Construction, Forestry, Maritime, Mining and Energy Union v Smit Lamnalco Towage (Australia) Pty Ltd
[2020] FWCFB 3611
•16 JULY 2020
| [2020] FWCFB 3611 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
Construction, Forestry, Maritime, Mining and Energy Union
v
Smit Lamnalco Towage (Australia) Pty Ltd
(C2020/1513)
DEPUTY PRESIDENT GOSTENCNIK | MELBOURNE, 16 JULY 2020 |
Appeal against decision [2020] FWC 1115 of Deputy President Asbury at Brisbane on 28 February 2020 in matter number C2019/6161.
Introduction
[1] The Appellant, the Construction, Forestry, Maritime, Mining and Energy Union, applies for permission to appeal and if granted, appeals a decision of Deputy President Asbury made on 28 February 2020 1 rejecting the Appellant’s contention that a roster change proposal purportedly to be implemented pursuant to provisions of the Smit Lamnalco Towage (Australia) Pty Ltd and MUA Gladstone Enterprise Agreement 2016 (Agreement) was in essence invalid because it amounted to a proposal to vary the Agreement other than in accordance with the provisions of Division 7 of Part 2-4 of the Fair Work Act 2009 (Act). In October 2019 the Appellant applied under s.739 of the Act for the Commission to deal with a dispute about a roster change proposed by the Respondent, Smit Lamnalco Towage (Australia) Pty Ltd, in accordance with the dispute settlement procedures of the Agreement.
[2] The Appellant raised two objections to the Respondent’s roster change proposal. Relevantly, the Appellant contended that the roster change proposal amounted to a proposal to vary the Agreement which could only be accomplished by processing the variation in accordance with the provisions of Division 7 of Part 2-4 of the Act. The application, together with two other dispute applications concerning the Respondent’s roster change proposal prosecuted by other unions under separate but substantially similar enterprise agreements, were allocated to Deputy President Asbury and dealt with concurrently.
[3] The Deputy President determined to deal with certain issues raised by the other unions in connection with their applications as “threshold/jurisdictional issues” in a hearing on 15 November 2019. She also determined to deal, in the same hearing, with the Appellant’s contentions as to an ‘impermissible variation’ (variation contention) described by the Deputy President as a “broader issue” and later as “the jurisdictional objection advanced by” the Appellant.
The Decision
[4] As to the Appellant’s variation contention, the Deputy President determined, relevantly, that:
• Division 7 of Part 2-4 of the Act was not a code; 2
• an enterprise agreement could contain provisions allowing terms of the agreement to be varied in a manner and/or in circumstances set out in the agreement; 3
• the effect of the provisions at issue in the Agreement is to provide a mechanism by which it can be varied and there is no prohibition in the Act on an enterprise agreement containing such a mechanism; 4
• the Agreement provides that rosters may be changed and establishes a process by which this can occur including a consultative process; 5
• changes to rosters are conditioned on changes to service, operational and port requirements as provided in clause 12.2 of the Agreement; 6 and
• employees have a right under the Agreement to dispute a roster change including by seeking arbitration by the Commission. 7
[5] Accordingly, the Deputy President rejected the Appellant’s variation contention and left for consideration in later proceedings the issue whether the Respondent’s roster change proposal was authorised by the provisions of the Agreement.
Grounds of appeal and summary of contentions
[6] The notice of appeal contains 10 appeal grounds. These may conveniently and broadly be grouped as follows.
[7] Grounds 1-5, 8 and 10 (impermissible variation grounds) variously contend error in the Deputy President’s conclusion that an enterprise agreement (and relevantly the Agreement) could be varied including that:
• the Agreement could be varied by means other than the mechanisms in Division 7 of Part 2-4 of the Act;
• the provisions of Division 7 of Part 2-4 of the Act do not operate as a code, governing variations to an enterprise agreement; and
• an enterprise agreement could contain provisions allowing terms of the agreement to be varied in a manner or in circumstances set out in the agreement.
