Australian Workers' Union v Job Connect Recruitment Pty Ltd
[2019] FWCFB 7369
•24 OCTOBER 2019
| [2019] FWCFB 7369 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604—Appeal of decision
Australian Workers’ Union
v
Job Connect Recruitment Pty Ltd
(C2019/3540)
VICE PRESIDENT HATCHER | SYDNEY, 24 OCTOBER 2019 |
Application for approval of an enterprise agreement under s 185 on rehearing
Background
[1] This decision concerns an application made by Job Connect Recruitment Pty Ltd (Job Connect) under s 185 of the Fair Work Act 2009 (FW Act) for the Commission to approve the Job Connect Recruitment Pty Ltd Major Projects Division Enterprise Agreement 2018 (2018 Agreement). The application was initially approved by Deputy President Lake. 1The Australian Workers’ Union (AWU) appealed against the decision on the grounds that it was denied procedural fairness because its request to make submissions to the Commission in opposition to the approval of the 2018 Agreement was overlooked.
[2] On 2 August 2019 we granted permission to appeal, upheld the appeal and quashed the decision (appeal decision). 2 We did not however dismiss the application for approval of the 2018 Agreement. We considered that the most efficient course was for us to re-determine the application rather than remit the matter to the Deputy President, as the only issue in contest was whether the group of employees covered by the 2018 Agreement had been fairly chosen as required by s 186(3), and we had received information and submissions on this issue that were not before the Deputy President. We considered that Job Connect had not had an adequate opportunity to address the union’s contentions and therefore directed that the company file and serve any affidavit and accompanying submissions addressing the agreement approval requirement in s 186(3) and (3A) within fourteen days, and that the AWU file any response within a further seven days. The parties then each filed further written submissions, and Job Connect filed an affidavit of Mr Craig Kelly, its managing director.
[3] We briefly summarise the parties’ appeal submissions concerning s 186(3), which the parties maintain in the rehearing of Job Connect’s application for approval of the 2018 Agreement in conjunction with their further written submissions.
[4] It will be recalled that s 186 of the FW Act relevantly provides:
186 When the FWC must approve an enterprise agreement - general requirements
Basic rule
(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).
…
Requirement that the group of employees covered by the agreement is fairly chosen
(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.
(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.
…
[5] Clause 3of the 2018 Agreement sets out the coverage of the agreement. It provides:
3. APPLICATION
This Agreement covers and applies to:
(a) Job Connect Recruitment Pty Ltd (ABN 40 145 040 964) (the Company); and
(b) all employees of the Company:
(i) who are engaged in the Major Projects Division; and
(ii) whose employment would otherwise be covered by the Building and Construction General On-site Award 2010, the Clerks-Private Sector Award 2010, the Electrical, Electronic and Communications Contracting Award 2010, the General Retail Industry Award 2010, the Manufacturing and Associated Industries and Occupations Award 2010, the Road Transport and Distribution Award 2010 or the Waste Management Award 2010; and
(iii) who are supplied as labour on an on-hire basis to the Company’s clients in Australia (the Employees).
[6] The expression “Major Projects Division” appearing in clause 3(b)(i) is not defined or otherwise explained in the instrument. The 2018 Agreement plainly does not cover all of the employees of Job Connect and therefore s 186(3A) applies to the consideration of whether the requirement in s 186(3) is satisfied. It may be noted that the coverage of the 2018 Agreement is narrower than that of its predecessor, the Job Connect Recruitment Pty Ltd Enterprise Agreement 2014 (2014 Agreement). Clause 4 of the 2014 Agreement states that the agreement binds Job Connect and all employees employed by the company who are supplied as labour on an on-hire basis to its clients in Australia.
[7] The AWU submitted that the group of employees covered by the 2018 Agreement was not fairly chosen because it was neither geographically nor operationally distinct and the company’s mere assertion in its form F17 that the Major Projects Division was a separate and distinct group did not demonstrate organisational distinctiveness. The AWU said that the lack of any clear definition or objective meaning of “Major Projects Division” meant that it may be no more than a term of administrative convenience, and that the employer could move employees into and remove employees from the coverage of the 2018 Agreement based on its own subjective characterisation of clients as being “major project” clients. It said that this would undermine collective bargaining and be indicative of an unfairly chosen coverage. The union further contended that the rationale for the coverage of the agreement was unclear.
[8] Job Connect submitted that its form F17 adequately explained the Major Projects Division, namely one that is a “separate and distinct group of employees who provide labour hire services to the company’s Major Projects’ clients”. It said that this constituted material upon which the Commission could found satisfaction that the group of employees was organisationally distinct. It also said that “major clients” were those which the company invoices an amount equal to or in excess of $5 million per year. It said that this is well known within its operations and employees understand whether or not they are part of the Major Projects Division.
