Canberra Building Services Pty Ltd
[2011] FWA 318
•17 JANUARY 2011
[2011] FWA 318 |
|
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Canberra Building Services Pty Ltd
(AG2010/9537)
COMMISSIONER DEEGAN | CANBERRA, 17 JANUARY 2011 |
Canberra Building Services Enterprise Agreement 2010.
[1] This decision concerns an application by Canberra Building Services Pty Ltd (CBS Pty Ltd) for approval of the Canberra Building Services Enterprise Agreement 2010 (the Agreement) made under s.185 of the Fair Work Act 2009 (Cth) (the Act) on 18 May 2010.
[2] According to the statutory declaration made by Mr Allen, 1 company director of the applicant, the agreement was intended to cover two employers: Main Runner Pty Ltd as trustee for Main Runner HR Services (Main Runner Pty Ltd) and CBS Pty Ltd. The Agreement was, according to the statutory declaration, a single enterprise agreement.
[3] On the basis of the information contained in the statutory declaration it appeared that the mandatory time limits applicable to the agreement approval process had been complied with, and that 18 of the 25 employees who voted on the Agreement (of a possible 28 employees) had voted to approve the Agreement. Information was also provided as to the action taken to explain the terms of the Agreement to the employees.
[4] By correspondence dated 24 May 2010 the Construction Forestry Mining and Energy Union (CFMEU) notified Fair Work Australia that it had concerns with a number of terms of the agreement and with the employer’s conduct during the bargaining process. The CFMEU also raised the matter of the proper identification of the employer covered by the Agreement. The CFMEU opposed the approval of the Agreement and sought clarification of a number of the matters raised.
Background
[5] Four hearings took place in relation to the application on the following dates:
- 26 May 2010;
- 7 June 2010;
- 2 November 2010; and
- 20 December 2010.
[6] At the hearing on 26 May 2010 the CFMEU entered an appearance, without objection, as a bargaining representative for employees to be covered by the Agreement.
[7] The CFMEU raised concerns with aspects of the application and the proposed Agreement. Among these concerns were the problems associated with two companies purporting to be covered by the agreement, particularly where the company actually employing the workers has no assets. It was noted by the CFMEU that only Main Runner Pty Ltd employed the workers and that CBS Pty Ltd had no employees.
[8] After additional submissions concerning whether CBS Pty Ltd was an employer for the purposes of the legislation, the matter was adjourned to allow further evidence on the matter to be adduced.
[9] At the further hearing of the matter on 7 June 2010 Mr Maxwell, for the CFMEU, put detailed submissions concerning the validity of the application for approval of the Agreement. Mr Maxwell also made submissions in support of the CFMEU’s position that the Agreement did not pass the Better Off Overall Test (BOOT). At the conclusion of Mr Maxwell’s submissions the matter was again adjourned to allow the employer to fully address the matters raised by the CFMEU. The matter was to be relisted when the employer found itself in a position to respond.
[10] No indication was received from the employer’s representative that they were in a position to respond to the matters raised by the CFMEU prior to my taking a period of extended leave commencing on 2 August 2010. On or about 19 August 2010 the applicant’s representative contacted FWA asking that the matter be relisted. The file was forwarded to the responsible panel head who determined that the application should continue to be dealt with by me on my return. The matter was then relisted for a hearing on 2 November 2010 the day after my return from leave. Late on 1 November 2010 the applicant’s representative lodged a detailed response, in writing, to the matters raised by the CFMEU.
[11] At the hearing on 2 November 2010, Mr Wilson commended the Agreement for approval in reliance on the employer’s written response to the CFMEU’s submissions, which response had been filed the previous evening. It was submitted that the Agreement passed the BOOT and that it did not otherwise offend any provisions of the Act. Mr Wilson also requested that, if FWA decided not to approve the Agreement, areas of concern be identified so as to allow necessary amendments to be made before submission of a corrected agreement for approval.
[12] Mr Maxwell, for the CFMEU noted that he had not received the applicant’s written response until the morning of the hearing (the document had been received in the ACT office of the CFMEU at 4.30 pm the previous day but Mr Maxwell had arrived from interstate on the morning of the hearing). He stated that he was not in a position to proceed without an opportunity to examine the claims. He requested 14 days in which to respond. Mr Maxwell also requested an opportunity to make comments on any undertakings that might be offered by the applicant.
[13] In objecting to a further delay in the determination of the matter, Mr Wilson suggested that a further response from the CFMEU was unnecessary. Despite the objection, the CFMEU was allowed a further 7 days to file a response to the employer’s documentation. The CFMEU response was filed on 9 November 2010. The applicant made some further submissions about the CFMEU response on 10 November 2010.