[8] The Appellant’s central contention is that the Deputy President’s conclusions are erroneous and contrary to law. It says that, contrary to the Deputy President’s conclusion, an enterprise agreement cannot be varied other than by recourse to Division 7 of Part 2-4 of the Act. As to these appeal grounds the Respondent says that although it accepts that an enterprise agreement may only be varied through the mechanisms in Division 7 of Part 2-4 of the Act, there is no principle that an employer cannot pursue change in a manner provided for in an enterprise agreement. It contends that this is what the Deputy President determined.
[9] Grounds 6, 7 and 9 (agreement construction grounds) variously contend that the Deputy President erred in construing the Agreement as permitting a variation to rosters established by Appendix 1 of the Agreement.
[10] For reasons that will shortly be made clear, it is necessary only to deal with the first category of appeal grounds.
Consideration
Permission to appeal
[11] We accept, as the Appellant contends, that the appeal grounds raise important questions about the manner in which an enterprise agreement might be varied and whether a variation of an enterprise agreement outside the scheme that Division 7 of Part 2-4 of the Act establishes is permitted. We also consider that the impermissible variation grounds advanced by the Appellant establish an arguable case of appealable error. We are therefore satisfied that it is in the public interest that permission to appeal be granted, and we do so.
Impermissible variation grounds
[12] We consider the Appellant has made good the errors for which it contends and that underpin the impermissible variation appeal grounds. Our reasons for that conclusion follow below.
[13] The Deputy President began her analysis by summarising the Appellant’s contentions, which amounted to two propositions:
“. . . On the one hand the Union asserts that the changes to rosters proposed by Smit are so radical that they are beyond the scope of the kinds of amendments contemplated by the provisions of the Agreements. On the other hand, if the CFMMEU’s case is taken to its logical conclusion, what the Union is actually asserting is an all or nothing proposition that the terms of an enterprise agreement made and approved under the provisions in Part 2 – 4 of Division 7 of the Act cannot be varied other than by the provisions in Division 7 of that Part and that a provision that purports to allow for such variation is invalid and of no effect.” 8
[14] As to the first proposition the Deputy President observed that it “is one for another day”. 9 The Deputy President did not accept the second proposition because:
“. . . the proposition that an enterprise agreement cannot be varied other than in accordance with the scheme in Part 2 – 4 of Division 7 of the Act, is inconsistent with the terms of those provisions and the provisions of the Act dealing with the making and approval of enterprise agreements. The provisions in Part 2 – 4 of Division 7 of the Act dealing with variations to enterprise agreements, do not indicate any intent on the part of the legislature that those provisions operate as a code. Rather, those provisions are mechanisms which may be used in certain circumstances.” 10
[15] The Deputy President reasoned as follows:
• Although the provisions in Division 7 of Part 2-4 of the Act make provision for variation to enterprise agreements through a process of agreement between employers and employees, or on application by a person covered by an agreement, to vary the agreement to remove an ambiguity or uncertainty, “…there is no indication that these provisions are the only mechanisms by which an enterprise agreement can be varied”; 11
• The provisions of the Act dealing with the effect of an individual flexibility arrangement made under a flexibility term of an enterprise agreement (s.202(2)) and the consequences of an enterprise agreement not including a flexibility term (s.202(4)) provided “…a further indication that there is no general prohibition in the Act on variations to enterprise agreements other than in accordance with Part 2 – 4 of Division 7”; 12
• Enterprise agreements “may also contain a provision that allows the employer and a majority of employees affected to agree to vary the spread” within which ordinary hours are worked 13 or allow “… terms of the agreement to be varied in a manner and/or in circumstances set out in the agreement”.14 “The effect of these provisions is that the enterprise agreement provides a mechanism by which it can be varied. There is no prohibition in the Act on an enterprise agreement containing such a mechanism”;15
• A term of an enterprise agreement which allows for its variation did not allow “…new terms to be created which have not been subject to scrutiny or ousts the operation of the Act with respect to ensuring agreements pass the better off overall test” 16 nor did it “. . . give employers carte blanche to vary agreements in any manner they choose…”17 because the “better off overall test acts as a mechanism to avoid such outcomes”;18
• An “agreement which provides for unilateral variation of its terms without constraint is unlikely to pass the better off overall test particularly where provisions which can significantly affect the wages of employees, such as hours of work and overtime, are permitted to be varied.” 19
[16] It is clear from the decision that the Deputy President’s reasoning proceeds upon an uncritical acceptance of the underlying premise of the Appellant’s contention – that the Respondent’s roster change proposal was a variation to the Agreement. This may be because the Respondent did not cavil with that characterisation and instead focussed on its right under the Agreement to make the roster changes. 20 However, the correctness of the premise needs to be determined. If, in truth, the Respondent’s roster change proposal amounted to a variation of the Agreement, it could only be made through the agreement variation scheme for which provision is made in Division 7 of Part 2-4 of the Act. If the Respondent’s roster change proposal involves a change to working arrangements that are regulated by the Agreement in a manner permitted by the terms of the Agreement, but the terms of the Agreement remain unchanged, this would not be a variation to the Agreement. There is a clear distinction between a variation to an enterprise agreement and a change to working arrangements that occurs pursuant to the terms of the agreement. The latter is not a variation to the agreement.
