Australian Municipal, Administrative, Clerical and Services Union-Western Australian Branch v Shire of Mundaring
[2018] FWCFB 3469
•6 JULY 2018
| [2018] FWCFB 3469 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604—Appeal of decision
Australian Municipal, Administrative, Clerical and Services Union-Western Australian Branch
v
Shire of Mundaring
(C2018/1278)
VICE PRESIDENT CATANZARITI | SYDNEY, 6 JULY 2018 |
Appeal against decision ([2018] FWCA 1241) of Commissioner Gregory at Melbourne on 2 March 2018 in matter number AG2017/1850.
[1] The Australian Municipal, Administrative, Clerical and Services Union-Western Australian Branch (ASU) has lodged an appeal, for which permission to appeal is required, against a decision issued by Commissioner Gregory on 2 March 2018 1 (the Decision) to approve the Shire of Mundaring (Local Government Employees) Enterprise Agreement 2017 (the Agreement). The Respondent in this matter is the Shire of Mundaring, referred to in this decision as the Shire.
[2] The Commissioner set out comprehensive reasons for his Decision. The reasons for the Decision included a finding that the coverage clause of the Agreement excludes from coverage of the Agreement those employees in the positions of Service Manager and above, including the Directors and the CEO, who are engaged on maximum term or some other form of individual employment contract. 2
[3] Upon finding that the exclusions for individual contractual arrangements are only associated with those employees in the senior management group whom were never covered by the Agreement, the Commissioner determined that the terms in the Agreement are not to be interpreted as enabling employees, who are already covered by the Agreement, to opt out. 3 Instead it is a situation where those senior level employees were not covered in the first place.4 This finding in turn led to the Commissioner finding that a ‘genuine agreement’ concern in relation to the senior management group not being provided with the Notice of Employee Representational Rights (NERR) did not arise as those employees are not covered by the Agreement.5
[4] Finally, the Commissioner decided that the Local Government Act 1995 (WA) was a relevant material for the purpose of s.180(2) of the Fair Work Act 2009 (Cth) (the Act) and was provided to employees in accordance with the Act since it was contained in the bundle of documents made available to employees during the access period. 6 The Commissioner found that the provision of documents through those means complied with the Act as it could be accessed by employees through the intranet, called up specifically by means of the search function, and that this was not the subject of any complaint or disadvantage.7
[5] Being otherwise satisfied that ss.186, 187, 188 and 190 of the Act had been met the Commissioner found that the Agreement was capable of approval with the acceptance of an undertaking notwithstanding the ASU’s objection to its approval on numerous grounds, including that;
• the coverage clause was an unlawful term since it provide a method by which there may be election, unilaterally or otherwise not to be covered;
• that the group covered by the Agreement was not fairly chosen and that there was not genuine agreement since there had been a failure to give the NERR to each employee to be covered by the Agreement; and
• that the Shire had failed to take all reasonable steps to ensure employees had access to material incorporated in the Agreement by reference.
[6] The Commissioner considered each of the matters in contention and, relevant to the matters in this appeal, construed the Agreement as to not contain an unlawful term, but accepting that the coverage clause was ambiguous which could be resolved with the acceptance of an undertaking.
[7] The circumstances of the proposed agreement included coverage of 187 administrative employees working at the Shire under predominantly part time and casual contracts (66%), with 67% of employees covered by the Agreement being female and 63% of employees being over the age of 45. 8
Grounds of appeal
[8] The ASU initially submitted six grounds of appeal, however only pressed three. 9 Each related to the construction of clause 3.3.2 of the Agreement. The wider clause 3 sets out the date of operation and parties to the Agreement, while the more specific clause 3.3.2 deals with the categories of people excluded from coverage. The three continuing grounds of appeal are:
● A failure to construe clause 3.3.2 with regard to its plain and ordinary meaning taking account of its text and context.
● An error in forming the construction of clause 3.3.2 by having regard to the subjective intentions of the parties.
● An error in finding that the parties had a common intention in relation to positions to be excluded from the coverage of the Agreement, with such finding not being available on the evidence.