[14] A further hearing of the application was listed for 20 December 2010 to allow the parties to make additional submissions relating to the coverage of the Agreement.
The validity of the application for approval and the coverage of the Agreement
[15] At the initial hearing of the matter of 26 May 2010 the question of the proper identification of the employer(s) to be covered by the Agreement was raised. According to Mr Wilson, the Agreement was to cover two companies with identical directors and shareholders which were, for the purposes of the Act, a single enterprise. Mr Allen, the director of both companies, gave evidence that CBS Pty Ltd had no employees at the time the Agreement was made but that Main Runner Pty Ltd had about 25 employees. It was put, however, that CBS Pty Ltd had engaged employees in the past and that it may have employees at some point in the future.
[16] It was noted that the application for approval of the Agreement was made only by CBS Pty Ltd and an application was made to amend the application for approval to include Main Runner Pty Ltd as an applicant.
[17] It was the employer’s position that should FWA take the view that CBS Pty Ltd could not be a party to the Agreement, that entity could be severed from the current application or FWA could allow a fresh application for approval to be lodged, out of time, by Main Runner Pty Ltd alone.
[18] The Agreement is expressed to apply to “Canberra Building Services” and “all Employees of Canberra Building Services who are employed in a classification at clause 21” (clause 4.1). Canberra Building Services is defined at Part I of the Agreement (Definition of Terms) as “Main Runner Pty Ltd ACN 097564906 as trustee for the Main Runner HR Services Trust and Canberra Building Services Pty Ltd ACN 091 242 885”.
[19] The application for approval of the Agreement 2 was made by CBS Pty Ltd, although the statutory declaration which accompanied the application and which was signed by the company director, Mr John Allen, stated at clause 1.3 that “the name of the employers to be covered by the agreement are Main Runner Pty Ltd ACN 097 564 906 (as trustee for Main Runner HR Services) and Canberra Building Services ACN 091 242 885”. As noted above, at the hearing on 26 May 2010 Mr Wilson applied to amend the application for approval to include Main Runner Pty Ltd and that application was granted.
[20] It was clear from Mr Allen’s evidence that CBS Pty Ltd had no employees at the time the Agreement was being made, while Main Runner Pty Ltd had about 25 employees. The question arose whether, in circumstances where the Agreement purported to cover two companies, it could be validly made if one of those companies had no employees. Clearly there could be no genuine agreement between CBS Pty Ltd and its employees, as there were none. The parties were asked to address these matters in more detail at the final hearing in relation to the application on 20 December 2010.
[21] Mr Wilson, for the employer, submitted that at least one of the entities had employees at the time the Agreement was made and that, if FWA considers that the other entity was not an employer for the purposes of s.172(2)(a) of the Act, then the application should be refused so far as it applies to that employer. It was put that the Agreement was capable of taking effect notwithstanding that the reference to “Canberra Building Services Pty Ltd” in the definition of “Canberra Building Services” would be “a dead letter”. 3 Mr Wilson argued, however, that in the circumstances of this case - where both entities were part of a small common enterprise run by the same director - the better outcome would be for the Agreement to refer to both entities as originally intended. It was the employer’s submission that the definition of “employer” in the relevant provisions of the Act was sufficiently wide to include CBS Pty Ltd and in such circumstances the Agreement would apply to any employees engaged by that company during the life of the Agreement.
[22] The CFMEU argued that as CBS Pty Ltd did not employ any employees, it could not make a single-enterprise agreement under s.172(2)(a) of the Act. It was submitted that the only option available to CBS Pty Ltd would have been to make a greenfields agreement with an employee organisation under s.172(2)(b).
[23] According to the CFMEU the fact that two constitutional corporations operate as a common enterprise is not sufficient for the purposes of s.172(2)(a) - both the businesses must also be employers. The CFMEU noted that s.14 of the Act defines an employer as, "a constitutional corporation, so far as it employs, or usually employs, an individual”, and that the evidence was that CBS Pty Ltd did not employ anyone at the time the agreement was made. It was also put that there was no evidence that the company customarily and habitually employed people for wages, and that there was no evidence of any clear intention that the company would employ people in the future.
[24] Finally, it was submitted for the CFMEU that the original applicant for approval of the Agreement was CBS Pty Ltd and the application was than amended to include, as an additional applicant, Main Runner Pty Ltd. It was the CFMEU position that if the original application was invalid, then the tribunal could not rely on the inclusion of an additional applicant to make the application valid. On this basis, the CFMEU submitted that the application for approval of the Agreement should be refused.
