C&H Acquisition Pty Ltd T/A C&H Acquisition

[2020] FWCA 1612

[2020] FWCA 1612

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

C&H Acquisition Pty Ltd T/A C&H Acquisition
(AG2019/4028)

C&H GENCON ENTERPRISE AGREEMENT 2020

Building, metal and civil construction industries
COMMISSIONER WILSON	MELBOURNE, 27 MARCH 2020

Application for approval of the C&H Gencon Enterprise Agreement 2020.

[1] An application has been made for approval of an enterprise agreement known as the C&H Gencon Enterprise Agreement 2020 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by C&H Acquisition Pty Ltd T/A C&H Acquisition. The Agreement is a single enterprise agreement.

[2] A decision detailing the chronology of the matter and considering whether the statutory approval tests had been met, was issued by me on 20 March 2020 (First Decision) 1. That decision included a comprehensive Better Off Overall Test (BOOT) assessment. In the First Decision, I found that the Agreement as it stood passed the BOOT and that the Agreement meets all legislative requirements, with the exception that I was not satisfied that the group of employees to be covered by the Agreement was “fairly chosen”.

[3] To remedy my “fairly chosen” concern, which would otherwise cause me not to be satisfied of the matters in s.186, I invited the Applicant to provide an Undertaking which removes from effect the provisions of Clause 4(b)(iv) and all related or cross-referenced provisions.

[4] An Undertaking in the terms requested by me in the First Decision was provided by the Applicant on 23 March 2020. The final version of all Undertakings is as follows:

“1. Clause 4(b)(iv) will be removed from the Agreement.

2. Clause S(c) will be removed from the Agreement.

3. Clause 7: under 'Market Arrangement', replace 'clause 16(c)' with 'clause 26(c)'.

4. Clause 21(b): replace 'An Employee's classification' with 'An Employee's remuneration'.

5. Clause 26(c): remove '(which incorporates the Relevant Award)'.

6. Clause 26(c): after 'The total payment to the Employee will not be less than that which the Employee would have received under this Agreement.', replace with "Clause26 (c)(i): where the Employer relies on this clause (and additionally, where requested by an employee who is paid in accordance with the provisions of this clause), the employer will undertake a review of the hours worked by that employee over the applicable assignment and will assess:

a. What the Employee would be entitled to be paid for the Period to Date if the Employee was paid in accordance with the Agreement (Period to Date Earnings - Agreement); and

b. What the Employee would be entitled to be paid for the Period to Date if the Employee was paid in accordance with their reference Award (Period To Date Earnings - Award).

Clause 26(c)(ii): If the Period to Date Earnings - Award amount is higher than the Period to Date Earnings -Agreement amount, the Employee will be paid, for the applicable pay period:

a. the amount payable under the Agreement for the hours worked in that pay period; plus

b. the difference between the Employee's actual Period To Date earnings and the Period to Date Earnings -Award amount plus $1.00."

7. Clause 28: Replace the first reference to 'clause 28; with 'clause 29'.

8. Clause 49(c): delete the words "and may be changed as notified by the Company to the Employee from time to time".”

[5] An employee bargaining representative supports the changed Undertaking as reasonable. The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), which is not a bargaining representative, advised on 25 March 2020 that it maintained their opposition to approval of the Agreement submitting that “an undertaking seeking to remove clause 4(b)(iv) of the Agreement would constitute a substantial change for the purposes of s.190(3)(b) of the Fair Work Act 2009”. In doing so, it referred to its earlier submissions on the subject, which argued that although an Undertaking on the subject could be considered without the Undertaking leading to a finding of financial detriment, the same could not be said of whether the Undertaking amounted to substantial change:

“16. The Applicant states the following at paragraphs [21] – [22] of its submissions:

“[21] There are no employees, who would have at any time been capable of coverage under the Gencon Agreement, who were excluded by Clause 4(b)(iv).

[22] As such, the group covered by the undertaking will be the same as the group covered when the ballot occurred”

17. The CFMMEU acknowledges that should the FWC accept the undertaking proposed by the Applicant this would not likely result in financial disadvantage for employees. However, it would result in a ‘substantial change’ to the Agreement.

18. Whilst there is limited authority on the scope of ‘substantial change’, and such authority is of limited value given the fact-specific and enterprise-specific enquiry to which s 190(3) is directed, two things are clear:

a. Undertakings which seek to alter the coverage of an agreement are likely to be found to be substantial; and

b. Undertakings which result in such a “wholesale reshaping” of the agreement that it bears no real resemblance to the pre-undertaking agreement will not be permitted.

19. As the proposed undertaking clearly seeks to alter the coverage of the Agreement by removing the high-income earner exclusion, the CFMMEU submits that it would constitute a substantial change and accordingly, must be rejected.”

[6] It is well accepted that s.190 of the Fair Work Act 2009 (Cth) suggests that minor changes to an agreement from a written Undertaking are permissible. 2  On the other hand a wholesale reshaping of an agreement such that it bears no resemblance to the pre-Undertaking agreement would not be. Pertinent to the subject of financial detriment, the Full Bench has held the following:

“[39] The changes brought about by the undertaking provided by Kaefer remove, rather than cause financial detriment to employees. However, the CFMEU contends that the undertakings resulted in significant changes to the Agreement, including by replacing several allowances and the minimum ordinary hourly rates of pay, and inserting clauses related to apprentice rates. The CFMEU refers to the decision in Perth Access Scaffolding Pty Ltd, in which it was found that the significant number of undertakings provided by the employer had resulted in the agreement bearing no resemblance to the instrument on which employees had voted. The Commissioner found that the essential character of the agreement in question was that it would exclude the award, and that employees would instead receive a small margin above the award rate. The Commissioner found that this essential character would have been changed by accepting the numerous undertakings.