[17] The proposition, accepted by the Deputy President, that the provisions in Division 7 of Part 2-4 of the Act dealing with variations to enterprise agreements do not indicate any intent on the part of the legislature that those provisions operate as a code is incorrect and inconsistent with authority. As a Full Court of the Federal Court of Australia made clear in Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union: 21
“. . . To the extent, however, that it is suggested that the relevant employer and a union having a sufficient interest could vary a previously approved enterprise agreement without recourse to Subdiv A and that such a “variation” would be effective, the submission must be rejected. An enterprise agreement is a “statutory artefact” (Toyota Motor Corporation Australia Ltd v Marmara[2014] FCAFC 84; (2014) 222 FCR 152, 180 [90]) which takes its form from the instrument approved by the Commission under s 186. It cannot be varied by means for which the FW Act does not provide. Subject to the matter of timing, Div 7 is a comprehensive code with respect to the variation of an enterprise agreement.
. . .
It follows . . . from the circumstance that the agreement was a statutory artefact which was not the property, as it were, of particular “parties”, that the only way that an enterprise agreement might be varied was in compliance with the specific provisions of the legislation which permitted, and regulated, a variation, that is to say, the provisions of Div 7 of Pt 2-4 of the FW Act.” 22 [Emphasis added]
[18] It is unfortunate, to say the least, that neither party referred the Deputy President to the Full Court’s judgment in Teys.
[19] It is correct, as the Deputy President noted, that other provisions of the Act operate to vary the terms, or the effect of terms, of an enterprise agreement. An undertaking that is accepted by the Commission as meeting a concern about one or more of the matters in s.186 or s.187 of the Act may have the effect of making changes to an enterprise agreement which are not substantial changes (s.190(3)(b)) and will be taken to be a term of the agreement (s.191(1)). Model flexibility and consultation terms will be taken to be terms of an enterprise agreement if the agreement does not contain complying mandatory terms (s.202(4), s.205(2)). An individual flexibility arrangement made by an employer and an employee pursuant to a flexibility term of an enterprise agreement has effect in relation to the employer and the employee as if the enterprise agreement were varied by the arrangement (s.202(2)(a)). The arrangement is also taken to be a term of the agreement (s.202(2)(b)).
[20] However, these “variations” or changes to an enterprise agreement operate according to the provisions of the Act which permit or give effect to them. The existence of these provisions lends no weight to the proposition that a person covered by an enterprise agreement, whether alone or by agreement with other persons covered by the agreement, can effect a variation to the agreement other than in accordance with Division 7 of Part 2-4 of the Act. This, in essence, is the ratio in Teys - those covered by an enterprise agreement cannot vary the agreement except in accordance with Division 7 of Part 2-4 of the Act.
[21] As the Deputy President proceeded on the basis that the Respondent’s roster change proposal was a variation to the Agreement and concluded the variation could be made without recourse to Division 7 of Part 2-4 of the Act, the Deputy President was in error. The appeal on these grounds must succeed.
[22] In upholding the appeal, we make the following observations. Not every change to the working arrangements that are regulated by an enterprise agreement will amount to a variation of the agreement. Self-evidently, an enterprise agreement may make provision for changes in, for example, working hours and the spread of those hours, or to rostering arrangements. Doubtless this is what the Deputy President had in mind in the example discussed at [121] of the decision.
