Drilling Industries Australia Pty Ltd T/A Drilling Industries Australia
[2019] FWC 6155
•3 SEPTEMBER 2019
| [2019] FWC 6155 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Drilling Industries Australia Pty Ltd T/A Drilling Industries Australia
(AG2019/2068)
COMMISSIONER JOHNS | SYDNEY, 3 SEPTEMBER 2019 |
Application for approval of the Drilling Industries Australia Enterprise Agreement 2019 – Pre-approval requirements – Explanation of terms of agreement – Genuinely agreed to
[1] On 18 June 2019, Drilling Industries Australia Pty Ltd (Drilling Industries/ Applicant) made an Application in the Fair Work Commission (Commission) for the approval of the Drilling Industries Australia Enterprise Agreement 2019 (Agreement). The application was made pursuant to s 185 of the Fair Work Act 2009 (Cth) (FW Act). The Agreement is a single enterprise agreement.
[2] The parties to the Agreement are Drilling Industries and, the “employees of [Drilling Industries] employed in the classifications contained in [the] Agreement.” 1 The relevant classifications are contained in Schedule 1 of the Agreement. The Agreement, if approved, will “operate to the exclusion of the Award and any other workplace instrument that would otherwise apply.”2 The Award is defined as the Hydrocarbons Industry (Upstream) Award 2010.3 The nominal expiry date of the Agreement is expressed to be “4 years from the date on which the [Commission] approves the Agreement”.4
[3] On 20 June 2019 the application for approval of the Agreement was allocated to me. The rates of pay have been assessed as between 46.85% and 156.35% above the rates of pay contained in the Award. However, an initial review of the Agreement suggested that there may be an issue in relation to casual and part time employees receiving a composite (loaded) rate inclusive of all penalties including public holiday. If a casual or part time employee were to work a Public Holiday or Sunday in isolation, they would unlikely be better off overall. If this is the case then the Agreement would unlikely pass the better off overall test (BOOT).
[4] On 21 June 2019, The Australian Workers’ Union (AWU) sought to be heard in relation to the approval of the Agreement. The AWU wrote:
“The AWU has genuine concerns about the ability of this agreement to pass the Better Off Overall Test, and expects to discover significant pre-approval deficiencies on the basis of the content of the agreement, specifically the broad scope.”
[5] On 25 June 2019 I issued the following Directions:
“[1] By no later than 4:00 pm on Tuesday, 9 July 2019, the Australian Workers’ Union must file in the Commission and serve on the Applicant any submissions, witness statements and any other documents it seeks to rely upon in opposition to the approval of the Proposed Agreement.
[2] By no later than 4:00 pm on Tuesday, 16 July 2019, the Applicant must file in the Commission and serve on the Australian Workers’ Union any submissions, witness statements and any other documents it seeks to rely upon in support of the approval of the Proposed Agreement.
[3] By no later than 4:00 pm on Tuesday, 23 July 2019, the Australian Workers’ Union must file in the Commission and serve on the Applicant any materials in reply.”
[6] The matter was listed for hearing on 26 July 2019. On 9 July 2019 the timetable for the filing of materials was adjusted at the request of the AWU.
[7] In compliance with the Amended Directions:
a) On 10 July 2019 the AWU filed submissions;
b) On 17 July 2019 the Drilling Industries filed submissions; and
c) On 23 July 2019 the AWU filed submissions in reply.
[8] Despite the terms of the Directions requiring the filing and service of “any submissions, witness statements and any other documents,” neither the Applicant nor the AWU filed any additional evidence. Consequently, following the completion of the Directions timetable the only evidence before the Commission was the Employer’s Statutory Declaration in support of the application attested to by Andrew Gallagher, a Director of Drilling Industries and dated 15 June 2019.
[9] Noting the absence of any additional evidence, on 24 July 2019 I wrote to the parties asking whether they were content for the matter to be determined on the papers that had been filed. On 25 July 2019 both the AWU and the Applicant replied consenting to the same.
[10] In coming to this decision the Commission, as presently constituted, has had regard to all of the filed material. Consequently, in coming to this decision the Commission, as presently constituted, has had regard to the following:
a) The Agreement;
b) Form F16 – Application for approval of an enterprise agreement submitted by the Applicant dated 15 June 2019;
c) Form F17 – Employer’s statutory declaration in support of an application for approval of an enterprise agreement dated 15 June 2019;
d) Comparison Document filed by the Applicant on 18 June 2019;
e) The Notice of Employee Representational Rights;
f) The AWU’s Outline of Submissions & Annexures filed 10 July 2019;
g) The Applicant’s Submissions filed 17 July 2019;
h) The Australian Workers’ Union Submissions in reply filed 23 July 2019;
i) Email to parties sent at 17:55 on 24 July 2019.
[11] For the reasons set out below I have decided not to approve the Agreement. This is because, having considered all of the evidence, I am not satisfied that Drilling Industries took all reasonable steps to provide an explanation to the relevant employees about the effect of the Agreement (s.180(5)). That is to say, because s.180(5) was not complied with, I am not satisfied about s.188(a)(i) and, consequently, I am not satisfied that the Agreement was genuinely agreed to as required by s.186(2)(a).
[12] Further, I am not satisfied that the Agreement passes the BOOT for the reasons I explain below.
Legislative Scheme
[13] Section 186(2)(a) provides as follows:
“(2) The FWC must be satisfied that:
(a) if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement.”
[14] Section 188(1)(a)(i) provides as follows:
(1) An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:
(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:
(i) subsections 180(2), (3) and (5) (which deal with pre approval steps).”
[15] Section 180(5) provides as follows:
“(5) The employer must take all reasonable steps to ensure that:
(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and
(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.”
[16] In relation to the BOOT section 186(2)(d) provides as follows:
(2) The FWC must be satisfied that:
(d) the agreement passes the better off overall test.
