take part in the Annual Salary Review (ASR) process occurring in April 2025, which may provide for a further increase to your TAP;
·you will continue to receive on-call and overtime payments in specifically defined circumstances (for example, to attend to urgent defect work) in line with how these payments operate for WA Periscopes salaried employees currently – see Appendix A and the enclosed table for more details on this; and
·the Company will continue to support your flexible accrual and use of ‘rostered days off’ (RDOs), as per the current practice.
Next Steps
In recent weeks, we have been advised by the workgroup that there is a desire to progress to a ballot to confirm that employees currently covered by the Agreement wish to terminate the Agreement in favour of shifting to a salaried arrangement with BAE Systems.
On this basis, we have arranged for a formal ballot of all employees covered by the Agreement to occur to confirm the workgroup’s preferred way forward (e.g. remaining covered by the existing Agreement or terminating it).
The ballot will be undertaken electronically by an experienced, independent, third party voting provider. You will be able to vote online using electronic voting, accessible from any computer or internet-enabled device (e.g. tablet, smartphone) at:
Noting the small workforce size, voting will:
·OPEN at 7.00am ACST on Thursday 7 November 2024; and
·CLOSE at 4.00pm ACST on Friday 8 November 2024.
Instructions on how to participate in the vote are enclosed.
Voting and Approval Process
If you vote ‘YES’, you are voting to terminate the Agreement. If the Agreement is terminated, BAE Systems will shift you to salaried employment (including the indicative TAP provided to you through these discussions). In that case, your minimum conditions will be set out in your employment contract, underpinned by the NES and the Award.
If you vote ‘NO’, you are voting to keep the Agreement in place. If the Agreement will not be terminated and it will continue to set the minimum conditions for your employment (subject to any later negotiations for any new Agreement to replace it).
Voting will operate on a simple majority basis – a majority of employees who cast a valid vote will need to vote in support of the proposal to terminate the Agreement for the proposal to succeed. If this were to occur, BAE Systems would then apply to the Fair Work Commission (FWC) to terminate the Agreement. If the FWC approves the termination of the Agreement, it would cease operation on a nominated day, and BAE Systems would organise for your salaried employment conditions and TAP to commence following this.
If the proposal does not receive a majority ‘YES’ vote, or if for any reason the FWC does not approve the termination of the Agreement, the parties will look to commence bargaining for a replacement enterprise agreement. It is important to keep in mind that the process of negotiating a new enterprise agreement could take many months.
IMPORTANT NOTE: A majority ‘YES’ vote in support of the termination of the Agreement would mean that BAE Systems would apply to the FWC to terminate the Agreement. If the FWC approves the termination, it would mean that from a specified date in future your employment would shift to a salaried arrangement, and you would no longer be covered by the Agreement.
Questions
Thank you for your patience whilst we’ve worked to provide you with information to allow you to make an informed decision on this matter. We have attached an additional FAQ document as Appendix B in the hope that it addresses any outstanding questions and allays any concern.
If you have any questions regarding your indicative TAP, the documents attached, or the voting process please speak to Julia Curran, Mel Dyson or myself.
Yours sincerely
Michael Obst
Defence Sustainment Solutions Program ManagerBAE Systems Australia
Enclosed:
1. Appendix A: Summary of Key Components of Salaried Employment
2. Appendix B: FAQ
3. Waged vs Salaried Employment Comparison Table
4. Voting Instructions Sheet”
The indicative total remuneration details read:[12]
“APPENDIX A: INDICATIVE SUMMARY OF KEY COMPONENTS OF SALARIED EMPLOYMENT
Salary Grade Level: BAE Systems Grade X, [role redacted ]
BAE Systems TAP: XXXX per annum for your full-time role, currently comprising of:
·XXXXX base salary*
·XXXX superannuation
Other Key Components: • On-Call – continued payment of the Periscopes On-Call allowance at a rate of $226.15 per week, in addition to the TAP, where required.
·Overtime – continued payment of overtime or provision of time off in lieu of overtime (TOIL) for specific additional work, such as urgent defect work in addition to the TAP.
·RDOs – continued accrual and flexible use of RDOs in line with the existing practices within the workgroup.
*Please refer to the attached Comparison Table for additional detail on what has been incorporated into your base salary, and linked additional materials regarding the NES and the Award.”
Relevant questions in the FAQ read:[13]
“Why can’t we move to salaried employment without terminating the Agreement?