[9] As we noted in the appeal decision, the submissions of the parties in the appeal left a number of matters somewhat unclear. These included the extent to which the Major Projects Division pre-dated the making of the 2018 Agreement, whether there was an organisational or other document evidencing the existence of the division as a separate organisational unit, the extent to which employees may move into and out of the division (and hence coverage under the 2018 Agreement) during their employment, the areas of employment which are not covered by the 2018 Agreement, and the rationale for the narrowing of coverage in the 2018 Agreement as compared to the 2014 Agreement.
Further submissions
[10] In its further written submissions, Job Connect submitted that the Commission is not required to be satisfied that the proposed coverage of the agreement represents a geographically, operationally or organisationally distinct group, and that whether the chosen group is distinct in one of these ways is not dispositive of whether the requirement in s 186(3) is met; it is instead a consideration that bears upon this question under s 186(3A). 3 It said that the term “organisational” refers to the manner in which the employer has organised its enterprise in order to conduct its operations and that its evidence and submissions had clearly identified and defined the Major Projects Division as a discrete organisational group for the purpose of s 186(3).
[11] Job Connect submitted that Mr Kelly’s affidavit had substantiated its contention that the Major Projects Division was a genuine organisational unit of the business. Mr Kelly said in his affidavit that prior to August 2018 the division was known colloquially by the name of what had hitherto been the only major client of the company, Coates. On 27 August 2018 the company had sent a letter to employees advising of the establishment of the Major Projects Division, which would be dedicated to servicing major clients. The letter stated that currently there was only one major client but that henceforth the division would also service other clients identified as major clients. Mr Kelly stated that “major clients” were those invoiced $5 million or more per annum, and that this fact was well known within the business. He also stated that the division’s “name change” did not result in any other formal reorganisation of the enterprise as the division was already distinct and managed independently from the four other divisions within the company, three of which were geographically defined, and the other being “office administration”. Mr Kelly had explained that the Major Projects Division maintains its own budget, sales reports and costs centre, and that employees are told which division of the company they are allocated to, allocation being based on skill set and experience.
[12] Job Connect acknowledged that the type of work performed by the Major Projects Division is similar to that undertaken in the three geographically-based divisions in the company but submitted that this does not mean the Major Projects Division is not organisationally distinct within the company, as the geographically-based divisions do not service major clients. Job Connect submitted that distinctiveness on one or more of the bases identified in s 186(3A) is a factor telling in favour of a finding that the group is fairly chosen.
[13] The company contended that its decision to make an agreement with the organisationally distinct group of employees in its Major Projects Division was a valid choice and consistent with the framework of the FW Act. It said that Mr Kelly had explained in his affidavit that the company considered it would gain a competitive advantage by establishing an agreement focused on Major Projects work referrable to the much smaller number of awards (seven) that are most relevant to prospective major clients; the 2014 Agreement by contrast operates in conjunction with 64 awards. The company also considered that narrowing the scope of the new agreement would provide a specific focus on supporting the provision of services to major clients. The decision was therefore informed by the commercial considerations and the company’s business needs.
[14] Job Connect’s primary position was that the 2018 Agreement should simply be approved however it submitted that, if required, it was prepared to give an undertaking to the Commission which would define the Major Projects Division in the following terms:
“The term ‘Major Project Division’ denotes the organisationally distinct division within Job Connect, dedicated to servicing major clients who are invoiced an amount equal to, or in excess of $5 million per annum.”
[15] The AWU contended that the Commission should not accept that the Major Projects Division was a genuine and discrete organisational unit of the business. It said that the company’s claims that the Major Projects Division had been established since 2014 must be rejected because the company’s message of 27 August 2018 advised employees that the division was being “established” and that it was a “structural change”. The AWU also contended that the company’s form F17 had indicated that the notification time for the Agreement was 3 September 2018, less than a week after the email advising employees of the establishment of the Major Projects Division, and that it was therefore implausible that the term “Major Projects Division” could have been well known and understood by employees in these circumstances. The AWU submitted that any organisational distinctiveness the Major Projects Division might have should be given limited weight in light of the division’s recent establishment, and also because it did not “map onto” the organisational structure of the company’s host employers.
[16] The AWU challenged the company’s business rationale for making an agreement covering the Major Projects Division. It said that the company’s contentions were devoid of meaning and not genuine and that no examples had been provided of how the agreement’s narrower coverage could increase the company’s efficiency or competitiveness or provide any commercial advantage. The AWU said there was no evidence as to how the new scope was linked to the circumstances of the division or the needs of the employees within that division. It said that the substantive terms and conditions in the 2018 Agreement were almost identical to those of the 2014 Agreement which it replaces. It also contended that there was no cogent evidence that employees understood that they were part of the Major Projects Division and how their assignment to that division interacted with the proposed scope of the new agreement.