Permission to appeal
[9] In relation to the question of permission to appeal, the Shire submitted that:
“17. Relevant to the assessment of the public interest criterion in section 604(2) of the Fair Work Act 2009 (FW Act) are that –
(a) terms substantially identical to clause 3.3.2 have been included (without any objection from the ASU, or any other person or body) in each of the preceding enterprise agreements since 2008;
(b) over that 10-year period, clause 3.3.2 and its predecessors have been applied by the Shire consistently with the terms of the Coverage Undertaking;
(c) there is no evidence that any Shire employee has been adversely affected by the way that clause 3.3.2 or its predecessors have been applied by the Shire;
(d) no objections have been raised by the ASU, or anyone else, to the way that the Shire has applied clause 3.3.2 or its predecessors;
(e) no objections have been raised by the ASU or anyone else, to the way that clause 3.3.2 would continue to be applied, consistently with the Coverage Undertaking; and
(f) since 10 July 2017, the Shire has provided, to employees covered by the Agreement, the additional entitlements under the Agreement.“ 10
[10] Having considered the above, as well as the all the other materials filed by the parties, we consider that permission to appeal should be granted. For the reasons which follow, we are of the view that the appeal raises important questions concerning the construction of the terms of the Agreement, and ultimately whether the Agreement was capable of approval with the various undertakings provided by the Shire.
Grounds of appeal
[11] The appeal in this matter raises three contentions, each in relation to the proper construction of clause 3.3.2.
[12] The ASU’s first ground of appeal is that the Decision at first instance failed to construe clause 3.3.2 of the Agreement with regard to its plain and ordinary meaning taking into account its text and context. At issue was the meaning of this clause:
“3.3 The parties to this Agreement shall be:
3.3.1 Shire of Mundaring of 7000 Great Eastern Highway, Mundaring in the State of Western Australia
And:
3.3.2 Employees of the Shire of Mundaring previously covered by the terms and conditions of the Local Government Offices Award (WA) 1999 or its successor including Apprentices and excluding:
● employees employed under a Director or Service Manager contract,
● a maximum term contract,
● early childhood teachers
● early childhood educators,
● swim teachers,
● umpires
● or unless otherwise advised under an individual contract or agreement.
And:
3.3.3 The Australian Municipal Administrative Clerical and Services Union”
[13] In respect of this clause, the ASU contended that the following findings indicate error on the part of the Commissioner. Having set out the agreement interpretation principles in AMWU v Berri Pty Ltd 11 (Berri), the Commissioner made the following findings:
“[68] The sub clause on one reading can be said to intend to exclude several different categories of employee, i.e. those under a Director or Service Manager contract, those under a maximum term contract, and those under an individual contract or agreement. However, it could also be read as excluding Directors or Service Managers employed under any of the various forms of contract referred to in the sub clause. The Shire seeks to clarify this intention in the so-called “coverage undertaking” by indicating that the only individual or maximum term contracts that exclude employees from coverage are those covering “senior leadership roles such as manager level and above.” The ASU submits, in response, that this only adds to the confusion and ambiguity by using terms such as “senior leadership roles” and “manager level and above,” which are not terms in common usage or commonly understood within the Shire.
[69] It is also noted that the Shire provided further amplification in answer to a question from the Commission during the proceedings about what was intended by the meaning of the sub clause, when it indicated that the reference to maximum term or individual contracts only referred to arrangements in place at the time the Agreement was made and approved by the Commission. It was not intended to be a device or mechanism to enable employees to opt out or be removed from coverage after the Agreement had been approved and was in operation.
[70] I am satisfied, in response, that the relevant words in sub clause 3.3.2 do not have a plain and ordinary meaning and there is instead some ambiguity in terms of what is intended. This involves, in particular, the uncertainty about whether those employees, who can be excluded by use of individual contracts, can only be the Directors and Service Managers, or whether other employees can also be excluded by means of the “maximum term contract” or “an individual contract or agreement” referred to.
[71] Having come to the conclusion that the words are ambiguous, or are capable of having more than one meaning, the principles in Berri make clear that evidence of the surrounding circumstances can be admissible to aide interpretation. This is obviously limited to evidence tending to establish objective background facts, which are known to both parties, and which inform the subject matter of the Agreement. It can include evidence of prior negotiations to the extent they establish objective background facts known to both parties, and notorious facts of which knowledge is to be presumed, or evidence of matters in common contemplation.
[72] In this context I note, firstly, the witness statements of both Ms Courtin and Ms Gerlach, who were both participants in the bargaining round. Each statement makes reference to the group of employees to be excluded from coverage, and these positions are set out specifically in the witness statement of Ms Courtin. She continued to indicate that she considered these positions to be part of either the “Executive Leadership Team” or the “leadership team,” and acknowledged that she would consider these latter positions to be “manager level.” The evidence also indicates that this understanding was clear to both parties throughout the entire process of the negotiations. It was also a common understanding that was consistent with the long standing practice in regard to the preceding enterprise agreements at the Shire. It was also consistent with what applies more broadly in the local government sector in Western Australia. I am satisfied, in response, that these understandings can be said to be objective background facts known to all parties, and are evidence of matters in common contemplation.