[40] In our view, simply increasing the quantum of various benefits will not ordinarily result in “substantial changes” for the purposes of s 190(3). It seems to us that the legislative concern is to avoid imposing on employees arrangements that they have not approved; employees are not likely to object to higher monetary amounts. The position might be more complex in relation to the reintroduction through undertakings of award-based benefits that were otherwise excluded by the agreement, if this were to have a significant bearing on working arrangements. However, this does not arise in the present matter.

[41] Section 190(3) does not permit undertakings that result in the wholesale reshaping of the agreement, such that it bears no resemblance to the pre-undertaking agreement that was approved by employees. In considering the application of s 190(3), each case will turn on its own circumstances. However, in the present case, we do not consider that the undertakings provided to date have resulted in substantial changes.” 3  (references removed)

[7] Further context to the operation of s.190(3) was given by Deputy President Gostencnik in the matter of Kore Construction Pty Ltd:

“[30] An undertaking which is intended to overcome concerns about whether an agreement passes the better off overall test will often need to take the form of varying the operation of the agreement, for example, by undertaking that a term of the agreement which provides a disadvantage when compared with the relevant modern award will not apply or will apply in a particular way. Once an undertaking is accepted by the Commission and an agreement is approved, the undertaking will have that effect because it will become a term of the agreement. An undertaking that is expressed as varying a particular provision in a proposed agreement should be taken to be a promise by the employer that a particular term in an agreement about which concern has been expressed, will not be applied and the term as set out in the undertaking will be applied. Moreover, the fact that section 190 itself requires that a written undertaking not “result in substantial changes to the agreement”, suggests that minor changes to an agreement resulting from a written undertaking are permissible. To view the proposed written undertakings as a variation to an agreement rather than an undertaking within the meaning of section 190 of the Act merely because of the expression used in the undertakings is to adopt an unnecessarily technical approach to the giving undertakings and is not one that is warranted when regard is had to the express requirements of the form and effect of an undertaking that are set out in sections 190 and 191 of the Act.” 4

[8] While the contest reported from the above decisions was largely associated with whether an Undertaking may result in financial detriment, the debate in this application is whether it would result in substantial change, because a group of employees otherwise not covered by the Agreement is brought within its scope.

[9] There is, of course, a circularity to the argument before me, at least as it has played out in submissions to me. Initially, it was argued that the Agreement could not be approved because it excluded coverage of high-income earners, with that leading to a finding by me that the group to be covered by the Agreement was not “fairly chosen”. When an Undertaking was proposed to ensure that such employees (and the evidence is that there are none) are included in the Agreement’s coverage, it is argued that the inclusion of a group initially excluded becomes a substantial change to the Agreement.

[10] The overall context of the application and the evidence before me does not satisfy me that this is an argument of substance. The fact that there are presently no high-income earners employed by the Applicant who would otherwise be covered by this Agreement, and none employed at the time it was made, leaves me satisfied accepting an Undertaking on the subject is not a substantial change. The inclusion within the Agreement of high-income earners disturbs the operation of no provision of the Agreement. No rights, entitlements or obligations of any other employee is affected. There are no high-income earners who could be considered to have been disenfranchised either during bargaining or at the time of the ballot. Since there are no presently employed high-income earners to be brought within the scope of the Agreement, or to be considered as to whether their vote at the time of making it would have changed the balance of voting, there is no meaningful enquiry to be made about how their conditions of employment might be affected as a consequence of the Undertaking. In relation to future high-income employees, they will, of course be covered by the Agreement and there is no evidence before me as to that such could be either a financial detriment for the individuals concerned or a substantial change to the Agreement. I note as well that the CFMMEU has not made any submissions or provided any evidence as to how it may be said that the change made by the Undertaking is a substantial change to the Agreement.

[11] I am satisfied therefore the Undertaking may be accepted by me, and that the relevant statutory tests for approval of the Agreement have been met.

[12] The Employer has provided written Undertakings. A copy of the Undertakings is attached in Annexure A. I am satisfied that the Undertakings will not cause financial detriment to any employee covered by the Agreement and that the Undertakings will not result in substantial changes to the Agreement. The Undertakings are taken to be a term of the agreement.

[13] Subject to the Undertakings referred to above, I am satisfied that each of the requirements of ss.186, 187, 188 and 190 as are relevant to this application for approval have been met.

[14] The Agreement is approved and, in accordance with s.54 of the Act, will operate from 3 April 2020. The nominal expiry date of the Agreement is 27 March 2024.

COMMISSIONER

Annexure A

 1   [2020] FWC 1142.

 2   Re: Kore Construction Pty Ltd [2014] FWC 1955, [30].

 3   CFMEU v KAEFER Integrated Services Pty Ltd[2017] FWCFB 5630, (2017) 271 IR 273, with reference to Re AKN Pty Ltd t/a Aitkin Crane Service[2015] FWCFB 1833, 248 IR 129, [34]; cited with approval in CFMEU v Lightning Brick Pavers[2018] FWCFB 3825, (2018) 281 IR 9, at [25].

 4   [2014] FWC 1955.

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