Whilst an enterprise agreement remains in operation, it sets out specific employment terms and conditions that must be complied with in relation to employees who are covered by that enterprise agreement – this remains the case even if the enterprise agreement passes its nominal expiry date.
Given the Agreement covers the workgroup, for as long as it remains in operation, BAE Systems will remain obligated to remunerate you and administer your employment in accordance with the conditions set out in that Agreement.
This means that if the proposal receives a majority ‘NO’ vote, and the Agreement is not terminated, BAE remains obligated to remunerate and administer employment conditions for all members of this workgroup in accordance with this Agreement. Subject to applicable laws, the current arrangements will continue to apply unless and until that Agreement is terminated or replaced.”
………
“What happens if there’s a YES vote?
If there’s a majority ‘YES’ vote, then BAE Systems will file an application for termination of the Agreement with the FWC. This is a necessary step that must occur before the Agreement can be formally terminated.
What happens if there’s a NO vote?
If the proposal to terminate the Agreement receives a majority ‘NO’ vote, the current status and arrangements continue to apply. If the parties to the Agreement commence bargaining for a new replacement enterprise agreement, then the usual bargaining process will apply. This process could take many months to resolve.”
On 30 October 2024, the same day it provided these materials to the employees, BAE also did so to the AMWU.[14] BAE again received no response.
Ballot
A ballot via an independent balloting agency was conducted on 7 and 8 November 2024. The question asked was:[15]
“Do you approve the proposed Termination of the BAE Systems Australia Periscope In-Service Support Project Enterprise Agreement 2022-2024?”
Of the four employees eligible to vote, all voted. All votes cast were in favour.
On 11 November 2024, BAE advised the employees of the ballot outcome.[16]
On 12 November 2024, BAE advised the AMWU of the ballot outcome. No response was received from the AMWU.[17]
On 15 November 2024, aware that no response had been received to any of the earlier communications to Mr Donnell, BAE wrote directly to the Assistant State Secretary of the AMWU, Mr Gordon, advising as follows:[18]
“Hi Stuart
Thanks for the brief chat earlier this week.
As discussed, please see below most recent correspondence and previous attempts to connect with Paul Donnell on this matter (I understand correspondence was directed to Sue Thomas as that is how Paul has corresponded with the business over email). As flagged, it appears from the recent ballot that all 4 of the employees covered by the Periscopes EA would like to terminate the EA and revert to a salaried arrangement. The business is in the process of preparing an application to that effect.
Happy to make time to discuss.
Kind regards
Maciek
Maciek Zielinski
Head of Employee RelationsBAE Systems Australia”
No response was received from the AMWU.
Application by BAE
On 21 November 2024, BAE filed this application under s 222 for termination of the Agreement.
On 22 November 2024, the day following, Mr Donnell attended the workplace. He and Mr Obst had a brief conversation in which Mr Donnell relayed that the employees had informed him that they were comfortable with the termination of the Agreement.[19]
Further communication from employees
While preparing its materials for filing as directed, Mr Obst prepared a witness statement. That statement, together with its lengthy attachments and BAE’s written submissions were, once filed in the Commission, forwarded to the employees by Mr Obst on 29 January 2025 for information and inviting them to express any “concerns about its accuracy”.
Mr Ferrari, once of the employees, responded the following day:[20]
“Hey Michael,
The Maintenance team (Neal Morris, Nathan Richardson, Ryan Cher, and Rhys Ferrari) have had a meeting today to go through all the information you’ve outlined below.
We believe that the only contradiction we have would be number 34 in your Witness Statement;
34: You stated “one of the Covered Employees made comments that referenced the fact that the primary reason for terminating the enterprise agreement was to align their employment arrangements with the Periscope Technician colleagues in WA.”
We, as a collective, recall that there were many contributing factors for justifying the termination of the agreement, Aligning with WA being one of them, but not the primary.
The Covered Employees reasons for termination of the agreement are as follows;
1.Elimination of the EBA negotiations process which we deem to be difficult and time consuming for both parties which can causes conflict within the team.
2.Financial Compensation.
3.PDR process to be able to set goals for rewards including further aspirations.
4.Alignment with WA Technicians
Kind Regards,
Rhys Ferrari
Periscope Technical Officer
Periscope Workshop facility
BAE Systems Australia”
After confirming that the employees agreed that their response be provided to the Commission and the AMWU, BAE did so and advised the Commission that it may seek to rely on the email exchange in proceedings.