The F17 Statutory Declaration
[17] As stated above, the only evidence before the Commission was the Statutory Declaration of Andrew Gallagher, a Director of Drilling Industries. The AWU having consented to the matter being dealt with on the papers (and having passed on the opportunity to cross-examine Mr Gallagher) I am entitled to accept what is stated in the Statutory Declaration. It is therefore worth setting out what was declared in the F17 filed with the Application for approval:
Question 2.7: What steps were taken by the employer to explain the terms of the agreement, and the effect of those terms, to the relevant employees?
“[On 16 May 2019] all 26 employees to be covered under the enterprise agreement were provided by email a comparison table which set out the differences between their wages, entitlements and conditions:
• under the Award;
• currently being received; and
• under the enterprise agreement.
Each employee was invited to ask questions or seek clarification about the bargaining process and the proposed enterprise agreement.
A copy of the Award and the FWO pay guide for the Award for the current financial year was also attached the email.”
Question 2.10: Please provide the following details about the vote on the agreement:
“At the time of the vote, how many employees were covered by the agreement? 26
How many of these employees cast a valid vote? 18
How many of these employees voted to approve the agreement? 11.”
Question 3.1: List the modern award(s), if any that currently cover the employer and any of the employees covered by this agreement.
“Hydrocarbons Industry (Upstream) Award 2010”
Question 3.3: Does the agreement containing terms or conditions of employment that are more beneficial than equivalent terms and conditions in the modern award(s) listed in question 3.1?
“Yes.
The Composite Daily Rates referred to in Schedule one a higher than that required by the Award for each employee classification under the enterprise agreement. By way of example, for a classification 5 Advanced Specialist:
• under the Award, the Rolled-up Day Rate is $486.89
• under the enterprise agreement, the Rig Daily Rate is $636.72”
Question 3.5: Does the agreement contain any terms or conditions of employment that are less beneficial than equivalent terms and conditions in the modern award(s) listed in question 3.1?
“No”
[18] The comparison table referred to in the F17 provided the following information:
Entitlement | Award | Current Drilling Industries Australia Terms | EA |
Wages and Allowances such as shift allowance and living away allowance | Ordinary rate of pay applicable for classification, plus: • Industry Allowance, being 5.96% of the standard rate per week; and • Overtime and penalties. • Example of Drillers award rate under the Hydrocarbons Upstream Award 2010 • Level 5 Advanced Specialist • Award Day rate: $486.89 per day | Wage rates are currently being paid at the rates specified in the proposed enterprise agreement Drilling Industries Australia current pays Driller at level 5 Advanced Specialist DIA Rig Composite Daily Rate: $636.72 | Wages rate are calculated as composite daily rates which include: • Base rate of pay; • Industry allowances • Overtime and penalties; and • Annual leave loading. • The "Rig Composite Daily Rate" is calculated as follows: • Permanent Employees - Hourly Base Rate x 12; or • Casual Employees - Casual Rate of Pay x 12. The "Yard Composite Daily Rate" is calculated as follows: • Permanent Employees - Hourly Base Rate x 9; or • Casual Employees - Casual Rate of Pay x 9. • The "Training and Leave Composite Daily Rates" are calculated as follows: • Permanent Employees – Hourly Base Rate x 7.6; or • Casual Employees – Casual Rate of Pay x 7.6. Driller Classification under the EA • DIA Rig Composite Daily Rate: $636.72 |
Rostering | Continuous shift workers may be required to work a shift of up to 12 consecutive hours (including meal breaks), rostered 24 hours per day, seven days per week and who is rostered regularly to work those shifts and works regularly on Sundays and public holidays. Work Cycle means a roster made up of a predetermined number of working days (on-duty period) and non-working days (off-duty period) over a period (work cycle). | Even Time Roster – 21 consecutive days of 12 hours per day on-duty, followed by 21 days off duty. | Applicable The Training and Leave Composite Daily Rate applies when taking paid leave. The base rate of pay applies to redundancy pay. |
National Employment Standards (NES) including leave entitlements, notice of employment and redundancy | Applicable Ordinary rate of pay applicable for classification, and for annual leave, plus 17.5% leave loading. | Applicable | Even Time Roster – 21 consecutive days of 12 hours per day on-duty, followed by 21 days off duty. |
Training | Ordinary rate of pay for applicable classification | The Training and Leave Composite Daily Rate will apply. | Applicable The Training and Leave Composite Daily Rate applies when taking paid leave. The base rate of pay applies to redundancy pay. |
Accommodation and meals | A living away from home allowance and meal allowance for overtime work applies. | Accommodation and Meals are supplied by DIA or the DIA client. | Accommodation and Meals are supplied by DIA or the DIA client. |
Clothing | Included as part of industry allowance entitlement. | DIA will supply 2 pairs of overalls or long sleeved shirts and trousers each 6 months and 1 pair of safety boots every 12 months. | DIA will supply 2 pairs of overalls or long sleeved shirts and trousers each 6 months and 1 pair of safety boots every 12 months. |
Travel | Ordinary rate of pay for applicable classification for journey to and from work-site to the designated reporting point, up to maximum of 12 hours. | The off-duty-period will include travel time to the work-site from the designated reporting point. The on-duty period will include travel time returning to the designated reporting point paid at the ‘Rig Composite Daily Rate’. | The off-duty-period will include travel time to the work-site from the designated reporting point. The on-duty period will include travel time returning to the designated reporting point paid at the ‘Rig Composite Daily Rate’. |
Section 180(5); (6) – Did the employer take reasonable steps in explaining the Agreement to its employees
[19] Whether an employer took reasonable steps to explain the agreement to its employees is an important preapproval step (Reasonable Steps Question).
[20] The AWU submitted that:
7. The Agreement is incapable of approval as the requirement in s.186(2)(a) of the Fair Work Act 2009 (Act) is not met.
8. Section 188 of the Act sets out the requirements for an enterprise agreement to be genuinely agreed to by employees. One of the criteria for genuine agreement is the requirement in s.180(5) of the Act to be met.
