Dale and Meyers Operations Pty Ltd ATF Dale and Meyers Operations Trust T/A DTM Timber

[2017] FWCA 6293

[2017] FWCA 6293

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.222 - Application for approval of a termination of an enterprise agreement

Dale and Meyers Operations Pty Ltd ATF Dale and Meyers Operations Trust T/A DTM Timber
(AG2017/5102)

BORAL TIMBER HARDWOOD NSW NAMMOONA ENTERPRISE AGREEMENT 2014

Timber and paper products industry
COMMISSIONER HUNT	BRISBANE, 21 DECEMBER 2017

Application for termination of the Boral Timber Hardwood NSW Nammoona Enterprise Agreement 2014.

[1] On 27 October 2017 Dale and Meyers Operations Pty Ltd ATF Dale and Meyers Operations Trust T/A DTM Timber (the Employer) applied pursuant to s.222 of the Fair Work Act 2009 (the Act) to terminate the Boral Timber Hardwood NSW Nammoona Enterprise Agreement 2014 (the Agreement).

[2] The Employer ‘inherited’ the Agreement by way of a transfer of business on the purchase of a part of the Boral business. The Employer does not have enterprise agreements in place in any other parts of its business. The nominal expiry date of the Agreement is 30 June 2017.

[3] The application was supported by a statutory declaration from the Employer that declared, among other things, that the employees covered by the Agreement were notified of the time and place of the vote and that of the valid votes cast, a majority of the employees approved the termination of the Agreement. In fact, the vote was approved unanimously.

[4] The Construction, Forestry, Mining and Energy Union (CFMEU) are an employee organisation which is covered by the Agreement. The CFMEU oppose the application.

[5] Directions were issued for the filing of material and the parties advised that they were content for the matter to be dealt with on the papers.

Background

[6] On 6 September 2017 the Employer made an application pursuant to s.225 of the Act to terminate the Agreement. In the s.225 application, the Employer stated that all employees supported the application, and each had signed letters of support to terminate the Agreement. It is clear that the manner in which the employees demonstrated their support for termination of the Agreement, in these circumstances would not constitute a vote of employees relevant to s.222 of the Act.

[7] The Employer stated that if the Agreement was terminated, the terms and conditions would revert to the Timber Industry Award 2000 (the Award). To offset any financial impact that termination of the Agreement may have on the affected employees, the Employer had agreed, effectively immediately to pay to employees a 3.3% increase to their current wages effective from the first pay period on or after 1 July 2017, and for each subsequent year, a minimum pay rise of the national CPI each pay period on or after 1 July.

[8] The CFMEU opposed the s.225 application, and a telephone conference was held before me on 12 October 2017. At the conference it was explained that the views of the employees and the CFMEU were necessary to take into consideration with a s.225 application, together with a public interest consideration.

[9] Following the telephone hearing, the Employer elected to hold the s.225 application in abeyance, and instead sought to put to a vote of employees to terminate the Agreement under s.222 of the Act.

[10] The Employer informed employees that a vote to seek their approval to terminate the Agreement would take place on 18 October 2017. Mr Hack, CFMEU Senior National Legal Officer, requested to attend a meeting of the employees during paid time. The Employer agreed to the request, and Mr Hack attended and addressed employees during paid time, with an unpaid meal break immediately following the meeting. It is the Employer’s contention that this allowed Mr Hack to remain on the Employer’s premises following the meeting in the event employees wished to speak with Mr Hack following the meeting.

[11] Employees were then invited to vote by SMS or by telephone between 3.00pm and 5.00pm on 18 October 2017. The application under s.222 was then made. As stated at [3], the CFMEU oppose the application.

[12] The parties were invited to inform the Commission if a hearing was required to determine the application, or if the matter could be determined ‘on the papers’. Both parties elected for the Commission to determine the matter on the papers.

CFMEU Submissions

[13] The CFMEU submitted that termination is inappropriate. There are a number of provisions within the Agreement that are more beneficial than the Award.

[14] The CFMEU submitted that employees’ terms and conditions of employment will, immediately after termination of the Agreement be less favourable than their terms and conditions of employment immediately before the termination. The CFMEU contend their – that is the CFMEU’s - existing rights will be adversely affected.