Submissions
BAE
BAE submit that it has standing to make the application and that the requisite statutory formalities have been met (s 223(a)).
BAE submit that the employees have agreed to the termination (s 223(b)) and that there are no reasonable grounds for believing that they have not done so (s 223(c)).
BAE submit that the information and material it provided the employees in advance of the ballot establishes that the ballot result was a genuinely made agreement to terminate. It rejects the AMWU assertion that employees were misled. It submits that:
there is no assertion, let alone evidence, of coercion, pressure or a lack of informed consent being exercised by the four employees;
it was not incorrect for BAE to indicate to employees that termination of the Agreement was necessary in order to move to a salary arrangement. That was a necessary element to the BAE position. Informing employees that all conditions in the Agreement were legal obligations whilst the Agreement existed was fair and accurate;
employees were not given a one-sided proposition. The material supplied in advance of the ballot expressly informed employees of what would occur should the ballot be successful and, conversely, should the ballot be unsuccessful;
BAE did not discount the prospect that the Agreement may need to be re-negotiated if the ballot was unsuccessful. BAE expressly contemplated this in its information to employees about the consequence of a no vote;
there is no obligation on an employer in advance of a ballot to terminate an agreement to explore, let alone exhaust, all other possibilities that may maintain an enterprise agreement in operation; and
to the extent the reason for approving of the ballot is relevant, the employees individually and collectively made informed decisions and the AMWU could have, if it wished, provided advice directly to the employees on the proposal in advance of the ballot, which it appears not to have done.
BAE submit that it is appropriate to approve termination of the Agreement (s 223(d)) having regard to its compliance with statutory requirements and the fact of agreement by secret ballot. BAE submit that whilst the views of the AMWU are relevant, they do not make approval of the termination inappropriate because:
the employer informed the AMWU of the workplace discussions which were occurring about moving to a salaried arrangement in lieu of retaining or re-negotiating the Agreement, but received no response from the AMWU;
to the extent that whether employees may be advantaged or disadvantaged by termination is relevant (and noting the different provisions in s 223 compared to s 226), the diminution or loss of some conditions is marginal and not of such significance that approval is inappropriate taking into account the higher remuneration that will be paid under the salary arrangements as well as a continuing safety net (the Manufacturing Award and NES) and the undertakings given; and
it is not necessary that there be a business case advanced or identified for termination by agreement of employees to be “appropriate”. In any event, there were rational operational reasons why BAE considered a salary arrangement to be preferable to the continuation of the Agreement given the operational and industrial linkages between the South Australian and Western Australian maintenance employees.
In respect of undertakings should the Agreement be terminated, by letter dated 25 February 2025 and forming part of its final written submissions, BAE provided a Statement of Undertakings in the following terms:[21]
“1. Should the BAE Systems Australia Periscopes In-Service Support Project Enterprise Agreement 2022-2024 (Agreement) be terminated by the Fair Work Commission (FWC), BAESA undertakes that it will:
a.provide the ‘salaried’ benefits to each of the four employees covered by the Agreement (Covered Employees) individually as set out in Annexures MO-7, MO-8, MO-9, MO-10, MO13, MO-14, MO-15 and MO-16 to the statement of Mr Obst; and
b.formalise the above commitments by way of issuing relevant documentation, including an employment contract, to each of the Covered Employees, which includes the benefits that are the subject of paragraph (a) above.
2. With respect to point 1, this undertaking will continue until:
a.such time as each of the Covered Employees accepts the contract of employment, and the contract of employment comes into effect; or
b.any new enterprise agreement comes into effect which covers and applies to the Covered Employees.
3. The undertaking given in point 1 will lapse at the earlier of the date in paragraph 2(a) or 2(b) above.
4. Where at the time of the termination of the Agreement a Covered Employee is engaged as an apprentice and subject to a training contract, BAESA will comply with any applicable legislative requirements under the South Australian Skills Act 2008 (SA) to have the South Australian Skills Commission approve any new employment contract entered into under paragraph 2(a) above prior to that contract commencing in operation.”
In summary, BAE submit that termination of the Agreement must be approved given that the requirements of s 223 are satisfied.