9. Section 180(5) of the Act provides:
“(5) The employer must take all reasonable steps to ensure that:
(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and
(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.”
10. Section 180(5) is a mandatory pre-approval step for an enterprise agreement to be approved by the Commission. As such, the Commission lacks the power to approve an agreement if it is determined that an employer has in fact not taken all reasonable steps to meet this obligation. 5
11. For the Commission to be satisfied that s.180(5) has been complied with, it must consider the content of the explanation and the terms in which it was conveyed. 6
Content of Explanation
12. The purpose of the explanation required by s.180(5) is to enable employees to cast an informed vote and understand how their wages and working conditions may be affected by their voting in favour of the Agreement. 7
13. On the basis of the material filed and the declaration made by DIA in its Form F17, the explanation provided by DIA to its employees falls significantly short of this requirement.
14. DIA has declared that the 26 employees to be covered by the Agreement were sent a comparison table that set out the differences between the wages, entitlements and conditions provided by the Award, those the employees currently received, and those under the Agreement. DIA also provided to employees a copy of the Award and the Fair Work Ombudsman pay guide for the Award. 8
15. These are the only steps that DIA has claimed to have taken to explain the terms of the Agreement and the effect of those terms to the relevant employees.
16. The comparison table, which has been filed with the Commission, spans two pages and addresses only seven of the applicable terms and conditions under the Award and the Agreement. The Agreement comprises 32 clauses and one schedule. The Award 9 consists of 31 clauses and nine schedules.
17. In addition to the comparison table only addressing a fraction of the terms and conditions applicable under the Award and the Agreement, what is offered in the table is not an explanation of how the condition operates, but merely a statement of what the condition is. Additionally, the statements offered in the table are incomplete and at times inaccurate.
18. For example, the first row of the table which addresses wages and allowances is incomplete and inaccurate, and therefore misleading. This is for two main reasons:
18.1 Under the ‘Entitlement’ column, it states that the entitlement includes the living away from home allowance, which is provided by the Award but not the Agreement. However, this allowance is not stated to be included in the “Award day rate” Under the ‘Award’ column;
18.2 Under the “Award” column, DIA has calculated a day rate for a Level 5 Advanced Specialist that is purported to include overtime and penalties, but as the working is not shown it is not known which penalties have been added to achieve the rate and at what rate the overtime has been calculated. The AWU is sceptical that the rate arrived at by DIA includes all penalties, loadings and allowances that the Agreement does not provide.
19. The second row of the table addresses rostering. The ‘EA’ column merely states:
“Applicable
The Training and Leave Composite Daily Rate applies when taking paid leave.
The base rate of pay applies to redundancy pay.”
20. This is not an explanation of the rostering provisions of the Agreement.
21. The third row of the table purports to address the National Employment Standards (NES). However, the ‘EA’ column merely states:
“Even Time Roster – 21 consecutive days of 12 hours per day on-duty, followed by 21 days off duty.”
22. The fifth row of the table, addressing accommodation and meals appears to contrast the living away from home allowance (LAHA) in the Award with the provision of meals and accommodation by DIA or its client under the Agreement as though this provision removes the need for the payment of LAHA.
23. The AWU notes that LAHA is not payable for the purposes of meals and accommodation, and therefore the provision of meals and accommodation at the expense of the company is not an equal entitlement.
24. The entitlement to LAHA is found at cl. 15.3(b) of the Award, cl. 15.3(b)(ii) states the purposes for which it is paid:
“(iii) This allowance is paid in compensation for isolation, the types of amenities and facilities available at the remote workplace and sharing accommodation.”
25. LAHA is a work-related allowance and not an expense-related allowance. 10 By contrasting the entitlement to LAHA in the Award against the provision of meals and accommodation under the Agreement, the table has the potential to mislead employees into having a reasonable belief that the entitlements are equal.
26. This is especially so when the following is taken into account:
26.1 the terms in which the alleged explanation by DIA to its employees was conveyed;
26.2 the particular circumstances of the employees are taken into account; 11 and
26.3 no bargaining meetings were held for the purposes of the Agreement.
Terms in which Explanation Conveyed
27. The comparison table, the Award and the FWC pay guide were emailed to the employees. No further action was taken by DIA to explain the terms of the Agreement and the effect of those terms.
28. Sending an incomplete, confusing and potentially misleading two-page table with no further explanation does not meet the requirement in s.180(5) of the Act.
29. It is not possible for the Commission to conclude on the evidence and declaration provided by DIA that all reasonable steps were taken to explain the terms of the Agreement and the effect of the terms to employees. 12 An explanation was not provided by DIA that would have enabled employees to cast an informed vote and understand how their wages and working conditions may be affected by their voting in favour of the Agreement.13
30. Accordingly, the application must be dismissed.
Circumstances of the Employees
31. The employees did not have a bargaining representative. 14 The absence of a bargaining representative is explicitly included in the Act as an example of a circumstance or need that must be taken into account in providing the explanation required by s.180(5) of the Act.15
32. Despite as much being explicitly stated on the Form F17 in the preamble to 2.8, DIA took no steps to take this circumstance or need into account. DIA merely emailed a two-page table to employees that provided little to no explanation of a minority of applicable conditions.