[23] An enterprise agreement may provide for ordinary hours to be worked within a spread of hours between 6:00am and 6:00pm Monday to Friday. It may also provide that this spread of hours may be altered by one hour either side by agreement with the majority of employees affected or perhaps by an employee affected. That enterprise agreement might also provide that an employer may alter the spread of hours by one hour either side by giving seven days’ notice to affected employees of the alteration. Alterations to working conditions of this kind made in accordance with the terms of an enterprise agreement are not a variation to the agreement. Both the status quo and the outer limits of the alteration are known and fixed by the agreement, as is the means by which the alteration is to be advanced. This is not a variation of any term of the agreement. It is a change permitted by the agreement within the parameters established by the agreement. But a term of an enterprise agreement that provides for the agreement to be varied by following a particular procedure will not validly support a variation of the agreement if the variation has not been processed in accordance with Division 7 of Part 2-4 of the Act. Just as a term of an agreement which would preclude the exercise of rights under Division 7 of Part 2-4 of the Act is invalid, so too is a term which permits variation of the agreement without recourse to Division 7 of Part 2-4 of the Act.
[24] The relevant question that required determination here was whether, properly characterised, the Respondent’s roster change proposal was an alteration to working arrangements in a manner permitted by the Agreement of the kind discussed above or whether it was a variation which could only be achieved through Division 7 of Part 2-4 of the Act. By accepting the Appellant’s premise that the Respondent’s roster change proposal was a variation to the Agreement, the Deputy President did not properly engage with the question. In the result the Deputy President erred in her conclusion that a variation to the Agreement could be made without recourse to Division 7 of Part 2-4 of the Act.
[25] The Deputy President observed at [138] of the decision that “…there are issues raised by the CFMMEU in relation to the proposed roster changes such as whether they exceed the scope of changes permitted by the Agreements or whether the change process has been undertaken in a manner that is consistent with the terms of the Agreements…” and that she would leave these issues for another day. However, these issues were central to the question whether the Respondent’s roster change proposal is merely an alteration to working arrangements within permissible bounds established by the Agreement or a proposal to vary the Agreement and thus achievable only through Division 7 of Part 2-4 of the Act. This was the essence of the dispute. It required determination.
Agreement construction grounds
[26] Given the foregoing it is not necessary to deal with the Agreement construction grounds advanced by theAppellant.
Conclusion
[27] For the reasons stated, the appeal is upheld. In the circumstances we propose to remit the matter to the Deputy President for determination in accordance with these reasons.
Orders
[28] We order that:
1. Permission to appeal is granted in respect of the impermissible variation grounds of appeal;
2. The appeal on these grounds is upheld;
3. That part of the decision in Construction, Forestry, Maritime, Mining and Energy Union v Smit Lamnalco (Towage) Australia Pty Ltd[2020] FWC 1115 which concerns the CFMMEU’s variation contention is quashed; and
4. The matter is remitted to the Deputy President to determine the Appellant’s contention that the Respondent’s roster change proposal is an impermissible variation of the Agreement, in accordance with our reasons.
DEPUTY PRESIDENT
Hearing details:
By consent, determined on the papers without a hearing.
Final written submissions:
Appellant, 28 April and 26 May 2020
Respondent, 19 May 2020
Printed by authority of the Commonwealth Government Printer
<PR720871>
1 Construction, Forestry, Maritime, Mining and Energy Union v Smit Lamnalco (Towage) Australia Pty Ltd[2020] FWC 1115
2 Ibid at [116]
3 Ibid at [120]
4 Ibid at [122]
5 Ibid at [126]
6 Ibid
7 Ibid
8 Ibid at [115]
9 Ibid at [116]
10 Ibid
11 Ibid at [117]-[118]
12 Ibid at [119]
13 Ibid at [121]
14 Ibid at [120]
15 Ibid at [122]
16 Ibid at [123]
17 Ibid
18 Ibid at [124]
19 Ibid at [125]
20 Appeal book 126 at [5] and 128 at [15]-[16]; Appeal Book 90 – 93 at Transcript PN426-PN453
21 [2016] FCAFC 122; (2016) 247 FCR 394
22 Ibid at [15], [19]
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