AMWU
The AMWU submit that reasonable grounds exist for believing that the employees did not agree to the termination (s 223(c)) as:
the ballot result was not the product of informed consent because the employer’s information provided to the employees in advance of the ballot was misleading and inadequate. It led employees to believe that termination of the Agreement was a necessity whereas it was possible for a third option to apply, being a re-negotiation that retained the Agreement but re-negotiated its terms so as to include provisions for annualised salaries;
the employer did not present a business case to employees. To the extent employees were motivated by the prospect of higher earnings via a salaried arrangement, this could have been accommodated without terminating the Agreement; and
the employer failed to commence re-negotiation of the Agreement with the AMWU as had been sought by letter of 6 August 2024. The employer’s view that collective bargaining under the FW Act was not desirable because it required “considerable effort” was inappropriate and influenced the employees to vote to terminate the Agreement.
The AMWU submit that it is inappropriate to approve the termination (s 223(d)) because:
terminating the Agreement will result in less beneficial terms and conditions of employment for employees in the workgroup. The employer’s undertaking to maintain some conditions is vague and unreliable because it relies on discretionary company policy. In any event, grandfathering of certain conditions only applies to existing employees. New employees would be covered solely by the Manufacturing Award and the NES with no guarantees of better conditions let alone annualised salary arrangements; and
the absence of a business case and the failure by BAE to explore the option of re-negotiation in advance of the ballot.
The AMWU submit that it was not indifferent to the interests of its members but that, due to human error, email correspondence to it from BAE about the transition to salary arrangements was not responded to.
The AMWU further submit that termination should not be approved and the Agreement should continue to operate, which would then lead to an orderly process of collective bargaining.
Consideration
Legal requirements
I am required to deal with this matter in accordance with the provisions of the FW Act. Section 222 relevantly provides:
“222 Application for the FWC’s approval of a termination of an enterprise agreement
Application for approval
(1)If a termination of an enterprise agreement has been agreed to, a person covered by the agreement must apply to the FWC for approval of the termination.
Material to accompany the application
(2)The application must be accompanied by any declarations that are required by the procedural rules to accompany the application.
When the application must be made
(3)The application must be made:
(a) within 14 days after the termination is agreed to; or
(b) if in all the circumstances the FWC considers it fair to extend that period—within such further period as the FWC allows.”
It is not in dispute that the application is competent and falls to be determined by reference to s 223 despite the Agreement now having passed its nominal expiry date. It had not done so when the application was made. This is not an application under s 225 and does not fall for determination by reference to the provisions of ss 226 or 226A. BAE, being a person covered by the Agreement, is entitled to apply for termination under s 222. The application was made within time. It was accompanied by the relevant declaration.
The formal requirements of s 222 have been met.
I now consider the substantive issues.
Section 223 provides:
“223 When the FWC must approve a termination of an enterprise agreement
If an application for the approval of a termination of an enterprise agreement is made under section 222, the FWC must approve the termination if:
(a) the FWC is satisfied that each employer covered by the agreement complied with subsection 220(2) (which deals with giving employees a reasonable opportunity to decide etc.) in relation to the agreement; and
(b) the FWC is satisfied that the termination was agreed to in accordance with whichever of subsection 221(1) or (2) applies (those subsections deal with agreement to the termination of different kinds of enterprise agreements by employee vote); and
(c) the FWC is satisfied that there are no other reasonable grounds for believing that the employees have not agreed to the termination; and
(d) the FWC considers that it is appropriate to approve the termination taking into account the views of the employee organisation or employee organisations (if any) covered by the agreement.”
If the considerations in ss 223(a) to (d) are made out, the termination application must be granted. This much is apparent from the chapeau to s 223 which provides that the Commission “must approve the termination” in those circumstances. No broader or other discretion exists; nor can other considerations inform the decision.
Section 223(a) is made out. On the evidence before me, I am satisfied that employees were provided a reasonable opportunity to decide whether they wanted to approve the proposed termination. Reasonable advance notice of the time and place at which the vote was to occur and of the voting method were provided. Subject to dealing with the issue of alleged misrepresentation raised by the AMWU (below), information provided by BAE on 30 October 2024 adequately and reasonably informed employees about the vote to terminate the Agreement.[22]
Section 223(b) is also made out. The evidence before me establishes that a majority of the four employees who were eligible to vote cast a valid vote by secret ballot and agreed to the termination. The vote was unanimous.