[15] The CFMEU highlighted the following provisions of the Agreement that are more favourable to employees than the Award:

“•  Clause 9.2 of the Agreement provides for the establishment of consultative committees. These committees are designed to improve work culture and participation. There is no equivalent in the Award.

b. Clause 10.2 of the Agreement provides an extended definition of ‘significant effects’ for the purposes of consultation obligations. The Award provision limits the circumstances in which consultation obligations arise on account of the more limited definition of ‘significant effects’, meaning employees may have changes imposed on them, without consultation permitting the taking into account of how such changes will impact employees. The loss of this and clause 9.2 above, will arguably be damaging to work culture and participation, and consequently productivity.

c. Clause 11 of the Agreement provides for facilitative provisions. There is no equivalent in the Award. Employees will lose the ability to make flexible work arrangements on a number of matters by majority vote.

d. Clause 12 of the Agreement provides for Individual Flexibility Arrangements (IFA) which may address a broader scope of matters that may be varied by an IFA than what is provided by clause 8 of the Award.

e. Clause 15 of the Agreement provides for the pay out of excessive accrued personal leave. The Agreement provides that a maximum of 76 hours may be paid out, whereas the Award provides for only 64 hours that may be paid out. Significantly, the Agreement provides that excess personal leave will be paid on termination of employment to employees with less than 5 years’ service, all accrued personal leave will be paid to employees with more than 5 years’ service.

f. Clause 16 of the Agreement provides for annual leave and an obligation for the Respondent to consult with employees in respect to Christmas close down periods. There is no similar provision in the Award.

g. Clause 18 of the Agreement provides for employee representation and Union recognition. There is no equivalent provision in the Award. Removal of this provision undermines Union membership, representation, collective bargaining and freedom of association.

h. Clause 19 of the Agreement provides for delegates’ rights. There is no equivalent provision in the Award. Removal of this provision undermines collective bargaining and employee representation.

i. Clause 20 of the Agreement provides for a period of paid leave for Union responsibilities and training. There is no similar provision in the Award. Removal of this provision undermines collective bargaining.

j. Clause 22.5 provides for a dispute resolution procedure in which either party may seek the arbitration of a dispute in the Fair Work Commission. The corresponding Award provision requires the consent of both parties before a dispute may be arbitrated, effectively giving the Respondent a veto power to avoid the arbitrated resolution of disputes.

k. Clause 23 of the Agreement provides for paid site meetings. There is no equivalent provision in the Award.

l. Clause 24 of the Agreement provides for payroll deductions for Union members. There is no equivalent provision in the Award. Removal of this provision undermines Union membership and collective bargaining.

m. Clause 25 of the Agreement provides for a far more generous redundancy pay scheme, up to a maximum of 52 weeks’ pay, whereas the Award provides the NES – a maximum of 16 weeks. Further, under the Agreement, all accrued personal leave is payable on termination due to redundancy, and the Respondent must discuss any redundancy selection method with employees. There are no such equivalent under the Award. Removal of this provision will be a significant financial loss to long-serving employees in particular.

n. Clause 26 of the Agreement provides above Award wages.

o. Clause 27 of the Agreement encourages the employment of full-time employees in favour of labour hire workers, which promotes employment security. There is no equivalent provision in the Award.

p. Clause 32 of the Agreement contains a provision for the issue of uniforms. There is no equivalent in the Award. Removal of this provision will have a direct financial impact on employees who will be responsible for providing their own work clothing.

[16] The CFMEU submitted that, taking into account the above matters, it is clear the employees and the CFMEU will be disadvantaged as a result of the termination of the Agreement.

[17] The CFMEU contended that the Employer has not articulated a sound basis for the application to terminate the Agreement.

Employer’s submissions

[18] The Employer submitted that employees will be better off overall under the Award. The Employer submitted that all employees are paid above-award rates of pay. In addition, all employees received a 3.3% pay increase applicable from the first pay period after 1 July 2017, which is well above CPI and previous rates in the Agreement.

[19] Furthermore, the Employer has given employees an undertaking that for each subsequent year, a minimum pay rise of the national CPI will apply from the first pay period after 1 July of that year.

[20] The Employer contended that it will have greater flexibility to transfer or redeploy employees to other locations if all employees are engaged under the same terms and conditions of employment. The Employer nominated a site reasonably close by at Rappville, and submitted that casual employees would be able to be shared across the two sites as their conditions will be similar, as opposed to the constraints within the Agreement.