[17] The AWU further contended that Job Connect had not addressed the question of the company’s apparent right to unilaterally transfer an employee from an assignment with a major client to a non-major client. An employee might simply cease to be covered by the 2018 Agreement solely on the basis of a decision made by the third-party client about the employee’s performance or about its general labour-hire needs. It said that employee performance and third-party commercial success are not appropriate or fair criteria to determine coverage under an enterprise agreement.
[18] The union also contended that the coverage provision was in effect an unlawful opt-out term within the meaning of s 194(ba) of the FW Act because it provides a method by which the employer may unilaterally elect not to be covered by the Agreement in respect of the employment of particular employees, by reassigning an employee from one division of the company to another. This could occur without any change in an employee’s “particular employment” within the meaning of s 53(6) of the Act, falling foul of s 194(ba).
[19] As to the proposed undertaking offered by the company, the AWU submitted that it would not change the fact that the group was not fairly chosen. It said that the Commission should find that it cannot be satisfied that the group of employees was fairly chosen and therefore dismiss the application for approval of the 2018 Agreement.
Consideration
[20] The principles applicable to the application of s 186(3) and (3A) were summarised in Aerocare Flight Support Pty Ltd v TWU 4 and referred to in our earlier decision,5 and we do not repeat them.
[21] Based on the affidavit of Mr Kelly and the further submissions of the company, we are satisfied, save for one matter about which we have a concern and will address below, that the group of employees covered by the 2018 Agreement was fairly chosen. We find that the Major Projects Division is a genuine organisational division within the company and that employees working in that division are organisationally distinct for the purposes of s 186(3A). The Major Projects Division is not just a term of administrative convenience or an arbitrary or ephemeral designation. We accept that the division has existed as a separate organisational unit of the business since 2014, even though it was previously devoted to a single major client and known by that client’s name (“Coates”). In substance, it appears that the existing structure was in fact maintained in August 2018 when the Major Projects Division was created, and that the Coates division was renamed and deployed towards a broader commercial purpose. In any event, organisationally, the division remained, as it previously had been, distinct within the enterprise.
[22] The history of the division as a distinct unit prior to the making of the 2018 Agreement is in any event not a necessary condition of the group being organisationally distinct. It is rather a point of evidentiary emphasis concerning its distinctiveness. It must be possible for a newly-established unit, division or group to be organisationally distinct for the purpose of s 186(3A), since the requirement in s 186(3) that the group be fairly chosen applies also to greenfields agreements. It is clear that from 27 August 2018 there was a Major Projects Division established within the company, to which the 2018 Agreement factually related. We note that the Major Projects Division is also reflected in the organisational chart appended to Mr Kelly’s affidavit, that the other four divisions of the company are not covered by the 2018 Agreement, and that employees employed in those divisions remain covered by the 2014 Agreement.
[23] To the extent that it is relevant to s 186(3) rather than s 186(2)(a), we see no reason to conclude that employees employed in the Major Projects Division did not understand that they were employed to work in that division. We reject the AWU’s contention that it is implausible that the term “Major Projects Division” could be well known and understood by employees in these circumstances. Employees were advised of the relevant changes a week before the notification time for the agreement, which is sufficient time for those changes to become well known. We also note that the letter sent to employees on 27 August 2018 explained that employees who would be working in the Major Projects Division would receive a separate notification in the near future.
[24] The evidence also establishes that Job Connect had a business rationale for its decision to make an agreement covering the Major Projects Division. We reject the AWU’s contention that the rationale was not sensible or convincing, or that the company ought to have provided examples of how the narrow scope in the 2018 Agreement could further its commercial objectives. If an employer does not have a rationale for its chosen group, this may give rise to concerns about possible manipulation in the agreement-making process and cast doubt on whether the Commission can be satisfied that the requirement in s 186(3) has been met. But if an employer has a genuine commercial rationale for its decision, the Commission will not ordinarily inquire into whether the employer has made a sound commercial or operational decision. Section 186(3) requires the Commission to be satisfied that the group was fairly chosen, not that the group was prudently or appropriately chosen such that the scope of the agreement will necessarily achieve a particular commercial or operational purpose.
[25] We reject the AWU’s contention that any organisational distinctiveness in the group chosen should be given limited weight because it did not correlate with the structures of the company’s host employers. There are no special rules in the FW Act about coverage provisions in enterprise agreements binding labour hire companies, nor any presumptions that ought to be made about how the coverage provisions in their enterprise agreements should align with the organisational structures of their clients’ businesses.