33. Also relevant in terms of circumstances of the employees is that no union was involved in bargaining, 16 the employees were not currently covered by the terms of an enterprise agreement,17 and that no bargaining for the Agreement actually occurred.18
[21] Drilling Industries submitted that:
“Pre-Approval Steps – Genuine Agreement s 180(5)
2.1 The AWU has submitted that:
(a) the Agreement is incapable of approval under section 186(2)(a) of the Fair Work Act 2009 (Cth) (FW Act) if the Commission cannot be satisfied that the Agreement has been genuinely agreed to by the employees;
(b) section 188 of the FW Act sets out the requirements for an enterprise agreement to be genuinely agreed to by employees;
(c) one of the criteria for genuine agreement is the requirement in section 180(5) of the FW Act which relevantly provides that an employer must take all reasonable steps to ensure the terms of the agreement, and the effect of those terms, are explained to the relevant employees; 19 and
(d) in considering whether reasonable steps have been taken, the Commission must consider the content of the explanation and the terms in which it was conveyed. 20
2.2 In terms of the threshold requirements, DIA submits that the AWU has fallen short when setting out the requirements that the Commission must consider when determining whether the employees have genuinely agreed to the Agreement.
2.2 That is, in order for the Commission to determine whether the employees had genuinely agreed to the Agreement, it needs to consider only whether the employees were likely to have understood its terms and effect. 21
2.3 Further, the Commission must consider the content of the explanation and the way it was given, having regard to all the circumstances and needs of the employees, and the nature of the changes made by the Agreement. 22
Content of Explanation
2.5 The AWU has submitted that the content of the explanation undertaken and declared by DIA to be deficient on the basis that the content in the comparison table, together with the Hydrocarbons Industry (Upstream) Award 2010 (Award) and the Fair Work Ombudsman's (FWO) pay guide fell significantly short of the requirement set out in section 180(5) of the FW Act.
2.6 In terms of the contentions of the AWU in relation to the comparison table, DIA submits that:
(a) At paragraph 16 and 17 in relation to the terms explained, there is no requirement in the FW Act for every term of the Agreement to be explained as the AWU suggests. 23
(b) At paragraph 18 in relation to the wages and allowances, the composite rates are inclusive of:
(i) the living away from home allowance (LAHA); 24 and
(ii) overtime and penalties rates when properly calculated. Annexed hereto and marked "A" is a breakdown of the Award Day Rate calculation.
(c) At paragraphs 19 and 20 in relation to rostering, the explanation is sufficient when taking into account all of the circumstances of the employees. This is because all 26 employees currently perform the roster contained in the Agreement, and as a consequence, they are already familiar with it.
(d) At paragraph 21 in relation to whether the NES applies under the Agreement, the application of the NES is specified in clear terms at clause 5 of the Agreement.
(e) At paragraphs 22 to 26 in relation to the LAHA, DIA repeats and relies upon paragraph 2.6(b) above and considers the explanation in terms of the LAHA being inclusive in the composite rates, and the additional provision of meals and accommodation at the expense of DIA or its client, is sufficient when taking into consideration all of the circumstances of the employees. This is because all 26 employees are currently paid the composite rates that include the LAHA. Further, the employees also currently receive the benefit of meals and accommodation in addition to LAHA.
Terms in which Explanation Conveyed
2.7 The AWU has contended at paragraphs 27 and 28 that DIA did not take all reasonable steps to explain the terms of the Agreement and the effects of those terms because:
(a) the comparison table, the Award and the FWO's pay guide were emailed to the employees without any further action taken by DIA to further the explanation; and
(b) the comparison table was incomplete, confusing and potentially misleading.
2.8 DIA refutes these contentions on the basis that:
(a) the material provided to each of the 26 employees by email, and via the DIA on-line portal, in of itself is sufficient to discharge DIA's obligation to provide access to the relevant materials; 25
(b) additional steps were taken after the material was issued to each of the 26 employees. In particular, various interactions were made which included a standing invitation for each employee to contact DIA if further explanation was required. In this regard, several of the employees took up this offer and DIA responded accordingly. Annexed hereto and marked "B" is a copy of the standing invitation sent to the employees; and
(c) the comparison table was not incomplete, confusing or potentially misleading and DIA repeats and relies upon the reasons set out at paragraph 2.6(b) above.
Circumstances of the Employees
2.9 The AWU has submitted that as a consequence of not having a bargaining representative, DIA is required to take this circumstance or need into account in providing the explanation required under section 180(5) of the FW Act.
2.10 DIA does not deny that this requirement exists, but it does refute that it did not take all reasonable steps to explain the terms of the Agreement, and the effect of those terms, and the issue of a comparison table to all 26 employees is in part demonstrative of the discharge of that obligation.
2.11 The AWU appear to assert at paragraph 33, that by having no union involved in the bargaining, that somehow the comparison table is deficient in explaining any difference with either conditions in the Award, or with the conditions the employees currently receive.
2.12 The notion that unless there is evidence of a differentiated method of explaining the terms of the agreement to different groups of employees, then it cannot be said reasonable steps to ensure the explanation has been provided in a reasonable manner, has been previously rejected by the Commission. 26
2.13 Quite the contrary, a Full bench made clear that there is no need for a differentiated method of explanation in circumstances where the method of explanation is adequate for all groups of employees. 27
2.14 Further, when circulating the comparison table and communication to the 26 employees, DIA provided recourse for anyone who had difficulties or required further assistance to contact the human resources manager, Mr Rob Dalla-Bona, or Mr Damian Briggs at the work-site. 28
2.15 The AWU also appear to assert at paragraph 32 that DIA's explanation was deficient because there was "little to no explanation of a minority of applicable conditions". In this regard, DIA repeats and relies upon its submission at paragraph 2.6(a) above, that there is no requirement to explain every term of the Agreement.
2.16 It is also important to note that the employees to be covered under the Agreement are already receiving the entitlements and conditions as that contained in the Agreement.”
[22] In reply the AWU submitted that:
7. The AWU relies on our submissions as filed. In its outline of submissions, the applicant has failed to provide the Commission with information that would enable the Commission to be satisfied that all reasonable steps were taken by the applicant in explaining the terms of the Agreement and the effect of those terms. The requirement in s.186(2)(a) of the Fair Work Act 2009 (Act) remains met.
8. The AWU provides the additional submissions in reply to those of the applicant.
9. The AWU agrees with the applicant that the Commission must consider the content of any explanation given and the way it was given having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement.