[73] I am satisfied, in conclusion, based on the application of the principles in Berri that sub clause 3.3.2 should be interpreted on the basis that it intends to exclude from coverage of the Agreement those employees in the positions of Service Manager and above, including the Directors and the CEO, who are engaged on maximum term or some other form of individual employment contract. I am also satisfied that the group of employees to be covered by the Agreement can be said to be fairly chosen, in that they are an operationally distinct group. The remaining employees, being the CEO, the Directors, and the Service Managers, are separate and distinct from the employees covered by the Agreement by virtue of their leadership and managerial responsibilities.
[74] As indicated, the ASU submits that the exclusions can enable employees to opt out of coverage by means of individual contracts being offered. I am satisfied that the decision I have come to, in large part, deals with this issue by making clear that the individual contractual arrangements are only associated with those employees in the senior management group being, the CEO, the Directors and the Service Managers. They were never covered by the Agreement by virtue of them being in a distinct operational group. The terms in the Agreement are accordingly not to be interpreted as enabling employees, who are already covered by the Agreement, to opt out. It is instead a situation where those senior level employees were not covered in the first place.
[75] This is obviously not to suggest that the group of employees who are covered by the Agreement will always remain static. Some employees will obviously be employed after the Agreement is approved, and will then become covered. Others will retire or leave the organisation and no longer be covered. In addition, employees who are covered by the Agreement will from time to time be promoted to managerial positions, taking them out of its coverage. In some cases employees in the management team might even leave those positions, for whatever reason, and move back into positions covered by the Agreement. It can also be assumed that employees acting up in managerial positions will also move from coverage of the Agreement on those occasions. These are obviously normal interactions that occur in any workplace, and clearly fall outside what is contemplated by s.194(ba) of the Act.
[76] The decision I have come to about the interpretation of the Agreement also means the ASU’s submissions about the Notice of Employee Representational Rights falls away. The CEO, the Directors, and the Service Managers are not covered by the Agreement, and were never intended to be. Therefore, they were never required to be provided with a copy of the Notice.”
[14] The ASU submitted that the Commissioner’s construction of clause 3.3.2, 12 being consistent with the approach advanced by the Shire, focuses “almost exclusively on past practice, the Shire’s intentions, and industry-wide custom and practice”13 rather than an assessment of the text itself having regard to its context and purposes. The ASU contended that the Commissioner’s approach was not only inconsistent with the principles in Berri but also inconsistent with the evidence led by the ASU concerning the correct interpretation of the clause.14
[15] The ASU’s second and third appeal grounds deal with the Commissioner’s regard to the subjective intentions as opposed to the objective intentions of the parties, 15 and the finding that the parties had a common intention in relation to positions to be excluded from the coverage of the Agreement,16 with such finding not being available on the evidence.
[16] The agreement interpretation principles set out by the Full Bench in Berri are as follows:
“[114]The principles relevant to the task of construing a single enterprise agreement may be summarised as follows:
1. The construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:
(i) the text of the agreement viewed as a whole;
(ii) the disputed provision’s place and arrangement in the agreement;
(iii) the legislative context under which the agreement was made and in which it operates.
2. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.
3. The common intention of the parties is sought to be identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement, without regard to the subjective intentions or expectations of the parties.
4. The fact that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself an important contextual consideration. It may be inferred that such agreements are intended to establish binding obligations.
5. The FW Act does not speak in terms of the ‘parties’ to enterprise agreements made pursuant to Part 2-4 agreements, rather it refers to the persons and organisations who are ‘covered by’ such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement ‘with the employees who are employed at the time the agreement is made and who will be covered by the agreement’. Section 182(1) provides that an agreement is ‘made’ if the employees to be covered by the agreement ‘have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement’. This is so because an enterprise agreement is ‘made’ when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.
6. Enterprise agreements are not instruments to which the Acts Interpretation Act 1901 (Cth) applies, however the modes of textual analysis developed in the general law may assist in the interpretation of enterprise agreements. An overly technical approach to interpretation should be avoided and consequently some general principles of statutory construction may have less force in the context of construing an enterprise agreement.
7. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or it is ambiguous or susceptible of more than one meaning.
8. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.
9. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.
10. If the language of the agreement is ambiguous or susceptible of more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.
11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.
12. Evidence of objective background facts will include:
(i) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;
(ii) notorious facts of which knowledge is to be presumed; and
(iii) evidence of matters in common contemplation and constituting a common assumption.