The AMWU does not contest that ss 223(a) and (b) are made out. It objects to the application to approve the termination having regard to ss 223(c) and (d). I deal with each in turn.
Section 223(c) – no other reasons to doubt agreement
Section 223(c) invites an assessment of the information provided to employees in order to determine whether agreement to the termination was real or merely apparent, or influenced by factors such as coercion or misrepresentation.
Coercion
There is no assertion, let alone evidence, of coercion or undue influence on the employees. I find that the vote was the expression of a freely formed decision of each person who voted.
Misrepresentation
Misrepresentation, particularly if it concerns material or significant issues relating to the voting decision and is sufficiently proximate to the vote, is capable of casting doubt on whether agreement by a majority of employees was real or merely apparent, and thus a factor that could constitute “reasonable grounds” for believing that agreement did not exist within the meaning of s 223(c).
The AMWU contends[23] that information provided to the employees in advance of the ballot was misleading because it led employees to believe that termination of the Agreement was a necessity to achieve the proposed remuneration arrangements whereas it was possible for a third option to apply, being one that retained the Agreement but re-negotiated its terms so as to include annualised salaries.
I do not accept this submission for two reasons.
Firstly, BAE made it clear from early in the discussions about moving to a salaried arrangement that it would only do so if the Agreement was terminated; that is, it was to be a transition from one employment arrangement to another whereby a salaried arrangement would substitute for the continued operation of the Agreement with its attendant terms and conditions no longer applying via that instrument. This was the basis on which the discussions with employees occurred from at least as early as 18 July 2024 and the basis on which the comparative table was then prepared by Mr Obst and other BAE officers and provided to the employees. It also appears to have been a common understanding. This was a position BAE was entitled to hold and advance. There is no evidence that this position was not communicated to or understood by the employees well in advance of the vote.
Secondly, representations made by BAE in the FAQ “Why can’t we move to salaried employment without terminating the Agreement?” were factual. It was correct and relevant to inform employees that the Agreement operated by force of law beyond its nominal expiry. It was also correct and relevant to state that all terms and conditions of an Agreement are mandatory obligations whilst an Agreement exists. It flowed from this second proposition that the Agreement could not be partly complied with whilst operating. Although BAE could have been more explicit in saying so, it was not misleading to state what it did. BAE could also have been more expansive in its answer to this question by indicating the reasons why it did not believe that a salaried arrangement was compatible with continuing employment under the Agreement. In the FAQ’s BAE made no representations one way or the other on this point. Whilst it may have been desirable for it to have done so, it was not misrepresentation to not do so. The absence of information about the employer’s reasoning in the FAQ does not preclude a finding of informed consent.
I deal with the AMWU’s two further submissions (no business case, and no information about or pursuit of alternatives) below as these were advanced as relevant to both ss 223(c) and (d).
Having found that a majority of employees agreed by secret ballot to the termination (s 223(b)), I also find that there are no other reasonable grounds to believe that the employees did not agree to the termination (s 223(c)).
Section 223(c) is made out.
Section 223(d) – views of employee organisation
The AMWU was provided an opportunity to express a view on the application and has done so.
No individual employees availed themselves of that opportunity. Notwithstanding, I draw a reasonable inference of employee support from the fact of a unanimous vote in favour of termination. I also find that employees did so generally for the reasons set out in Mr Ferrari’s email of 30 January 2025.
I now deal with the remaining grounds on which the AMWU submit that it is not appropriate to approve the termination. I do so noting that, as the AMWU has accepted, there is no general rule that the Union’s concerns act as a disqualifier to the approval of the termination[24] but that each should be considered and where the circumstances identified by both BAE and the AMWU point in different directions each issue of relevance must be given weight and balanced one against the other and as a whole.[25]
No business case
The AMWU submit that it is inappropriate to approve the termination because the employer did not present a business case to employees or the Commission.
I reject this submission for two reasons.
Firstly, there is no authority for this proposition and it reads into the statutory scheme concerning s 222 applications a requirement which is not express on its face or implicit in its terms. The reference to a “business case” relied upon by the AMWU in Fresenius Medical Care Australia Pty Ltd[26] is a comment in passing by a single member of the Commission concerning the specific facts of that case. It was not expressed as a general rule or decision-making principle. It has no persuasive value in this matter.