[25] In response, Mr Wilson noted that CBS Pty Ltd could not have entered into a greenfields agreement with the CFMEU as it was not a “genuine new enterprise” for the purposes of s.172(2)(b)(i).
[26] Section 186 of the Act relevantly provides as follows:
186 When FWA must approve an enterprise agreement—general requirements
Basic rule
(1) If an application for the approval of an enterprise agreement is made under section 185, FWA must approve the agreement under this section if the requirements set out in this section and section 187 are met.
[27] The question that arises in this matter is whether an application has been properly made under s.185. Section 185 of the Act relevantly provides:
185 Bargaining representative must apply for FWA approval of an enterprise agreement
Application for approval
(1) If an enterprise agreement is made, a bargaining representative for the agreement must apply to FWA for approval of the agreement.
[28] In order to determine whether an enterprise agreement has been “made” it is necessary to have regard to s.182(1) which provides as follows:
182 When an enterprise agreement is made
Single-enterprise agreement that is not a greenfields agreement
(1) If the employees of the employer, or each employer, that will be covered by a proposed single-enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement.
Valid application
[29] An employer who will be covered by an agreement that is not a greenfields agreement is a bargaining representative for the agreement. 4 At the hearing on 26 May 2010 I exercised my powers pursuant to s.586 of the Act to make Main Runner Pty Ltd an applicant for approval of the agreement. In those circumstances I am satisfied that a bargaining agent for the Agreement made the application for approval.
Coverage of the Agreement
[30] While I am satisfied that the Agreement is an agreement made between Main Runner Pty Ltd and its employees, I am unable to find that the agreement represents an agreement made between CBS Pty Ltd and its employees. The evidence was that CBS Pty Ltd had no employees at the time the agreement was purportedly made, and in fact, appears not to have employed anyone since Main Runner Pty Ltd was set up in 2002 to assume the role of employer. There can be no genuine agreement between an employer and its employees where there are no employees.
[31] Thus, the question to be determined is whether the Agreement can be approved in circumstances where it is expressed to cover an employer which is unable to make an agreement of this kind in the first place.
[32] Section 53(1) of the Act states that “(a)n enterprise agreement covers an employee or employer if the agreement is expressed to cover (however described) the employer or employee”. Section 53(4)(b) provides that, despite s.53(1), an agreement does not cover an employer if “an FWA order made under another provision of [the] Act” so provides or has that effect.
[33] In light of the above, it would appear that if there is another provision of the Act that would allow me to order that CBS Pty Ltd is not covered by the Agreement, the Agreement could validly operate so as to cover Main Runner Pty Ltd alone. In effect, the reference to CBS Pty Ltd would be excised from the definition of “Canberra Building Services” in Part I of the Agreement. There would appear to be no extant procedural defects which would prevent the Agreement from operating so as to cover only Main Runner Pty Ltd.
[34] While it was put that I could simply order that the Agreement not cover CBS Pty Ltd (so as to provide that the Agreement covered only Main Runner Pty Ltd) I was not directed to any provision of the legislation under which such an order could be made in circumstances where the Agreement had not yet been approved. I am unable to find any provision of the legislation pursuant to which I could order that the Agreement not cover CBS Pty Ltd. In my view, however, it is unnecessary for such an order to be made as I have determined that CBS Pty Ltd is not an employer for the purposes of Part 2-4 of the Act as it does not meet the definition of employer because it does not employ or usually employ an individual.
[35] Section 53(1) of the Act relates only to the coverage of employers, as CBS Pty Ltd is not an employer it has no application to CBS Pty Ltd.
[36] I have reached the view that, to the extent they mention CBS Pty Ltd, the terms of the Agreement are a nullity and of no effect. In the circumstances there is no reason why the Agreement cannot validly operate to cover “Canberra Building Services” which is defined in the Agreement to mean Main Runner Pty Ltd if the reference to CBS Pty Ltd is ignored.
The National Employment Standards (NES)
[37] Section 186(2)(b)(iii) provides that in order to approve an agreement FWA must be satisfied that the terms of the agreement do not contravene s.55 of the Act. Section 55 of the Act provides that an enterprise agreement must not exclude the NES or any provision of the NES.
[38] Two matters were raised in relation to the interaction between provisions of the Agreement and the NES. These concerned clauses 24.1 and 25.1 which set full-time and part-time ordinary hours of work, and clause 40 which contains the redundancy provisions.
The ordinary hours of work issue
[39] It was put by the CFMEU that clauses 24.1 and 25.1 contravened the NES prescription of maximum weekly full-time and part-time hours. The relevant provision of the Act provides as follows:
62 Maximum weekly hours
Maximum weekly hours of work
(1) An employer must not request or require an employee to work more than the following number of hours in a week unless the additional hours are reasonable:
(a) for a full-time employee—38 hours; or
(b) for an employee who is not a full-time employee—the lesser of:
(i) 38 hours; and
(ii) the employee’s ordinary hours of work in a week.