13. The diversity of interests involved in the negotiation and making of enterprise agreements (see point 4 above) warrants the adoption of a cautious approach to the admission and reliance upon the evidence of prior negotiations and the positions advanced during the negotiation process. Evidence as to what the employees covered by the agreement were told (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement.
14. Admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties’ intention or purpose was.
15. In the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. But such post-agreement conduct must be such as to show that there has been a meeting of minds, a consensus. Post-agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.” 17
[17] The context of the ASU’s three grounds of appeal are that, Commissioner Gregory when considering the approval of the Agreement, expressed the view that he was satisfied that the coverage clause 3.3.2 “should be interpreted on the basis that it extends to exclude from coverage of the Agreement those employees in the positions of Service Manager and above, including the Directors and the CEO, who are engaged on maximum term or some other form of individual employment contract”. 18 Connected with that finding is what is argued to be an error in relation to the formation of the view; that the exclusion within clause 3.3.2 was not an unlawful term.19
[18] The Act requires that upon consideration of an agreement approval, the Commission must be satisfied that the agreement does not include any unlawful terms (s.186(4)). In forming that view the Commission is obliged to have regard to the provisions of s.194(ba) which is in following terms:
“194 Meaning of unlawful term
A term of an enterprise agreement is an unlawful term if it is:
…
(ba) a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement; or
…”
[19] Of course, it is also the case that consideration of an agreement approval requires the Commission to be satisfied of other matters, in particular, that the agreement has been genuinely agreed (s.186(2)(a)) and that the group to be covered by the agreement has been fairly chosen (s.186(3) and s.188).
[20] The notification time by which the employer agreed to initiate bargaining for the Agreement was 2 December 2016 which was also the same date upon which the NERR was provided to employees. 20 The preamble to that Notice is in the following terms:
“The Shire of Mundaring gives notice that it is bargaining in relation to an enterprise agreement (The Shire of Mundaring (Local Government Administrative Employees) Enterprise Agreement 2017) which is proposed to cover Employees of the Shire of Mundaring who were previously covered by the terms and conditions of the Local Government Officers Award (WA) 1999 including apprentices but excluding Early Childhood Teachers, Early Childhood Educators, Swim Teachers, Umpires, and employees employed under a Director or Service Manager contract, a maximum term contract, or unless otherwise advised under an individual contract or agreement.” 21
[21] After a period of negotiations voting for the Agreement commenced on 11 May 2017 with the resultant Agreement made on 12 May 2017. 22 The Form F17 (Employer Statutory Declaration) in support of the Agreement identified that it would cover 187 employees, 138 of whom cast a valid vote in the ballot, with 116 voting in favour of the Agreement.23
[22] The underlying reference instruments to the Agreement were identified by the employer as being the Local Government Industry Award 2010 Modern Award (the Modern Award), 24 with the applicable pre-reform instrument being the Local Government Officers’ (Western Australia) Award 1999. In the employer statutory declaration, the Shire identified the following classification mapping between the Agreement and the Modern Award:
Enterprise Agreement Level | Relative Local Government Industry Award 2010 Level |
1 | 2 |
2 | 3 |
3 | 4 |
4 | 6 |
5 | 7 |
6 | 8 |
7 | 9 |
8 | 10 |
9 | 11 |
[23] Is relevant to note that the Modern Award provides the following classification definition for the highest of its classifications, level 11:
“B.11 Level 11
Level 11 positions can be described as those which have a management focus upon the attainment of operational and strategic objectives undertaking duties and responsibilities at a higher level than Level 10 and includes senior executive officers (but not the chief executive officer, however described) who have overall responsibility and accountability for a number of significant functions.
B.11.1 Authority and accountability:Makes determinative decisions and is accountable under delegated authority. Influences day-to-day and/or strategic direction of a department. Leads policy development and implementation.
B.11.2 Judgment and problem solving: Resolution of problems which require highly analytic reasoning and integration of wide-ranging and complex information. High level of independence in determining direction and approach to issues.
B.11.3 Specialist knowledge and skills: Positions require the application of a wide range of specialist knowledge and skills, including relevant legislation and policies and other areas of precedent.
B.11.4 Management skills: Application of highly developed management skills to establish and/or monitor goals and objectives. Manage employees, budgets, work programs or major projects of the employer or a department utilising leadership, evaluation and monitoring skills to facilitate achievement of objectives. Ability to generate innovative approaches to more effectively deploy resources, meet changing circumstances and improve services.
B.11.5 Interpersonal skills: Positions at this level are required to use highly developed interpersonal skills to influence, persuade and/or motivate others to achieve objectives critical to the employer and to resolve complex conflict situations.