Secondly, to the extent relevant, there appears to have been rational operational reasons why BAE considered a salary arrangement to be preferable to the continuation of the Agreement. Mr Obst’s evidence was that there are linkages between the South Australian and Western Australian maintenance employees in that they are part of the same maintenance group forming part of the overall cohort of 26 employees in the periscope project workforce. Further, Mr Obst’s evidence was that either the South Australian or Western Australian employees could be called on at any given time to perform maintenance on a vessel, and that this was controlled by naval officers deciding where to berth a vessel, and not by BAE. In these circumstances there is apparent synergy in duties and organisational structure between the South Australian maintenance employees (who were not salaried employees) and the Western Australian maintenance employees (who were).
It is not inappropriate to approve the termination simply because a business case was not expressly put to the employees by BAE.
Outcome can be achieved by re-negotiation
The AMWU submit that BAE failed to commence re-negotiation of the Agreement with the AMWU as had been sought by letter of 6 August 2024 and that the employer’s view that collective bargaining under the FW Act was not desirable because it required “considerable effort” was inappropriate and influenced the employees to vote to terminate the Agreement.
The material supplied by BAE in advance of the ballot expressly informed employees what would occur should the ballot be successful and, conversely, should the ballot be unsuccessful. In stating the consequence of a ‘no’ vote, both BAE’s letter of 30 October 2024 and separately the FAQs expressly dealt with this prospect, and accurately. The relevant FAQ stated:[27]
“What happens if there’s a NO vote?
If the proposal to terminate the Agreement receives a majority ‘NO’ vote, the current status and arrangements continue to apply. If the parties to the Agreement commence bargaining for a new replacement enterprise agreement, then the usual bargaining process will apply. This process could take many months to resolve.”
It is readily apparent on the evidence that BAE did not discount the prospect that the Agreement may need to be re-negotiated if the ballot was unsuccessful. BAE expressly contemplated this in the information provided to employees about the consequence of a no vote. Nor do I consider it misleading or inappropriate for BAE to have observed that the process “could take many months” or, in the words of its 30 October letter, require “considerable effort on both sides”. Whilst these expressions of view conveyed a somewhat negative disposition to the collective bargaining alternative, they were not inaccurate or inflammatory.
I take into account that at no time prior to the ballot does BAE appear to have advised the employees that the AMWU had in its own right, and purportedly on their behalf, sought, three months earlier, to re-commence bargaining. I consider this to have been a material omission in the employer’s communication with employees. I also take into account that, whilst BAE did respond to the AMWU prior to the ballot, it took just over two months to do so.
However, these considerations, considered overall, do not re-characterise the outcome of the ballot to be other than informed consent, though they weigh somewhat towards that finding. There is no evidence that the AMWU sought to inform its members of this step it had taken or sought to dissuade them from the workplace discussions about transitioning to salary arrangements that were well underway by 6 August. The AMWU had express notice from BAE of these developments on 14 October and a reminder on 24 October and 30 October, but on each occasion failed to initiate contact until after the ballot. Whatever the reason for the AMWU’s lack of responsiveness, there is no evidence that it was caused by BAE or the employees.
I also take into account that the statutory scheme for the approval of termination under s 222 involves different mandated considerations than s 225 applications. Unlike s 226, the application by BAE, preceding as it does on the fact that a workplace vote in favour of termination has occurred, does not specifically require consideration of the bargaining consequences of termination, unlike ss 226(4).
I also reject this submission by the AMWU on the basis that it wrongly presupposes that an employer’s failure to have canvased all possibilities other than termination with its employees prior to the ballot means that the Commission cannot be satisfied that there are no other reasonable grounds for believing that employees have not agreed to the termination.[28]
Firstly, there is no authority for this proposition. It also reads into the statutory scheme a requirement which is not express on its face or implicit in its terms. I do not accept the AMWU submission that BAE had some obligation to have “meaningfully availed the affected workgroup of the opportunity”[29] to renegotiate or that its failure to have done so counts materially against a finding of appropriateness required by s 223(d). The fact of non-disclosure of the AMWU’s request for bargaining to commence is relevant, and I take it into account, but a standard of conduct which requires the alternate collective bargaining option to have been positively embraced by an employer prior to a vote to terminate being put to a workgroup is not required by s 223.