[40] The employer disputed the CFMEU claim and argued that the reference to 40 hours in the applicable clauses of the Agreement constituted “additional hours” which were reasonable, as allowed by the NES. It was put that s.55(5) of the Act would allow the agreement to include clauses 24.1 and 25.1 given that the terms were “substantially the same as the NES”.
[41] Under the NES an employee may refuse to work additional hours where these hours are unreasonable. Whether such hours are unreasonable is determined taking into account those matters set out in s.62(3) of the Act.
[42] On this point I agree with the submissions of the CFMEU. I do not accept that clauses in an agreement that provide for ordinary full-time hours of 40 per week and pro-rata part-time ordinary hours aligned to a full-time 40 hour week can be considered to be “substantially the same” as the 38 hour week provided under the NES. All employees would be required to work the hours set out in the Agreement, and would be deprived of the ability to refuse to work, on unreasonableness grounds, as the additional two hours would be an absolute requirement under the Agreement. Clauses 24.1 and 25.1 of the Agreement are terms which exclude a provision of the NES, contrary to the requirements of s.186(2)(c) of the Act.
[43] This is a matter that could be rectified by an undertaking from the employer. 5
The redundancy issue
[44] The CFMEU also argued that the terms of clause 40 (Redundancy) are contrary to the provisions of s.186(2)(b) as the clause purports to exclude a provision of the NES.
[45] The employer response is that the redundancy entitlements under the reference instrument, the Building and Construction General On-site Award 2010 (the Award), 6 are essentially the same as those provided in the NES. However, it notes that the NES redundancy standard does not apply to employees to whom an industry specific redundancy scheme in a modern award applies. As the employees to be covered by the Agreement are covered by an industry-specific scheme set out in the modern award, the employer argues that the NES is not offended by the Agreement provision and the redundancy provisions of the Agreement are merely a question to be considered in the context of the BOOT test.
[46] Section 123 limits the scope of the NES redundancy pay provisions. The relevant sub-section is s.123(4)(c) which provides as follows:
123 Limits on the scope of this division
Other employees not covered by redundancy pay provisions
(4) Subdivision B does not apply to:
(c) an employee to whom a redundancy scheme in an enterprise agreement applies if:
(i) the scheme is an industry-specific redundancy scheme that is incorporated by reference (and as in force from time to time) into the enterprise agreement from a modern award that is in operation; and
(ii) the employee is covered by the industry-specific redundancy scheme in the modern award.
[47] The Explanatory Memorandum that accompanied the Fair Work Bill 2009 included the following explanation of the provision that became s.123(4) of the Act:
[491] An employee excluded from the entitlement to redundancy pay because they are covered by an industry-specific redundancy scheme would derive their entitlement to redundancy pay from the industry-specific redundancy scheme. Such a scheme is enforceable as a term of the award or agreement; it does not become a term of the NES.
[48] In the circumstances I consider that the redundancy provisions of the Agreement do not constitute a term that excludes the NES. The clause is, however, a matter for consideration in the application of the BOOT test.
The Better Off Overall Test (the BOOT)
[49] The BOOT is set out in s.193 of the Act. In accordance with s.193(6) the BOOT must be applied in respect of each employee as at 18 May 2010, as this is the date of the application for approval.
[50] In the employer’s statutory declaration, which accompanied the application, the following Agreement terms were identified as less beneficial than the equivalent terms of the reference instrument: 7
- Ordinary hours of work 40 rather than 38 as provided for in award;
- No provision for rostered days off; and
- No leading hand allowance for site foreman.
[51] According to the same statutory declaration the less beneficial provisions are offset by the following increased benefits provided under the Agreement:
- Pay rates in excess of applicable award rates for working increased hours; and
- Expense allowances of $330 per week.
[52] Annexure 2 to the employer’s statutory declaration in support of the Agreement went into more detail about the difference between the Award entitlements and the Agreement provisions. That annexure also indicated that the employer was prepared to make undertakings concerning a range of matters where the Award contained content which was not replicated in the Agreement, including provisions relating to part-time employees, casual employees and termination of employment. In addition, the employer offered further undertakings in relation to the provisions of the Agreement relating to payment rates for junior employees and higher duties.
[53] At the initial hearing on 26 May 2010 the CFMEU identified a number of other provisions of the Agreement, not identified by the employer in the statutory declaration, which it claimed were less beneficial than those provided under the relevant award.