[26] Subject only to the concern which we discuss below, we do not see any substance in the AWU’s objection that the company can unilaterally transfer an employee from an assignment with a “major projects” client to a non-major client. The coverage of the 2018 Agreement, like many other enterprise agreements, applies to part of the employer’s business. While an employee works in that part, the agreement will apply to the employee’s employment. If the employee is deployed on other work, another instrument, or perhaps no instrument at all, may apply. The ability of an employer to transfer an employee to other work is usually determined by the contract of employment. There is nothing antithetical to Part 2-4 of the FW Act, or anything unusual, about an employee’s employment being subject to different instruments from time to time depending on the employee’s working arrangements and the coverage provision of relevant instruments.
[27] The AWU contended that, if employees ceased to be covered by the 2018 Agreement because a particular client for whom they worked was no longer a major client, the effect would be that those employees would lose their right to bargain. But this is not the case. Employees have exercised their right to bargain and voted to approve the 2018 Agreement. As things stand at the moment, an employee transferring out of the Major Projects Division would become covered by the 2014 Agreement, which applies to all of the company’s employees except those who will be covered by the 2018 Agreement (see s 58). The 2014 Agreement has passed its nominal expiry date and employees would be free to bargain for, and take protected industrial action in support of, a new enterprise agreement. Even if the 2014 Agreement is later superseded, and an employee transferring out of the Major Projects Division becomes covered by an in-term agreement, that would not mean that the employee has been deprived of a right to bargain.
[28] Finally, we do not consider that the coverage clause in the 2018 Agreement is an unlawful opt-out term within the meaning of s 194(ba) of the Act. It does not provide any “method by which the employee or employer may elect (unilaterally or otherwise) not to be covered by” the Agreement. If an employee is transferred to a different division, this does not occur pursuant to any such “method” in the agreement. It is no different from an employee transferring from work covered by one award or agreement to work covered by another. If a particular client ceases to be a major client, that might mean that an employee working for that client is no longer covered by the 2018 Agreement (alternatively the employee might be reassigned to another major client). But in any event that would not occur pursuant to a term in the agreement that provides for a “method” of election not to be covered.
[29] We raised in the appeal the question of the extent to which employees may move into and out of the division, and hence fall within or outside the coverage of the 2018 Agreement. Our concern in this respect, which we retain, was not the fact that this could occur, but whether it was clear as to the circumstances in which this would occur, and whether this affected the question of whether the group of employees covered by the agreement was fairly chosen. In particular, we were concerned that the lack of a definition of the critical expression “Major Projects Division” made it conceivable that the scope of the division could be changed to alter the practical coverage of the 2018 Agreement at some time in the future. However the undertaking now proposed by Job Connect, which would add a definition of “Major Projects Division” that is consistent with the description of and rationale for the division described in the affidavit of Mr Kelly, resolves this concern. For the purposes of s 190(3), we do not consider that the undertaking would cause financial detriment to any employee covered by the 2018 Agreement, nor do we consider it would be likely to result in a substantial change to the agreement since it is merely confirmatory of the intended coverage of the agreement. Accordingly we accept the undertaking and it will form part of the operative terms of the 2018 Agreement by virtue of s 190(1). The undertaking is attached to this decision as Annexure A.
Conclusion
[30] We are satisfied, on the basis of the acceptance of the undertaking, that the group of employees covered by the 2018 Agreement was fairly chosen for the purposes of s 186(3). It was not in dispute that the other requirements set out in s 186 and s 187 were met.
[31] On the basis of the material contained in the application and the accompanying statutory declaration, as well as the submissions of the company and the affidavit of Mr Kelly, we are satisfied that each of the requirements of ss 186, 187, 188 and 190 as are relevant to this application for approval have been met.
[32] The Agreement is approved as at the date of this decision and, in accordance with s 54, will operate from 31 October 2019. Consistent with clause 4 of the 2018 Agreement, which we consider provides for the nominal expiry date of the agreement for the purpose of s 186(5) of the FW Act, the nominal expiry date is 24 October 2023.
VICE PRESIDENT
Final written submissions:
Australian Workers’ Union: 27 August 2019
Job Connect Recruitment: 20 August 2019
Printed by authority of the Commonwealth Government Printer
<AE505866 PR713688 >
Annexure A
1 [2019] FWCA 3446
2 [2019] FWCFB 5132
3 Australian Maritime Officers' Union v Harbour City Ferries Pty Ltd[2016] FWCFB 1151 at [31]
4 [2017] FWCFB 5826, 270 IR 385
5 At [17] and [18]
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