[21] The Employer submitted that employees were given an opportunity to vote anonymously on whether to retain or terminate the Agreement with all employees voting in favour of terminating the Agreement. With respect to the CFMEU and its rights under the Agreement, the employees have exercised their free-will by choosing not to be or not remain members of the CFMEU.

[22] The Employer submitted that the establishment of consultative committees under Clause 9.2 of the Agreement is not mandatory and meetings are only to be held “as required”. As there are only five employees, there is no requirement to form a consultative committee as management can and do engage in consultation with all employees on any issues impacting on their working conditions. Furthermore, there is no immediate disadvantage to the CFMEU as it currently has no members at the location.

[23] In relation to clause 10.2, the Employer submitted that the Award definition is almost identical to the Agreement. The only difference relates to circumstances where there is a transfer of business under Part 2-8 of the Act. The Act provides employees with protection where there is a transfer of business. The Employer refuted that the loss of either clause 9.2 or 10.2 will have any adverse impact on “work culture and participation, and consequently productivity”. For example, the workplace has functioned with no disruption to productivity despite the absence of consultative committees.

[24] With respect to the facilitative provisions in the Agreement, the Employer contended the Award at Part 2 Item 9 provides for a similar provision. The Employer conceded that the Award provision does not allow for employees to vote upon flexible work arrangements, however it does say management must consult with the employees.

[25] The Employer submitted that clause 8 of the Award provides employees with adequate protection and process to negotiate Individual Flexibility Arrangements (IFA), and noted that it has a number of employees in other locations that are on IFAs.

[26] Regarding the pay out of accrued personal leave (up 76 hours) in clause 15 of the Agreement, the Employer stated that section 34.4 of the Award allows for leave in excess of 15 days to be paid out, capped at 64 hours in any 12 month period. The Award requires that an employee retain a minimum balance of 15 days’ accrued leave after the equivalent payment is made. There is no clause for payment of personal leave upon termination of employment in the Award. The Employer contended that although the Award is less generous than the Agreement, none of the employees have a current balance of 15 or more accrued days and based on accrual rates, only one employee would be eligible for the benefit under the Agreement in approximately 12 months. Therefore the current employees would not be disadvantaged.

[27] The Employer submitted that the Award (section 33.11) sufficiently deals with an annual shut-down over the Christmas period, and that there is not a company-wide shutdown; rather, there are site-specific shutdowns. The Employer’s practice is to consult with managers on each site, rather than the Agreement’s imposed obligation to consult with employees.

[28] In respect of union recognition and employee representation provided for under clause 18 of the Agreement, the Employer stated that there are currently no union members among its employees. Should any employees choose to join the union at a later date, the Employer stated they will have the right to freedom of association provided under s.336 of the Act. Similarly, as to the rights of delegates under clause 19, the Employer argues there is no detriment as there are no delegates, there being no union members. As for clause 20 of the Agreement which provides for paid leave for union responsibilities in the Award, the Employer again says there is no detriment to employees as there are no union members in its employ. However, should any employee choose to become a union member, the Act confers rights to attend training conducted by the union.

[29] The Employer submitted, in respect of the dispute resolution procedure in clause 22.5, that the Act allows parties to apply to the Commission to resolve a workplace dispute under several provisions, and that section 10 of the Award allows any employee to refer a dispute to the Commission.

[30] In respect of paid site meetings provided for in clause 23 of the Agreement, the Employer again noted there is no detriment as there are no union members at the company – however if the CFMEU wished to meet with employees, it may lodge a right of entry application. Clause 24 of the Agreement provides for payroll deductions for union members, and again the Employer notes that there are no union members at the company and submits there is no detriment.

[31] Addressing the Agreement’s redundancy pay scheme in clause 25, under which there is a maximum of 52 weeks’ pay contrasted with the Award’s maximum of 16 weeks, the Employer stated it has no intention of making any employees redundant in the foreseeable future. Further, that terminating the Agreement would give the Employer greater flexibility to transfer or redeploy employees within the group of companies. It submitted that only one employee would be eligible for the maximum redundancy pay and thereby be adversely affected.

[32] Although the Agreement in clause 26 provides employees will be paid above-award wages, the Employer submitted that all employees are currently paid above the Award and pointed to a recent wage increase. The Employer has given an undertaking to increase rates of pay in line with CPI for subsequent years to ensure wages remain above Award rates.