[54] On 7 June 2010 Mr Maxwell, for the CFMEU, made a detailed submission comparing the Award provisions with those of the Agreement. He noted a number of prescriptive provisions of the Award which were not included in the Agreement. These related to information to be provided to the employees, consultation provisions, casual conversion and coverage. He also made submissions about the various allowances included in the Award which were not referred to in the Agreement. Mr Maxwell reiterated the CFMEU concern with both the inclement weather clause of the Agreement and the inferior redundancy provisions which, he submitted, were contrary to the NES. He also noted that the Agreement provided for a 40 hour standard working week while the relevant Award provision specified a 38 hour week.
[55] It was the CFMEU submission that by their calculations the Agreement did not pass the BOOT. Mr Maxwell referred to a number of decisions to support his submissions concerning both the application of that test and his argument that each individual employee was required to be “better off overall” under the Agreement terms. 8
[56] Both parties provided voluminous material in support of their respective arguments that the Agreement passed or did not pass the BOOT. These arguments are consolidated in the documents filed by the parties on 1, 9 and 10 November 2010.
Provisions of the Agreement which are less beneficial than those of the Award
[57] I have considered all the material put by the parties and have examined and compared the terms of the Award and the Agreement. Having done so it is apparent that a number of Agreement terms provide employees with less beneficial entitlements than the Award provision dealing with the same subject matter.
Clause 13 - Overtime
[58] Under the Agreement an employee has far less capacity to refuse to work overtime than under the overtime provisions of the Award.
Clause 14 - Stand down
[59] Under the Agreement employees can be stood down (in ordinary hours) in circumstances where work is unavailable for reasons beyond the control of either the employer or the employees. In such circumstances employees are required to make up the lost time for no additional pay. The employees must make up this time in addition to performing their ordinary hours of work.
[60] Under the Award employees can be stood down only in very limited circumstances and detailed conditions control the performance of work in inclement weather. Employees are entitled to penalty payments for work performed in certain circumstances and also have an entitlement to be paid for up to 32 hours of time due to inclement weather in any four week period. No such provisions are included in the Agreement.
[61] The CFMEU was concerned that the stand down provision of the Agreement would act to the detriment of the employees because it appeared that if they were required to make up lost time on weekends or public holidays any payment would be at ordinary rates.
[62] Although the employer had conducted a survey in an attempt to show that in the majority of cases other work would be able to be found for employees unable to work due to inclement weather, this was of little assistance. The survey was conducted in respect of a period which involved few days of inclement weather. The CFMEU asserted that there were periods in the months following those examined in the employer’s survey where up to 9 days of work were lost due to inclement weather on construction sites where the employer was working in the ACT. I have given little weight to the either the employer’s survey or the CFMEU assertions as to how the Agreement provision may have operated over particular periods. The stand down provisions of the Agreement are, in my view, clearly less beneficial for employees than the inclement weather provisions of the Award. The employer’s evidence was that the term was introduced as one day of inclement weather can cost the company up to $6,000 which it is unable to recover. It must be that the majority of this cost to the employer is made up of the wages of employees unable to be gainfully employed and who must on many occasions be paid nevertheless. In such circumstances the Award regime is clearly of more benefit to employees.
Clause 15 -Payment of wages and allowances
[63] Under the Award employees are entitled to penalty payments in circumstances where wage payments are delayed. The Award also provides for a large number of special allowances which are not replicated in the Agreement.
Clause 16 and Schedule 1 Table 4 - Junior rates of pay
[64] There is no provision for junior rates of pay in the Award - the same wages are applicable to all employees without reference to age. The Agreement stipulates pay rates for juniors (up to 21 years) which are significantly less than the Award rate that would be payable to such employees.
[65] It was put for the employer that, apart from labourers aged 16 and under, employees engaged on the junior rates set out in the Agreement would be better off overall when all the terms of the Agreement were taken into account. This is probably the case if the Expense Allowances in Table 3 of Schedule 1 are added to the junior rates of pay.
[66] The employer recognised that the junior rates of pay might prevent the Agreement from passing the BOOT and indicated that it would be willing to undertake not to employ any junior employees.
Clause 17 - Casual rates of pay
[67] Under the terms of the Agreement it is not apparent that a casual employee is entitled to receive the Expense Allowances. Casuals employed under the Award, however, are entitled to the fares and travel allowance.
Clause 18 - Superannuation
[68] The terms of the Agreement do not make it clear that superannuation will be paid in respect of the Expense Allowances. It was submitted by the CFMEU (and not refuted by the employer) that a number of the Award allowances, including the fares and travel allowance, are included in the calculation of Ordinary Time Earnings for the purposes of the superannuation guarantee legislation.