10. In order to make such a consideration in this matter, the AWU submits that the Commission must consider:
10.1 the paucity of detail in the explanation, which is inaccurate, brief and at times confusing;
10.2 that the explanation was provided to employees via email with no additional explanation;
10.3 that no bargaining meetings took place throughout the process;
10.4 that there were no bargaining representatives for the agreement, which is a consideration that the applicant must take into account in providing an explanation pursuant to s.180(5) by virtue of s.180(6)(c);
10.5 that s.180(6)(c) necessarily requires an increased obligation on the applicant to discharge s.180(5) in the absence of any bargaining and any bargaining representatives;
10.6 that although the applicant appears to rely on the relevant employees allegedly receiving similar terms and conditions of employment to the Agreement prior to the Agreement being made, such terms and conditions were not pursuant to an Agreement and therefore the employees’ employment was in accordance with the Award; and
10.7 therefore, the Agreement made significant changes to the terms and conditions that underpin the employees’ employment as it displaces the terms and conditions of the Award.
11. The responses provided by the applicant regarding the content of the comparison table provided to employees are of little assistance to the Commission in reaching the requisite state of satisfaction about compliance with s.180(5).
12. The applicant’s contention that s.180(5) is satisfied by the content comparison table in relation to the rostering arrangements in the Agreement because the employees are currently working the ‘usual’ roster that the Agreement provides conveniently ignores two significant issues.
13. Firstly, the content of the explanation provided in the comparison table for rostering under the Agreement states:
“Applicable
The Training and Leave Composite Daily Rate applies when taking paid leave.
The base rate of pay applies to redundancy pay.”
14. This is not an explanation for the purposes of s.180(5), let alone an explanation at all. It is entirely unrelated to rostering.
15. Secondly, the roster pattern that the employees allegedly already work is only the ‘usual’ roster. The Agreement provides for DIA to determine the applicable roster in accordance with operational requirements, and also change the applicable roster with 24 hours’ notice. 29
16. It is hard to envisage how employees currently working a particular roster – one of any provided for in the Agreement – do not require an explanation of the rostering terms because they work this one roster. Contrary to what the applicant submits, familiarity with one roster provided by an agreement does not obviate the requirement for section 180(5) to be discharged.
17. Additionally, in paragraph 2.6(d) of the applicant’s submissions, the applicant apparently relies on the terms of the Agreement to explain the terms of the Agreement in the absence of an explanation being provided in the comparison table. This is clearly not available to the applicant.
18. The applicant also attempts to convince the Commission that employees covered by the Agreement already receive LAHA because the employees receive a loaded rate of pay. In such circumstances, asserts the applicant, an explanation that contrasts the payment of LAHA in the Award with the provision of meals and accommodation in the Agreement – an entirely misleading proposal – is sufficient to discharge the applicant’s obligations pursuant to s.180(5).
19. To be clear, the Agreement does not provide a payment for LAHA. To contend that it does because the rates of pay in the Agreement are intended to be all-inclusive is obviously incorrect.
20. In its submissions regarding the terms of the explanation provided, the applicant relies on the decision on Re MSS Security 30as authority for the applicant to provide the explanation by email alone.
21. Notwithstanding that the AWU has not criticised the applicant for failing to provide access for the purposes of voting (the criticism is aimed squarely at the lack of explanation), the paragraphs in the decision of Re MSS Security relied upon by the applicant relate to compliance with s.180(3), not s.180(5). As such, the decision is not helpful, and the point made by the applicant is irrelevant to the matter at hand.
22. The applicant additionally asserts that the ‘standing invitation’ offered to employees to contact DIA should further explanation be required is a relevant consideration for the applicant’s obligation under s.180(5) to be met. The AWU strongly disagrees.
23. An explanation cannot be said to have been given merely because an invitation to obtain an explanation has been provided. Even taken at its highest, this submission may potentially mean that several employees did receive an explanation, despite there being no evidence before the Commission of such explanations being given. However, this still leaves the majority of the employees covered by the Agreement to contend solely with the brief and inaccurate comparison table to inform them of the terms and conditions of their employment should they vote in favour of the Agreement. The result is the same: s.180(5) has not been met.
24. At paragraph 2.12 of the applicant’s submissions, the applicant’s representative appears to have misapprehended the thrust of the AWU submissions regarding the circumstances of employees without representation from a union being taken into account for the purposes of any explanation provided in accordance with s.180(5) by virtue of s.180(6).
25. The applicant’s submissions address the decision of McDonald’s Australia v SDA 31 and rely upon passages of this decision to assert that different methods of explanation are not required for different groups of employees for the purposes of s.180(5).32
26. For clarity, the AWU does not contend that DIA should differentiate between its employees in terms of what the explanation in accordance with s.180(5) requires. The submission of the AWU is that due to no bargaining representative being present at any stage throughout the agreement making process, and particularly an experienced bargaining representative such as a union official, this circumstance must be taken into account for any explanation provided for the purposes of s.180(5) due to the terms of s.180(6)(c).
27. The only explanation provided to employees by the applicant for the purposes of s.180(5) was the comparison table, which was brief, inaccurate and potentially misleading. Against the backdrop of employees having no bargaining representative and no bargaining meetings being held, the explanation offered by the applicant is clearly well short of what is required in order to enable employees to cast an informed vote and understand how their wages and working conditions may be affected by their voting in favour of the Agreement. 33
Consideration – Reasonable Steps
[23] In an agreement approval application made by Falcon Mining Pty Ltd
(AG2016/1347) 34 Deputy President Asbury observed that the FW Act “does not stipulate the manner in which an explanation of the terms of an Agreement must be provided.”35 Her Honour continued:
“[157] As a Full Bench of the Commission observed in McDonalds, 36 s.180(5) of the Act does not establish an absolute requirement that a particular outcome be achieved, but requires only that the employer take reasonable steps to ensure that the terms and conditions of the Agreement are explained to employees. The reasonableness of the steps taken must be considered in the context of:
• The size of the employer;
• The resources of the employer including available mechanisms and available expertise to provide an explanation;
• The role and qualifications of the persons who provide the explanation; and
• Whether the capacity or the ability of employees to receive an explanation is impacted by issues such as language, literacy, access to electronic media, hours of work, rosters, the locations at which work is performed, travel to and from remote locations or the availability of employees to receive an explanation.