[33] The Employer submitted that in respect of the preference of employment for full-time employees over labour hire workers mandated by clause 27, it does not engage labour hire workers and therefore there is no detriment to employees.

[34] Regarding the uniform provisions in clause 32, the Employer argued that there would be no direct financial impact on employees because the Award (in clause 21.22) requires that any out of pocket expenses for protective clothing, footwear and equipment are reimbursed by the Employer. Further, the Employer submits that it provides hi-vis shirts, safety boots, ear muffs and goggles to employees, provides workwear annually, and has agreed to provide trousers for the treatment plant operator.

[35] The Employer concluded that in its submission, the employees will not be disadvantaged by the Agreement being terminated; instead, the termination would benefit both the Employer and its employees.

Consideration

[36] An application has been made for approval of the termination of the Agreement under s.222 of the Act. I am satisfied that the application for approval was accompanied by the declarations required by the procedural rules to accompany the application and that the application was made within 14 days of the termination being agreed to.

[37] If an application for approval of a termination of an enterprise agreement is made under s.222 of the Act, the Commission must approve the termination if satisfied of those matters in s.223 of the Act.

[38] Section 223 of the Act is as follows:

'223 When the FWC must approve a termination of an enterprise agreement

If an application for the approval of a termination of an enterprise agreement is made under section 222, the FWC must approve the termination if:

(a) the FWC is satisfied that each employer covered by the agreement complied with subsection 220(2) (which deals with giving employees a reasonable opportunity to decide etc.) in relation to the agreement; and

(b) the FWC is satisfied that the termination was agreed to in accordance with whichever of subsection 221(1) or (2) applies (those subsections deal with agreement to the termination of different kinds of enterprise agreements by employee vote); and

(c) the FWC is satisfied that there are no other reasonable grounds for believing that the employees have not agreed to the termination; and

(d) the FWC considers that it is appropriate to approve the termination taking into account the views of the employee organisation or employee organisations (if any) covered by the agreement.’

[39] It has not been submitted that the Employer has not complied with the notification requirements in s.220(2) of the Act, and on the basis of Ms Kaminski’s declaration I am satisfied that the Applicant has taken reasonable steps to notify employees of the time and place of the vote and the voting method, and that employees were given a reasonable opportunity to decide whether they wanted to approve the termination of the Agreement.

[40] Further, it has not been submitted that the termination has not been agreed to by a majority of the employees who cast a vote to approve the termination. I am satisfied on the basis of Ms Kaminski’s declaration, which has not been challenged, that the termination was agreed to in accordance with s.221(1) of the Act.

[41] There has been no submission that there are other reasonable grounds of believing that employees have not agreed to the termination, and on the basis of the unchallenged evidence before the Commission I am satisfied that there are no other reasonable grounds for believing such.

[42] Although the CFMEU has not specifically referred to s.223(d) in this submissions, I presume the CFMEU’s contention is that the Commission must not approve the termination of the Agreement on the basis that the Commission should not accept that it is appropriate to do so taking into account the views of the CFMEU under s.223(d) of the Act.

[43] The CFMEU submitted that it is not appropriate to approve the termination on the basis of its view that:

1. Taking into account the differences between the terms of the Agreement and the Award, employees and the CFMEU will be disadvantaged by the termination; and

2. The Employer has not “articulated a sound basis” for the Commission to approve the termination.

[44] The Employer does not accept that the majority of the provisions of the Agreement when compared to the Award, if no longer applicable to employees and the CFMEU by approval of the termination, would constitute a detriment to the current employees.

[45] The Employer does accept that some provisions of the Agreement, if removed, may represent a detriment to employees. It is submitted, however, that this does not immediately affect current employees.

[46] Even accepting the CFMEU’s position at its highest, those are matters that are necessary for the employees covered by the Agreement to consider when asked to vote whether to terminate the Agreement. Absent some vitiating factor in that process, the Commission’s role is limited to the requirements of s.223 of the Act.

[47] The Commission must approve the termination if satisfied of those matters in s.223 of the Act. None of those considerations, at least directly, requires the Commission to undertake an analysis of the terms and conditions between the alternate industrial instruments and form a level of satisfaction as to the benefits and disadvantages of approving the termination. That is a matter for those employees requested to approve the proposed termination. The termination has been voted on and approved by a majority of voting employees. In this case, 100% of employees voted and 100% of employees approved the termination of the Agreement.