Clause 24 - Full-time hours
[69] The ordinary hours of work for full-time employees under the Agreement are 40 hours per week averaged over a 4 week period compared to an average of 38 hours per week under clause 12 of the Award. There is no limit on ordinary hours that may be worked on any one day under the Agreement, whereas under the Award only 8 ordinary hours may be worked on any one day.
Clause 25 Part-time hours
[70] The ordinary hours of work for part-time employees under the Agreement are hours less than 40 hours per week over a 4 week period (as agreed) while the Award provision is for part-time hours to be fewer than 38 per week.
Clause 27 Breaks
[71] Under the Agreement there is no entitlement to 20 minutes paid crib time before the working of overtime of more than four hours.
Clause 38 - Dispute resolution training leave
[72] There is no entitlement under the Agreement to dispute resolution training leave as provided by clause 9.7 of the Award.
Clause 40 -Redundancy
[73] The redundancy provisions are essentially those set out in the NES, which are significantly less beneficial to employees than the Award industry-specific scheme which may be accessed by employees in a much greater range of circumstances.
Matters provided for in the Award for which no provision in made in the Agreement
[74] The Award provides a number of benefits which are not referred to in the Agreement and therefore will not apply under the terms of the Agreement. These include:
- a minimum number of hours work to be provided on weekends or public holidays;
- penalty payments where an employee has less than a 10 hour break between shifts;
- penalty payments for work as a result of a recall; and
- penalty payments in circumstances where an employee is required to work through a meal break.
[75] The employer response in relation to these matters is that work attracting these allowances never, or very rarely, occurs. It is my view that the BOOT must be applied having regard to all situations which may occur in the employment. The lack of such provisions must be considered to constitute a detriment to the employees as against their clear entitlements under the Award should such a situation arise. Situations which may not have been avoided in circumstances where a penalty might be attracted may occur more commonly were the penalty no longer applicable.
[76] According to the employer there are a number of entitlements under the Award which are not replicated in the Agreement because they have no application to the employer’s operations or are provided as a matter of course. The CFMEU rejected this claim. These entitlements included paid washing time, living away from home allowances and payment for higher duties. The lack of higher duties provisions in the Agreement is a matter that should be taken into account when applying the BOOT. Similarly, the employer’s stated intention to allow employees paid time for washing is not the equivalent of an entitlement secured under an award. I accept, however, the employer’s assertion that the living away from home provisions have no application to the business.
[77] The Award provision for the re-crediting of sick leave for employees with short breaks in employment is another Award benefit not provided in the Agreement and as the occasion for its application could arise during the life of the Agreement some weight should be given to the loss of the entitlement.
[78] The provision for rostered days off (RDOs) provided by the Award must be considered a benefit to employees. The employer did not appear to argue that such a system did not benefit employees. The CFMEU did not accept the employer’s claim that it was too small to operate on a 38 hour week with rostered days off. The lack of RDOs under the Agreement must be taken into account for the purposes of the BOOT.
[79] I do not accept that there is much detriment to the employees by the alteration made by the Agreement to the casual conversion provisions of the Award.
Provisions of the Agreement which are more beneficial than those provided in the Award
[80] The employer claims that the following terms of the Agreement are more beneficial to employees to be covered by the Agreement than the comparable provisions of the Award, and that these provisions are sufficient to outweigh the Award entitlements which are reduced by the terms of the Agreement.
Clause 11 and Schedule 1 Table 1 Minimum Rates of Pay
[81] The base rates of pay under the Agreement (with the exception of junior rates) are higher than those provided for under the Award. There was some dispute between the employer and the CFMEU as to the correct Award rates of pay that applied (in particular, whether the employer had included in the calculations of the base rate of pay all Award allowances that are paid for all purposes). There was also a dispute between the parties as to the correct classification of the site foreman under the Award. The CFMEU claimed that CW8 was the correct classification while the employer claimed that the site foreman was in reality a “leading hand” and thus properly classified at the CW3 level. For the purposes of the BOOT the calculations were performed for a site foreman at both classification levels.
[82] A comparison of the wage rates under the Award and the Agreement indicates that the Agreement rates of pay for the tradesperson classification are 2.2% ahead of the Award base rate of pay (inclusive of the all purpose allowance). This comparison takes into account the 40 hour week under the Agreement by comparing the Award rate for 38 hours and two additional hours at overtime rates. As the percentage difference for the CW3 rate represents the smallest differential between the Agreement rate and the Award rate of any of the classifications it follows that, if the Agreement rate for the CW3 classification is sufficient to compensate an employee for the loss of the other Award entitlements, then the rates applicable to other classifications will also prove sufficient to pass the BOOT
Clause 12 and Schedule 1 Table 3 Expense Allowances
[83] Clause 12 of the Agreement provides as follows:
12 Expense Allowances
12.1 Employees will be entitled to the expense allowances specified in Schedule 1 Table 3.
12.2 Canberra Building Services expect that all moneys paid as an expense allowance will be fully expended by the employee in the course of him or her providing his or her services to Canberra Building Services.