[158] In the present case, I am not satisfied that reasonable steps were taken to give employees an explanation of the terms of the Agreement and the effect of those terms. On the basis of the evidence of Mr Ryan, I am satisfied that there were employees working rosters that would likely have impacted on or prevented them from attending meetings at which the terms of the Agreement and their effect were explained. I am also satisfied that Ms Gayton did not take steps to address this lack of access, on the basis that she was not aware that employees were working such rosters at the relevant time.
[159] I am also of the view that the error in the Form F17 Employer declaration, where it is wrongly stated that there are no terms of the agreement less beneficial than those in the Award, makes it more probable than not that Ms Gayton made comments to this effect during her explanation about the terms of the Agreement. While I accept that the incorrect statement was unintentional, and that Ms Gayton did not set out to mislead the Commission or employees when she made that statement, the provision of incorrect information in a statutory declaration is a matter I can take into account in deciding whether the Agreement was genuinely agreed. I also note that while swearing an affidavit acknowledging the error, Ms Gayton has not provided any statement as to what terms of the Agreement are less beneficial when compared to the terms of the Award and there is insufficient evidence upon which I could reasonably be satisfied that an explanation addressing this matter was provided to employees.
[160] In my view the entirety of the failure to comply with requirements for approval of the Agreement – failure to correct typographical errors in the NERR (despite two attempts); failure to establish that reasonable steps were taken to give the NERR to employees (despite being given numerous opportunities to provide evidence to that effect); the incorrect statement about less beneficial terms of the Agreement in the Form F17 Employer Declaration; failure to properly correct that statement and to provide particulars; failure to provide particulars about the terms of the Agreement which are less beneficial than those in the Award; and Mr Ryan’s evidence about the inadequacy of the explanation of the terms of the Agreement – are reasonable grounds for believing that reasonable steps were not taken to explain the terms of the Agreement and their effect, and that the Agreement was not genuinely agreed.”
[24] I agree with and, with respect, adopt her Honour’s reasoning in Falcon Mining.
[25] Last year a Full Court of the Federal Court Australia in One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union 37 provided further instruction about what the Commission is required to consider to reach the requisite state of satisfaction that s.180(5) has been complied with. It held:
“[112] It is common ground that the Commission was never told what was said to the relevant employees. It was simply told that they had been given an explanation of the terms of the Agreement and the effect of those terms. In effect, this amounted to little more than a self-serving statement that the employer had complied with its obligation under the Act. OKW contended that the fact that it made such a statement in a statutory declaration was significant. It is not. As the CFMEU argued, whether all reasonable steps were taken to ensure that the effect of the terms of the Agreement was explained in an appropriate manner is a question of substance, not form. The recital of a conclusion on the very question the Commission was required (through an evaluative process) to determine is not, without more, a sufficient basis for the satisfaction of the statutory test. In other words, a bare statement by an employer that an explanation has been given is an inadequate foundation upon which to reach a state of satisfaction. OKW submitted that if the Commission had erred in this respect, it was an error in fact finding or an error in process, which would be an error within its jurisdiction. We reject this submission. In order to reach the requisite state of satisfaction that s 180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement. It is true that the Act does not expressly say that. But the question of whether an administrative decision-maker is required to consider a matter is not determined only by the express words of the Act; it may also be determined by implication from the subject-matter, scope and purpose of the Act: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39–44 (Mason J).
[113] A consideration of the subject-matter, scope and purpose of the relevant provisions of the Fair Work Act indicates that the content of the explanation and the terms in which it was conveyed were relevant considerations to which the Commission was bound to have regard. The absence of that information meant that the Commission was not in a position to form the requisite state of satisfaction. Put differently, without knowing the content of the explanation, it was not open to the Commission to be satisfied that all reasonable steps had been taken to ensure that the terms and their effect had been explained to the employees who voted on the Agreement or that they had genuinely agreed to the Agreement.
[114] The following considerations point inexorably to that conclusion.
[115] The Commission was required to be satisfied that OKW had taken “all reasonable steps to ensure” that both the terms and the effect of the terms had been explained to the relevant employees as an element in the inquiry as to whether “genuine” agreement had been obtained from them. The agreed purpose of the obligation imposed on employers by s 180(5) is to enable the relevant employees to cast an informed vote: to know what it is they are being asked to agree to and to enable them to understand how wages and working conditions might be affected by voting in favour of the agreement.
[116] In order for the employer to comply with the obligation it must take into account the particular circumstances and needs of those employees, including their cultural and linguistic backgrounds, their youth, and the absence of a bargaining representative. That is made explicit in s 180(6). How could the Commission decide whether the steps the employer had taken were “all reasonable steps” unless it knew what the employees had been told before they cast their votes? Without knowing the terms in which the explanation had been conveyed how could the Commission form an opinion on the sufficiency of the explanation, particularly having regard to the considerations mentioned in s 180(6)? Ultimately, how could the Commission decide that a genuine agreement had been reached without having evidence upon which it could answer both these questions?”
[26] I agree with and, with respect, adopt the reasoning of the Full Court in One Key.
[27] The reasoning in One Key (at first instance) was followed by a Full Bench of this Commission in CFMEU v Shamrock Civil Pty Ltd. 38In Shamrock the Full Bench observed that:
[22] Satisfaction under s.186(2)(a) is a jurisdictional prerequisite for the approval of any enterprise agreement. If s.180(5) is not satisfied, then the Commission cannot be satisfied re: s.188 (a)(i) and consequently the Commission cannot be satisfied that the Agreement has been ‘genuinely agreed’ as required by s.186(2)(a).