Secondly, whilst re-negotiation with a view to making a new agreement or varying the existing Agreement by altering or removing conditions to introduce a form of annualised salary was an option to BAE and the employees, it does not appear to have been ignored. To the extent relevant, it appears that both BAE and the employees considered a future collective bargaining path to not be their preference. Mr Ferrari, purportedly on behalf of all covered employees, stated that it was a “process we deem to be difficult and time consuming for both parties which can cause conflict within the team”.[30]
It is not inappropriate to approve the termination simply because other bargaining options for securing a variation to terms and conditions of employment were available to BAE and the employees.
Inferior terms and conditions
The AMWU submit that terminating the Agreement will result in less beneficial terms and conditions of employment for employees in the workgroup. It submits that the employer’s undertaking to maintain conditions is vague and unreliable because it relies on discretionary company policy. In any event, grandfathering certain conditions applies only to existing employees. New employees would be covered solely by the Manufacturing Award and the NES with no guarantees of better conditions let alone annualised salary arrangements.
I have closely considered this submission, particularly given the fact that an apprentice is in the workgroup and would, if the termination is approved, cease to be covered by the Agreement and instead be employed on a salaried arrangement underpinned by the Manufacturing Award and the NES.
The evidence before me is that a not insignificant number of employment conditions currently provided under the Agreement would be lost or diminished as part of an enforceable safety net. In some but not all respects a level of protection concerning the subject matters would be provided for by the remaining underpinning industrial instrument (the Manufacturing Award) and the NES though not to the same extent. In other respects, the employees would have access to rights under company policy or undertakings given by BAE, repeated and expanded upon in these proceedings. However, I find that some conditions would not continue or would be materially diminished. Further, any new employees in the South Australian workgroup would not have the benefit of the Agreement’s terms; they would simply fall to be employed under whatever terms agreed with BAE, subject to the Manufacturing Award, the NES and the employer’s undertakings.
These are material considerations. However, for the following reasons they do not persuade me to conclude that approval of the termination is other than appropriate.
Firstly, whilst the loss of conditions is not irrelevant to appropriateness, the statutory scheme for applications where termination has been agreed by employees does not apply a general test of fairness, as it does for s 225 applications where employees have not voted in favour of termination (see s 226(1)(a)).
Secondly, it is apparent that the employees in this matter voted in favour of termination at least in part to secure immediate access to higher remuneration from a salaried arrangement (“financial compensation” as Mr Ferrari described it[31]) as well as to “set goals for rewards including further aspirations”. The employees did so aware of the gains and losses including from the Comparative Table.
Thirdly, whilst some of the losses of conditions are more material than others, there are some mitigating factors. An industrial safety net remains, though not to the same extent. I do not agree with the AMWU[32] that the continued existence of the statutory safety net is irrelevant. If the loss of some conditions against the statutory safety net is relevant (as it is, and as the AMWU submits) then it logically follows that the remaining statutory safety net (in this case, the Manufacturing Award and NES) is also relevant.
Further, and whilst taking into account that the evidence does not disclose the specific total salary dollar figure to be contractually payable to each employee, each was aware of that figure prior to the ballot and considered collectively the losses are material but do not appear so substantial as to preclude a finding that approval is appropriate. The most material of the losses concern working hours, rostered days off and access to overtime. On this, the employees sought information from BAE concerning arrangements which apply to the Western Australian salaried maintenance employees, and this was promptly provided by Ms Curran. BAE have undertaken to apply comparable access to RDOs and overtime as advised in this exchange. This also includes the application of company policy concerning workplace flexibility requests, a policy provided to the employees prior to the ballot. Whilst the undertakings could have been drafted with greater precision, I do not agree with the AMWU[33] that they are imprecise such that approval of the termination is inappropriate. Nor do I consider it necessary to condition approval of the termination by requiring BAE to provide further undertakings concerning the make-up of the total annual remuneration package to each employee beyond what BAE has expressed in Undertaking 1(a).
Fourthly, BAE have undertaken, should the Agreement be terminated, to provide the employees with written confirmation of its undertakings (including the salaried arrangements) by way of a revised employment contract offer, and to commence making those higher payments from the termination date. The effect of this is that such undertakings would not only form part of the Commission record but would also become enforceable obligations with respect to the existing employees. The undertaking to contractually preserve these conditions is relevant and appropriate.