B.11.6 Qualifications and experience:Positions require a relevant degree or equivalent and significant management experience.”
[24] Evidence was received by the Commission at first instance from a number of witnesses, including the Shire’s Manager Human Resources, Ms Maureen Gerlach and Ms Danielle Courtin, the Shire’s Governance Officer, called on behalf of the ASU. Amongst other matters Ms Gerlach gave evidence in her statutory declaration that the NERR “was issued to all employees to be covered by the proposed agreement”. 25
[25] An issue in the proceedings at first instance was whether, as contended by the ASU, the Agreement could not be approved because it contained an unlawful term because it provided a method by which an employee could elect, unilaterally or otherwise, not to be covered by the proposed agreement. 26 It was also contended that the NERR should have been provided to all employees at the commencement of bargaining including senior management “because the exclusion in sub clause 3.3.2 was not in effect at the time”27 and given that the NERR was not so issued to all employees including senior management, the Commission could not be satisfied the Agreement was genuinely agreed to, as required by s.186(3) of the Act.
[26] The Commissioner’s Decision in relation to the ASU’s contentions includeD the following background about the matters before him:
“[7] Clause 3.3.2 – the unlawful term – the ASU first makes reference to s.186(4) of the Act, which provides that the Commission must be satisfied that an Agreement does not include any unlawful terms. It then refers to s.194(ba), which provides that a term of an enterprise agreement is an unlawful term if it is:
“a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement.”
[8] The ASU submits this has broad operation and extends to terms that allow an employee to choose not to be covered by an Agreement, whether that choice can be made by the employee, or is contingent on some action by the employer.
[9] The ASU then refers to sub clause 3.3.2, which acts as the coverage clause. It relevantly provides:
“The parties to this Agreement shall be:
….
3.3.2 Employees of the Shire of Mundaring previously covered by the terms and conditions of the Local Government Officers Award (WA) 1999 or its successor including Apprentices and excluding:
● employees employed under a Director or Service Manager contract,
● a maximum term contract,
● early childhood teachers,
● early childhood educators,
● swim teachers,
● umpires
● or unless otherwise advised under an individual contract or agreement.”
[10] The ASU then refers to the recent Full Bench Decision in amwu v Berri Pty Limited (“Berri”) in terms of the principles to be applied in interpreting the clause. It continues to submit that the sub clause, firstly, defines the employees covered by the Agreement by reference to coverage of the previous Award and its successor, being the Local Government Industry Award 2010 (“the Award”). It then acts to exclude employees, who would otherwise be covered, by providing that certain types of contracts can be used to enable those employees to opt out. The ASU submits that this can occur by an employee accepting either a Director or Service Manager contract, a maximum term contract, or another form of individual contract or agreement. In its submission these exclusions are not limited to the named classifications, but also enable other employees to opt out by accepting individual or fixed term contracts. It makes this submission, in particular, in regard to the first two dot points and the last dot point in sub clause 3.3.2. It submits, in conclusion, that the sub clause is an unlawful term within the meaning of s.194(ba), and therefore the Commission cannot be satisfied in terms of what s.186(4) requires.
[11] The ASU also notes there are other references in the Agreement, which suggest that senior managers are intended to be covered and in this context it refers, in particular, to the pay scales Level 1 to Level 9 at pages 11 and 12 of the Agreement, and the various definitions at each Level, which encompass work performed by employees in senior management positions.” (formatting and references omitted)
[27] The Commissioner records that an undertaking in the following terms was proposed by the Shire to resolve the concerns that had been identified:
“The Shire undertakes that the only individual or maximum term contract that will exclude employees from the coverage of the Enterprise Agreement 2017 will be those for senior leadership roles such as manager level and above which will result in a maintenance of the status quo and reflect the long standing legacy of separation through former Award coverage.” 28
[28] The Decision at first instance records that the undertaking was objected to by the ASU on numerous grounds including that;
• it would permit employees who would otherwise be covered by the Agreement to opt out; that the references to “senior leadership roles” and “manager level” were ambiguous;
• that the undertaking purportedly altered the coverage of the Agreement which becomes a substantial change to its terms;
• that senior staff should have been provided with a NERR; and
• that “the undertaking has no bearing on the use of Director or Service Manager contracts to exclude employees who would otherwise be covered.” 29
[29] In dealing with these matters, the Commissioner first considered the provisions of the clause, indicated by him as being effectively the Agreement’s coverage clause. 30 The Commissioner had regard to the principles set out in Berri, and he formed the view that the clause had a particular intention in relation to the exclusion of certain positions from coverage of the Agreement, and in particular:
● That its intention was to “exclude from coverage of the Agreement those employees in the positions of Service Manager and above, including the Directors and the CEO, who are engaged on maximum term or some other form of individual employment contract”; 31
● That the group of employees to be covered by the Agreement was fairly chosen, being an operationally distinct group. Those not covered, “being the CEO, the Directors, and the Service Managers, are separate and distinct from the employees covered by the Agreement by virtue of their leadership and managerial responsibilities”; 32
● That the Agreement does not permit an opt-out arrangement, with the individual contractual arrangements only being associated with the senior management group, who “were never covered by the Agreement by virtue of them being in a distinct operational group. The terms in the Agreement are accordingly not to be interpreted as enabling employees, who are already covered by the Agreement, to opt out. It is instead a situation where those senior level employees were not covered in the first place”; 33
● That with the group of employees covered by the Agreement not being static, there may be movement into and out of its coverage for various reasons, including promotions and acting-up arrangements. Such circumstances “are obviously normal interactions that occur in any workplace, and clearly fall outside what is contemplated by s.194(ba) of the Act.” 34
[30] Having construed this, the Commissioner then found that the contentions in respect of the NERR fell away, since the “CEO, the Directors, and the Service Managers are not covered by the Agreement, and were never intended to be. Therefore, they were never required to be provided with a copy of the Notice.” 35
[31] In its strictest sense, the matter before the Commissioner was confined to whether or not the Agreement contained an unlawful term, as defined within s.194 of the Act, which may lead to him rejecting the approval. Faced with a contest between the parties as to whether there was any such unlawful term, it was necessary for him to resolve the matter by construing the terms of the Agreement. The finding that clause 3.3.2 did not have a plain and ordinary meaning led the Commissioner to consider, firstly, whether other material could resolve the ambiguity and if it could not, to consider accepting an undertaking from the Applicant pursuant to s.190 of the Act.
[32] The question of whether or not the clause contained ambiguity may be resolved with reference to either or both admissible extrinsic material or matters of objective fact. In the matter before the Commissioner at first instance, the admissible extrinsic material is limited to the NERR, circulated to employees on 2 December 2016, the Agreement that was operating at that time, the provisions of the Modern Award, the pre-reform award, several draft agreements proposed during the course of bargaining, and minutes of the bargaining meetings. With one exception, the respective contentions of Ms Gerlach and Ms Courtin about the intention of the parties during bargaining do not ultimately assist either case, amounting merely to a summary of the hopes and aspirations of each during bargaining. That exception is the acknowledgement by both witnesses that it was appropriate for the Agreement to exclude certain levels of senior employees, although ultimately neither witness agreed about which employees were to be excluded.
[33] Further, in accepting that there is an ambiguity within the term, the Commissioner noted other possible constructions of the clause, relying significantly upon the Shire’s submissions regarding its intentions for the Agreement. More specifically, the Commissioner took into account the Shire’s intention with respect to the undertaking:
“the only individual or maximum term contracts that exclude employees from coverage are those covering “senior leadership roles such as manager level classifications and above” 36 and that the undertaking’s “reference to maximum term or individual contracts only referred to arrangements in place at the time the Agreement was made and approved by the Commission. It was not intended to be a device or mechanism to enable employees to opt out or be removed from coverage after the Agreement had been approved and was in operation”.37
[34] As a result the Commissioner was satisfied:
“[70] … that the relevant words in sub clause 3.3.2 do not have a plain and ordinary meaning and there is instead some ambiguity in terms of what is intended. This involves, in particular, the uncertainty about whether those employees, who can be excluded by use of individual contracts, can only be the Directors and Service Managers, or whether other employees can also be excluded by means of the “maximum term contract” or “an individual contract or agreement” referred to.”
[35] Respectfully, such reliance upon the Shire’s intentions for the Agreement was misplaced.
[36] A proper analysis of whether the clause in question contained an ambiguity would be to rely upon the language of the clause itself and to consider any relevant extrinsic material or matters of objective fact.
[37] In the NERR provided to employees on 2 December 2016, the following is notified:
“The Shire of Mundaring gives notice that it is bargaining in relation to an enterprise agreement (The Shire of Mundaring (Local Government Administrative Employees) Enterprise Agreement 2017) which is proposed to cover Employees of the Shire of Mundaring who were previously covered by the terms and conditions of the Local Government Officers Award (WA) 1999 including apprentices but excluding Early Childhood Teachers, Early Childhood Educators, Swim Teachers, Umpires, and employees employed under a Director or Service Manager contract, a maximum term contract, or unless otherwise advised under an individual contract or agreement.”