[23] The meaning of s.180(5) and what is required, particularly in regards to s.180(5)(a) was subject to detailed consideration in the recent decision of his Honour Justice Flick in the One Key decision and reasoned as follows:
“[91]… A failure to comply with a “[p]re-approval requirement”, in this case the failure to “take all reasonable steps” for the purposes of s 180(5), precluded the proposed Agreement from being an agreement susceptible of subsequent approval by the Commission. And a failure to take the necessary steps to secure the agreement of those “employees covered by the agreement” (s 186(2)(a)) – be it genuine agreement or otherwise – again precluded the proposed Agreement from being an agreement in respect to which the Commission need reach any state of satisfaction.”
…
[97]… Section 180(5) is not a section which is expressed in terms of whether the Commission is “satisfied” that “all reasonable steps” have been taken. That subsection is expressed as a statement of objective fact as to that which must occur before approval is sought. If “all reasonable steps” have not in fact been taken, the Commission lacks power to “approve” the agreement.”
…
[103] The requirement imposed by s 180(5) to “take all reasonable steps to ensure that … the terms of the agreement, and the effect of those terms, are explained” is an important obligation imposed upon an employer to ensure that employees are as fully informed as practicable. The requirement is not a mere formality. Whatever steps may be necessary will depend upon the facts and circumstances of each particular case; but those steps are not satisfied by a person reading – without explanation – the terms of an agreement to an employee.”
[28] Like the Full Bench in Shamrock I agree with and, with respect, adopt his Honour’s reasoning in One Key (which was not disturbed on appeal).
[29] Drilling Industries filed a Form F17 statutory declaration with its application for approval of the Agreement. Question 3.5 of the Form F17 statutory declaration filed with the application for approval of the Agreement asks the employer the following question “does the agreement contain terms and conditions of employment that are less beneficial than equivalent terms and conditions in the modern award(s) listed in questions 3.1?” Like in Shamrock, in the present matter, Drilling Industries answered “No”.
[30] In Shamrock the Full Bench held that:
“[32] In this matter, the Applicant answered “no” in respect to questions 3.5 and 3.6 of the Form F17 stating that there were no more beneficial terms or less beneficial terms in the Agreement compared to the Award. It is patently clear that both answers do not accord with the factual situation. The reality is that there are some more beneficial terms in the Agreement, for example higher base rates of pay. It is also apparent that there are a significant number of less beneficial terms. In the Decision at first instance the Commissioner considered a number terms of the Agreement which the CFMEU considered to be less beneficial and other issues identified by the Commission in its initial assessment of the Agreement. The Commissioner did not consider a number of the terms identified by the CFMEU to be a detriment to employees. However, the Commissioner found that no requirement in the consultation term to provide written information, entitlements for shiftworkers, redundancy, meal breaks and rest periods, the absence of a minimum engagement on Saturdays and public holidays, reduced notice of annual shut down and averaging of hours over a 12 month period were either detrimental to employees or may result in scenarios where employees may be worse off under the Agreement. A number of undertakings were sought to satisfy the Commissioners concerns in relation to the BOOT.
[33] It is important to note that the Form F17 is a statutory declaration as to what the Applicant declares that they have done to satisfy the various requirements of the legislation. While in some circumstances an Applicant will incorrectly answer question 3.4 and/or question 3.5 because they have omitted one or some items from the list, and because the omitted items are not particularly significant this may not necessarily be a cause for concern. However, in this case a declaration that there are no less beneficial terms does give rise to concern as it is apparent that in fact there were a significant number of less beneficial terms. Aside from the obvious concern that the declarant has made a declaration which is untrue, it gives rise to a further concern as to the nature of the explanation given to employees as to terms of the Agreement and the effect of those terms. That is, it at least raises a real question as to the explanation to employees about the terms of the Agreement and in particular the effect of those terms, in circumstances where the employer is attesting that the agreement has no less beneficial terms.
[34] We are of the view that where the answer to the question less beneficial terms’ was so clearly at odds with the factual situation, this should have led to the Commissioner to make further enquiries. While we understand the focus of the CFMEU during the proceedings was not on that aspect, this does not alter the fact that the Commissions statutory obligation is to properly assess all of the approval requirements, to the standard set by Justice Flick. We have sympathy for the fact that the decision in One Key was not handed down until after the approval of this Agreement.
[35] As we have mentioned, the Respondent has made further submissions regarding the explanation provided to the relevant employees in this case. Those submissions are set out above. We note that the Respondent submits and we accept that the employees were aware that they were covered by the Building and Construction General On-Site Award 2010. We also accept that some Award clauses and Agreement clauses were compared. We also accept that the knowledge and experience of employees is relevant when determining whether the employer has taken ‘reasonable steps’. However, importantly, the Respondent concedes that “The CSM [Corporate Services Manager] did mention that the Award and NES formed the baseline and that nothing in the Agreement would be less than what they were entitled to under the Award or NES. And at the time the CSM believed this to be the case”.
[36] However, it is apparent that there are in fact a number of significant reductions in the Award entitlements. In light of the concession, it is apparent that the explanation to employees was quite simply, wrong. We accept that an explanation of the terms of the Agreement and the effect of those terms to employees may not be perfect and may, depending on the circumstances, still satisfy the requirement of s.180(5) of the Act. However, an explanation which is clearly misleading (as in this case) cannot possibly meet the requirement. We note that the Commissioner did not have the benefit of the additional submissions and the concession.