[48] There is no requirement in s.223 that an applicant for the approval of a termination of an enterprise agreement prove or demonstrate a “sound basis” for approving the termination. The Act mandates that the termination be approved by the Commission if those matters in s.223 of the Act are satisfied. Those are the matters which the legislature has required the Commission to consider.

[49] I have taken into account the CFMEU’s view that the Agreement should not be terminated because it considers employees and the CFMEU will be disadvantaged by the termination of the Agreement and only the Award applying. The unchallenged evidence before the Commission is that the Employer agreed to Mr Hack holding discussions with employees on a number of occasions prior to a vote, and being present when the Employer discussed the termination of the Agreement with employees on the day the vote was conducted.

[50] The issue which arises is whether, in these circumstances, it is appropriate to terminate the Agreement where that termination has been agreed by the Employer and unanimously by employees, but is opposed by the union that is covered by the Agreement.

[51] I have had regard to the decision of Anderson DP in Carl Zeiss Vision Australia Holdings Limited [2017] FWCA 5825 where the Deputy President stated:

‘[82]Relevant to the submission of United Voice are the objects of the FW Act and in particular sections 3 and 171:

“3  Object of this Act

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by: 

(a)  providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and 

(b)  ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and 

(c)  ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and 

(d)  assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and 

(e)  enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and 

(f)  achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and 

(g)  acknowledging the special circumstances of small and medium-sized businesses.”

“171  Objects of this Part 

The objects of this Part are:

 
(a)  to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and 

(b)  to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through: 

(i) making bargaining orders; and 

(ii) dealing with disputes where the bargaining representatives request assistance; and 

(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.”

[83] I do not consider these objects to create a statutory presumption against termination of a collective agreement. While the FW Act expresses the objective of promoting collective bargaining in good faith at the enterprise level, those objectives are then reflected in a detailed statutory scheme which (without being exhaustive) imposes both rights and obligations concerning the negotiation of agreements, the content of agreements, the approval of agreements by the Commission, the continued operation of agreements beyond their nominal expiry date, and the termination of agreements (also by Commission approval). In relation to termination of single enterprise agreements, the statutory scheme expressly provides for termination by consent of the employer and employees (section 222, as in this instance) or on application by one of the parties (section 225).

[84] Further, the tests governing the exercise of the Commission’s discretion differ between consent and contested applications. A more rigorous test (including the public interest) applies to section 225 (contested) applications. While the views of objecting parties are relevant and must be considered (for example, in deciding whether termination is appropriate), the scheme of sections 222 and 223 (consent applications) places weight on the existence of agreement and the facts surrounding the expression of that agreement.

[85] In considering the statutory scheme relevant to the termination of agreements a Full Bench of this Commission in Re Aurizon Operations Ltd said as follows:

“The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.” 

[86] The Full Bench went on to observe that “there is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and collective bargaining in good faith.” Although made in the context of a section 225 application, I consider these observations to also be pertinent to the statutory scheme governing section 222 applications.

[87] United Voice has not led evidence that would support a conclusion that it is not appropriate in the particular circumstances of this enterprise to continue to regulate wages and conditions by collective bargaining rather than by other lawful instruments of regulation (including modern awards which have collective effect).

[88] I am satisfied that it is appropriate to approve the termination notwithstanding the views of United Voice. I do not consider there to be a statutory bar to doing so or a statutory presumption against doing so. The statutory requirements have been met. Persons bound by the Agreement have, by majority, agreed to terminate it. There are no reasonable grounds for believing that the employees have not so agreed. The Commission approves the termination.’ (references omitted)

[52] I adopt the reasoning of the Deputy President above. In the matter before me, the CMFEU has not led evidence that would support a conclusion that it is not appropriate in the particular circumstances of this enterprise to continue to regulate wages and conditions by collective bargaining, and in particular, the Agreement, rather than by other lawful instruments of regulation, including the Award.

[53] Taking into account the material before the Commission, and the CFMEU’s view about the matter, I consider it is appropriate to approve the termination of the Agreement.

[54] I am satisfied that the requirements of s.223 of the Act have been met. In accordance with s.223, I must terminate the Agreement. The application to terminate the Agreement is approved.

[55] The termination will take effect from today, 21 December 2017.

COMMISSIONER

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