[38] A bargaining meeting took place on 15 March 2017 at which a consultation draft of the proposed agreement was circulated by management representatives. That draft, capable of being admissible as extrinsic material, contained a proposed coverage clause in different form to the NERR, but in identical terms to that which appears in the final Agreement. 38 At least on the face of the documents before the Commissioner at first instance, that clause does not appear to have been subsequently changed.
[39] Ms Courtin’s evidence to the Commission on the subject is largely confined to the matters set out within her written witness statement which put forth concerns around the ambiguity of the “senior leadership roles” identified in the undertaking provided by the Shire to be the excluded from the Agreement under clause 3.3.2. Ms Courtin stated that the Shires’ current structure is separated into the “Executive Leadership Team” comprising of the Chief Executive Officer, Director of Corporate Services, Director Strategic and Community Services, Director Infrastructure and Director Statutory Services, and the “Leadership Team” comprising the various Managers in Finance and Government, IT, HR, Community Safety and emergency Services, Building and Health, Planning and Environment, Recreation Services, Libraries and Community Engagement Children’s Services, Design, Building Maintenance and Operations. Whilst she would describe the positions in the Leadership Team as being at “manager level” Ms Courtin stated that she would not describe such positions as being part of “a senior leadership team” or an “Executive Leadership Team”. However, in the undertaking provided by the Shire, these categories of employees were to be excluded from coverage of the Agreement as each of these Managers reported to a Director.
[40] In Ms Gerlach’s evidence it is stated that the positions are sufficiently clear, as the Shire’s previous agreements (from 2008-14) had excluded “employees employed under a Director or Service Manager contract, a maximum term contract, or unless otherwise advised under an individual contract of agreement” with positions which were subject to an individual contract; for example the Chief Executive Officer and senior employees such as Service Directors (the Executives) and Service Managers who reported to Directors. 39 Ms Gerlach’s stated that she is not aware of any current or former Shire employees, other than an employee holding one of these positions who is or has been employed by the Shire under an individual employment contract.
[41] In this appeal, the Shire advanced that having identified two ways in which the clause could reasonably be construed, it followed that the words used in clause 3.3.2 were ambiguous and capable of more than one meaning. 40
[42] The Shire took the Full Bench to its analysis of three of the seven bullet points referred to in clause 3.3.2 arguing that each has no plain meaning. The exclusion of “Employees employed under a Director or a Service Manager contract” was argued to have no plain meaning because neither of those terms is defined in the Agreement. As such, it follows that the exclusion could therefore apply to a person employed under “a contract generally used by as a Director or Service Manager”, “a Director or Service Manager employed under a contract of that type”, or alternatively that on the basis of the uncontested evidence - all Directors and Service Managers have been and continue to be employed by the Shire under individual employment contracts.
[43] The Shire also contended that the exclusion of persons engaged under “a maximum term contract” did not make grammatical sense, particularly in making clear those who are excluded under the Agreement. It was submitted that the phrase could refer to anyone employed under a maximum term contract or in the alternative a Director or Service manager employed under a maximum term contract. Finally the exclusion of persons “or unless otherwise advised under an individual contract or agreement” was also submitted as not making grammatical sense because it was unclear as to what “advised” meant in the relevant context. Moreover, the Shire contended that it was unclear as to whether the reference to “contract or agreement” is limited to an individual employment contract or extends beyond that category, and if it is so limited, whether the category is limited to a “maximum term contract”.
[44] Consideration of these matters does not reasonably lead to the view that the clause in question is ambiguous. Instead, we are of the view that the clause has a plain meaning. That meaning is consistent with the slightly different formulation of words used within the NERR. On the basis of the evidence before the Commission and upon the proper construction of the clause following the principles in Berri, the plain meaning of clause 3.3.2 is that the intention of the Agreement at all relevant times was to cover all employees formally covered by the pre-reform award, the Local Government Offices Award 1999 (WA) including apprentices, but excluding others.
[45] The exclusions at the point of the NERR were for:
“Early Childhood Teachers, Early Childhood Educators, Swim Teachers, Umpires, and employees employed under a Director or Service Manager contract, a maximum term contract, or unless otherwise advised under an individual contract or agreement”. (Emphasis added).
[46] With some minor changes of reordering the categories and laying them out as bullet points, the same principles of exclusion are used in the resultant Agreement. Persons employed under a Director Service Manager contract are excluded, as are Early Childhood Teachers, Early Childhood Educators, Swim Teachers and Umpires. However both the Notice and the Agreement are consistent that persons employed under a maximum term contract are to be excluded, as are people engaged under an individual contract or agreement.