12.3 The expense allowances will be increased from the first full pay period after 1 July each year commencing on and from 1 July 2010 in line with adjustments to the Al Groups Consumer Price Index for Canberra (as published by the Australian Bureau of Statistics) that have occurred in the four most recent quarters. (my emphasis)
[84] Table 3 of Schedule 1 is set out below:
Allowance | $ per week (full time employees) | $ per week (pro rata entitlement for part-time employees) |
Tool purchase, repair and wear and tear allowance | $25.00 | $0.63 |
Protective clothing allowance | $17.00 | $0.43 |
Protective footwear allowance | $5.00 | $0.13 |
Work clothing laundering allowance | $3.00 | $0.08 |
Petrol and travel allowance | $280.00 | $7.00 |
Total | $330.00 | $8.27 |
[85] The CFMEU asserted that while the inclusion of the substantial petrol and travel allowance in the Agreement was directed at providing for the Agreement to pass the BOOT it would also result in the employer paying lower workers’ compensation premiums (as these are calculated on the base rate of pay) and payroll tax being levied in respect of that lower base pay. According to the CFMEU, the terms of the clause could mean that that while the employer was seeking to protect itself from any tax problems, employees could find themselves in difficulties with the Australian Taxation Office (ATO). It was suggested that the Award travel allowance of $82.50 enables employees to satisfy ATO audit requirements. The submission of the CFMEU was that the Agreement provisions were directed at reducing the base rate of pay for the employees to the benefit of the employer.
[86] In response to the CFMEU’s concerns about the taxation treatment of the allowance, Mr John Allen (director of the employer) gave evidence that he had discussed the matter of the Expense Allowances with his accountant and had been guided by his advice.
Does the Agreement pass the Better Off Overall Test.
[87] The BOOT is a global test. A judgement must be made as to whether, taken as a whole, all the benefits provided under an agreement more than make up for any loss of award conditions and entitlements. Employees covered by an agreement must be “better off overall” under the agreement than under the relevant award.
[88] So far as the Agreement provides for junior rates of pay which do not exist under the Award the employer concedes that the Agreement would fail the BOOT for at least some junior employees and has offered an undertaking that no juniors would be employed.
[89] Table 3 of Schedule 1 does not indicate a rate of Expense Allowances for casual employees. The employer asserts that the combined application of all relevant Agreement clauses has the effect of providing casual employees with an entitlement to the Expense Allowances and has offered to provide an undertaking that the Agreement would be interpreted in this manner. Without such an undertaking it is my opinion that the Agreement would fail the BOOT test for casual employees.
[90] The stand down provisions of the Agreement are capable of application in a manner which could cause substantial detriment to employees covered by the Agreement when compared to the Award entitlements. The terms of the clause are very wide and entitle the employer to require employees to make up lost time with no additional pay no matter when that additional time is worked (for example, on weekends). By contrast, under the Award employees have an entitlement to payment for time lost. An employee required to work overtime or to work on weekends to make up time lost due to inclement weather would usually be entitled to penalty rates for that work. No such payment would be available to employees under the Agreement.
[91] Although the employer argued that a reversion to the NES redundancy standard does not constitute a detriment to the employees I do not accept this argument. The industry specific redundancy scheme represents, in my view, a greater benefit to employees. There is a far wider entitlement to payment under the industry scheme. I accept that a long-term employee may have more substantial rights under the NES redundancy provisions in the case of an actual redundancy. However, there is no evidence before me as to the periods of service of the relevant employees. Clearly new employees and employees with a few years of service would be better off under the industry scheme. All employees would be better off if wishing to access the scheme when terminated for reasons other than those which would constitute a redundancy under the NES. According to the employer redundancies were unlikely. Even still, in the circumstances outlined above the industry scheme would be more beneficial.
[92] In the absence of the Expense Allowances the Agreement would clearly not pass the BOOT. A 2.22% increase in the base rate of pay for a tradesman under the Agreement would not be sufficient to compensate the employee for the loss of the Award entitlements identified.
[93] The question arises as to whether the Expense Allowances should be taken into consideration in applying the BOOT.