That an apprentice, albeit apparently in his fourth and final year, is part of the workgroup is a matter of potential concern which I raised with BAE during these proceedings. BAE have provided an undertaking concerning the apprentice to the following effect:[34]
“4. Where at the time of the termination of the Agreement a Covered Employee is engaged as an apprentice and subject to a training contract, BAESA will comply with any applicable legislative requirements under the South Australian Skills Act 2008 (SA) to have the South Australian Skills Commission approve any new employment contract entered into under paragraph 2(a) above prior to that contract commencing in operation.”
Whilst it remains unusual that an apprentice would lose the coverage of a particular industrial instrument in favour of becoming a salaried employee, and that this is an unorthodox and potentially undesirable arrangement for someone who has not yet secured a trade, in the context of a s 222 application where all persons (including it would appear the apprentice) have voted in favour of the termination based on informed consent, where the Manufacturing Award and the NES would continue to apply as a safety net, and where an undertaking has been made by BAE to submit to and comply with the approval requirements of South Australian legislation regulating apprenticeships, I do not consider that this consideration precludes a finding that it is appropriate to terminate the Agreement. In so concluding, I observe that this decision deals with FW Act considerations only and is not an expression of view on any issue requiring determination by the South Australian Skills Commission.
I have also considered the AMWU views cumulatively and whether, as a whole, they preclude a finding of appropriateness. I am not persuaded that the force of the AMWU views, have that effect. Whilst some matters raised by the AMWU are more meritorious than others, even the weightier objections are not sufficiently persuasive when considered against the strong and compelling factors in favour of a finding of appropriateness. For example, whilst BAE could have provided more information to the workgroup prior to the ballot (and particularly the fact that the AMWU had sought to re-commence bargaining), the information provided was substantial, was not false or misleading and viewed overall, not inadequate.
No other matters arise under s 223(d). I find that it is appropriate to approve the termination.
Conclusion
The statutory requirements in s 223 have been made out.
Accordingly, the FW Act provides that the Commission must terminate the Agreement.
The only issue remaining is operative date.
Section 224 provides that the date will be that provided for in the decision.
I take into account that:
· the vote to terminate the Agreement was made more than four months ago;
· it is reasonable for employees to be informed of this decision before termination of the Agreement comes into effect; and
· it is reasonable for a short period of prospectivity to allow BAE to consolidate the undertakings given to the Commission as part of the intended revised employment contract offers, as per Undertaking 1.
A two-week period is sufficient for these purposes. Termination of the BAE Systems Australia Periscope In-Service Support Project Enterprise Agreement 2022-2024 will come into effect from the first full pay period on or after 1 April 2025.
An Order[35] giving effect to this decision is issued in conjunction with its publication.
DEPUTY PRESIDENT
Appearances:
E. Hawthorne, of Seyfarth Shaw with permission, on behalf of BAE Systems Australia Limited
P. Rocconi, of and on behalf of the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).
Hearing details:
2025.
Adelaide;
18 February.
Final written submissions:
BAE Systems Australia Limited: 25 February 2025
AMWU: 6 March 2025
[1] Statutory Declaration of Michael Obst 17 December 2024
[2] A1 plus attachments MO1 to MO22
[3] R1
[4] A2
[5] Agreement clause 3.1(c)
[6] Agreement clause 4
[7] R1
[8] A1 MO11
[9] A1 MO12
[10] A1 MO13 to MO16
[11] A1 MO13
[12] A1 MO13
[13] A1 MO13 FAQ pages 1 and 3
[14] A1 MO17
[15] A1 MO13
[16] A1 MO19
[17] A1 MO20
[18] A1 MO21
[19] A1 paragraph 29
[20] A2
[21] Letter by BAE to Deputy President Anderon 25 February 2025
[22] See Statutory Declaration of Ms Mel Dyson dated 21 November 2024 at 2.1
[23] Submission 6 February 2025 paragraph 23
[24] Respondent’s Further Submissions 6 March 2025 paragraph 5
[25] Esso Australia Pty Ltd t/as Esso v The Australian Workers’ Union & Ors[2019] FWC 6143, [249]
[26] [2022] FWC 2088, [33]
[27] A1 MO 14 Appendix B FAQ page 3
[28] Respondent’s Further Submissions 6 March 2025 paragraph 14
[29] Ibid paragraph 19
[30] A2
[31] A2
[32] Respondent’s Further Submissions 6 March 2025 paragraph 29
[33] Respondent’s Further Submissions 6 March 2025 paragraph 41
[34] BAE letter 25 February 2025 Undertaking 4
[35] PR785319
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