[47] A construction to the effect that the clause merely maintained and did not extend the status quo of greater than 10 years of excluding only those employed in a senior leadership position, 41 along with the excluded employment categories of Early Childhood Teacher, a Swim Teacher or an Umpire is inconsistent with the plain meaning of the words employed in both the Notice and the resultant Agreement.
[48] The obligation conferred by s.186(4) of the Act, is satisfaction that the Agreement does not include any unlawful terms. This requires consideration of s.194(ba) of the Act which defines the term of an enterprise agreement to be an unlawful term if it is “a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement”.
[49] The ASU argues in this respect that the undertaking provided by the Shire and accepted by the Commissioner is impermissible, since it “continues to permit the use of individual and maximum term contracts to allow employees in “senior leadership roles such as manager level and above to opt out of the Agreement” 42 and does not address the use of Director or Service Manager contracts to achieve the same result. It also argues that the undertaking is impermissible since it results in there being significant change to the Agreement, which is not permitted by s.190(3)(b) of the Act. While we do not determine the question of whether the undertaking would result in significant change to the Agreement, we agree that the undertaking does not resolve the problems which have been identified.
[50] Further, in view of our construction of clause 3.3.2 and its consistency with the NERR, the evidence before the Commissioner does not support acceptance of the undertaking, since he could not be satisfied that it did not have the effect of excluding people notified of and participating in bargaining and expecting to be covered by the Agreement. As such, the Commissioner could not be satisfied that s.186(2) of the Act, requiring satisfaction that employees genuinely agreed to the Agreement, as defined by s.188 of the Act, had been complied with. If there were such a category of people, the requirement in s.188(c) of whether there were other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees would need consideration.
Conclusion
[51] For the reasons set out above, we have determined that the Commissioner erred in satisfying himself that s.186(4) of the Act had been met, and that the identified problems with the coverage clause under the Agreement could be met with the undertakings proposed by the Shire. As a result, the Commissioner erred in concluding that the approval requirements of ss.186, 188 or 190 of the Act were met. We have therefore determined to uphold the appeal and to quash the Decision of Commissioner Gregory.
[52] We order as follows:
(1) Permission to appeal is granted.
(2) The appeal is upheld in respect of appeal grounds 1, 2 and 3.
(3) The Decision ([2018] FWCA 1241) is quashed.
(4) The agreement approval application (AG2017/1850) is dismissed.
VICE PRESIDENT
Appearances:
Mr D. Scaife, Solicitor for the Appellant.
Mr N. Douglas, Solicitor for the Respondent.
Hearing details:
2018.
Melbourne with video link to Perth
17 May.
Printed by authority of the Commonwealth Government Printer
<PR608090>
1 [2018] FWCA 1241.
2 Ibid at [73].
3 Ibid.
4 Ibid at [74].
5 Ibid at [76].
6 Ibid at [79].
7 Ibid at [79] – [80].
8 The Form F17 (Employer Statutory Declaration).
9 Appellant’s Outline of Submissions at [5]-[6]; Transcript of Proceedings dated 17 May 2018 at PN7.
10 Shire of Mundaring, Outline of Submissions.
11 [2017] FWCFB 3005.
12 [2018] FWCA 1241 at [67] – [70].
13 Appellant’s Outline of Submissions at [20].
14 Ibid at [22] – [23].
15 [2018] FWCA 1241 at [69] – [70].
16 Ibid at [70].
17 [2017] FWCFB 3005.
18 [2018] FWCA 1241 at [73].
19 Ibid at [75].
20 Appeal Book, p.151.
21 Ibid, p.165.
22 Ibid, p.151.
23 Ibid.
24 Respectively MA000112 and AW787011, Appeal Book, p.154.
25 Appeal Book, p.160 at [8].
26 [2018] FWCA 1241 at [5].
27 Ibid at [20].
28 Ibid at [12].
29 Ibid at [13] – [18].
30 Ibid at [47].
31 Ibid at [73].
32 Ibid.
33 Ibid at [74].
34 Ibid at [75]
35 Ibid at [76].
36 Ibid at [68].
37 Ibid at [69].
38 Appeal Book, p.182.
39 That is, ‘senior employees’ within the meaning of s.5.37 of the Local Government Act 1995 (WA).
40 Ibid at [26].
41 Shire of Mundaring Outline of Submissions at [60].
42 ASU Outline of Submissions at [45].
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