[94] As there is no evidence before me as to the tax implications of the payment of the Expense Allowances I am unable to draw any conclusions in that regard. In my view, however, I am bound to have regard to the term of the Agreement which provides for the payment of the Expense Allowances. Clause 12.2 of the Agreement provides that the employer “expects that all moneys paid as an expense allowance will be fully expended by the Employee in the course of him or her providing his or her services to Canberra Building Services”. The Expense Allowances do not appear to represent the payment of moneys to be disposed of at the discretion of the employee. In the circumstances, I am reluctant to find that the Expense Allowances can compensate an employee for the removal of Award entitlements provided wholly for the benefit of the employee.
[95] I note the employer’s expressed intention to calculate employees’ superannuation entitlements inclusive of the Expense Allowances, but I also note that the superannuation clause of the Agreement does not provide for such payment as an entitlement.
[96] In the circumstances I am not satisfied that I should include the Expense Allowances under the Agreement in my consideration of the compensation payable to employees for the loss of Award entitlements. As a consequence I must find that the Agreement does not meet the requirements of s.186(2)(d) of the Act as the Agreement does not pass the BOOT.
Undertakings
[97] In circumstances where I am concerned that the Agreement does not meet the requirements set out in of ss.186 or 187 of the Act, s.190 enables me to approve the Agreement on the basis of written undertakings from the employer provided those undertakings meet the concerns, do not cause financial detriment to an employee covered by the Agreement, and do not result in substantial change to the agreement.
[98] The CFMEU argued that the Agreement should not be approved on the basis of any undertakings given by the employer because, given the number of issues identified, the required undertakings would necessarily result in “substantial changes to the agreement” and thus any approval would be contrary to s.190(3) of the Act.
[99] The employer offered to make numerous undertakings, if necessary, in respect of the provisions of the Agreement. The initial offers of undertakings accompanied the application for approval of the Agreement. Undertakings were foreshadowed at the various hearings and in the documents filed by the employer on 1 November 2010 and 10 November 2010.
[100] Any undertaking that might affect the purposes for which the Expense Allowances under the Agreement would be paid would in my view constitute a substantial change to the Agreement
[101] In the absence of a large percentage of the Expense Allowances being able to be disposed of at the discretion of the employee, undertakings would need to be provided in relation to most of the instances where the loss of an Award entitlement was identified, in particular in relation to the stand down clause and the redundancy provisions. Similarly, the Agreement would not be capable of approval in the absence of an undertaking in relation to junior rates, and the matter of casual rates would also need to be addressed.
[102] In accordance with my conclusion above, it would be necessary for the terms of the Agreement relating to ordinary hours of work to be modified by an undertaking in order to meet the requirements of s186(2)(c) of the Act.
Conclusion
[103] The undertakings required to satisfy my concerns about the Agreement would result in substantial change to the Agreement. It is my strong view that the employees should be given an opportunity to consider the terms of any new agreement which will, of necessity, be substantially different to that which they previously agreed.
[104] The application for approval of the Agreement is dismissed.
COMMISSIONER
Appearances:
Mr J Wilson with Mr J Macken and Ms R James for the Applicant.
Mr S Maxwell with Mr G Hamilton for the CFMEU on behalf of employees to be covered by the Canberra Building Services Enterprise Agreement 2010.
Hearing Details:
Thursday, 6 May 2010 (Canberra)
Monday, 7 June 2010 (Canberra)
Tuesday, 2 November 2010 (Canberra)
Monday, 20 December 2010 (Canberra)
1 FWA Form F17 - Employer’s Declaration in Support of Application for Approval of Enterprise Agreement dated 17 May 2010.
2 FWA Form 16 - Application for Approval of Enterprise Agreement dated 17 May 2010.
3 Transcript Reference PN141 (Hearing conducted on Monday, 20 December 2010).
4 Fair Work Act 2009 (Cth) s.176(1)(a).
5 Fair Work Act 2009 (Cth) s.190(1)(b).
6 MA000020, PR986361 (1 January 2010).
7 Building and Construction On-site General Award 2010, MA000020, PR986361 (1 January 2010)
8 Bupa Care Services Pty Ltd v P & A Securities Pty Ltd as trustee for the D’Agostino Family Trust t/as Michel’s Patisserie Murwillumbah & Ors [2010] FWAFB 2762 (SDP Acton); Dak-Wal Construction Pty Ltd [2010] FWA 3696 (Watson SDP); Rhino Transport (QLD) Pty Ltd [2010] FWA 2798 (Deegan C); Sentinel Security Group [2010] FWA 3250 (Larkin C); Triple Double Pty Ltd t/as The Athlete’s Foot Horsham & Ors [2010] FWA 2830(Whelan C); Mr Gerald Fanning (AML Pty Ltd) [2010] FWA 3251 (Lewin C).
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