[37] Where the Commission is provided with a statutory declaration which is at odds with the real position in important respects, a number of practical difficulties can be raised in determining an application for approval. The applicant stated in its application that there were no reductions on the award when in fact there were, which gradually became apparent during the proceedings at first instance. Such an employer understanding would presumably lead it to provide the same misleading explanation to employees, and it is now conceded by the employer that this was the case. As in this present matter this may well have implications in many proceedings for the question of whether or not there was genuine agreement within s.186(2)(a), and therefore whether the agreement can be approved, which the Commission must endeavour to examine in greater detail as the real facts become apparent.
[38] In the circumstances we conclude that the Commissioner erred in concluding that the requirements of s.180(5) of the Act were met. Satisfaction of the requirements under s.186(2)(a) is a jurisdictional prerequisite for the approval of any enterprise agreement. If s.180(5) is not satisfied, then the Commission cannot be satisfied of the requirements of s.188(a)(i). Consequently the Commission cannot attain satisfaction of the requirement at s.186(2)(a). For these reasons we uphold this ground of appeal.”
(Footnotes omitted)
[31] I agree with and, with respect, adopt the reasoning of the Full Bench in Shamrock.
[32] Late last year another Full Bench considered whether an agreement had been genuinely agreed by employees, whether employer took reasonable steps to provide an explanation of terms of agreement and effect of those terms in the context of s.180(5) of the FW Act.
[33] In Diamond Offshore General Company v Michael Baldwin & Ors 39 the Full Bench observed that:
“[22] In Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd8 the Federal Court (Flick J) observed thatthe nature of the task of the Commission under s. 180(5) of the FW Act and other terms requiring its satisfaction or otherwise about a state of affairs is to make a broadly-based value judgment.9 On appeal from that decision,10 the Full Court of the Federal Court held that the matters in s. 180(5) were matters to which the employer was required to attend but were not jurisdictional facts for the purpose of the exercise of the Commission’s approval powers. The Full Court went on to hold that a condition precedent to the exercise by the Commission of its jurisdiction under s. 186 to approve an enterprise agreement was its satisfaction that the employer had complied, among other things, with s. 180(5). The Full Court determined that satisfaction as to whether s. 180(5) had been complied with involved an evaluative judgment as to whether “reasonable steps” were taken by the employer.”
[34] The Full Bench then held that:
“[28] The first appeal ground is based on a number of premises that we do not accept. We do not accept that the obligation placed on an employer to provide an explanation of the terms of an agreement and the effect of those terms is limited to the operative outcome that the text of the term produces. While in some cases the operative outcome of a term of an enterprise agreement will be synonymous with the effect of the term that is not always the case. The operative outcome of a term with respect to employees covered by an enterprise agreement is that it provides a right or an entitlement to employees or places an obligation on employees. The effect of a term may also be that it displaces another previously operative term either explicitly or by omission or that the obligation it places on employees is one that they would not otherwise be subject to. Where a material or significant change is brought about by a term of a proposed agreement, an explanation of the effect of that term may be required to extend beyond its operative outcome. Whether this is so will depend on the circumstances of a particular case such as those we have set out below.
[29] A further premise upon which the Diamond Offshore’s contentions in relation to the first appeal ground are based is that the Deputy President found that s. 180(5) of the FW Act requires that an employer explain to employees, whose employment would be covered by an enterprise agreement, the extent to which the agreement’s terms differ from a predecessor enterprise agreement, by way of a clause-by-clause comparison. We accept the submission of Diamond Offshore that s. 180(5) of the FW Act does not prescribe such a requirement in absolute terms and that there is no rule to this effect when the Commission is deciding whether the requirements of s. 180(5) have been met. However, on a fair reading of the Decision under appeal in the present case, the Deputy President made no such finding and did not purport to establish such a rule. To the contrary, it is clear from the Decision that the Deputy President considered whether, in the particular circumstances of the application he was considering, the requirement in s. 180(5) had not been met.
[30] Those circumstances included that the Agreement would bring about material changes to the terms and conditions of employment of employees covered by the Agreement which had either not been highlighted or which had been explained in a limited way. The most significant of these was the reduction in the casual loading from 25% to 20%, which would necessarily have a direct and substantial effect on the earnings of casual employees. The Deputy President’s conclusion in relation to s. 180(5) was also reached in the context of other findings that the response to a question in the Form F17 Employer statutory declaration in support of approval of the Agreement in relation to whether the Agreement contained any terms and conditions less beneficial than the relevant reference instrument had not been as fulsome as it could have been and there were some potential disadvantages to employees from the terms of the Agreement when compared to the Award. In taking this approach, the Deputy President cited the principle set out by Flick J in Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd that in respect of the requirements established by s. 180(5) of the FW Act:
“[103] …The requirement imposed by s. 180(5) to ‘take all reasonable steps to ensure that…the terms of the agreement and the effect of those terms, are explained’ is an important obligation imposed upon an employer to ensure that employees are as fully informed as practicable. The requirement is not a mere formality. Whatever steps may be necessary will depend upon the facts and circumstances of each particular case: but those steps are not satisfied by a person reading – without explanation – the terms of an agreement to an employee.”
[31] This principle is also apparent from the decision of the Full Court of the Federal Court in the appeal of that decision (One Key v CFMEU) which makes clear that it may be necessary for the Commission to know the content of any explanation of the terms of an enterprise agreement, and their effect, in order to form the necessary state of mind in relation to whether the requirements in s. 180(5) have been met.
[32] We do not accept the proposition advanced by Diamond Offshore that the existing terms and conditions under which employees to be covered by a proposed agreement are working are irrelevant to the consideration of whether the requirement in s. 180(5) has been met. Existing terms and conditions may be relevant regardless of whether those terms and conditions are prescribed by the relevant reference instrument, a current enterprise agreement, statute, contract or common law. For example, if a proposed enterprise agreement would impose an obligation on employees which is not imposed by a relevant modern award, and thereby expose employees to civil penalty for breach of the agreement, the Commission may consider whether that obligation causes detriment to employees and determine that reasonable steps to explain the effect of that term should have included an explanation of the potential detriment. The fact that a particular term has been provided for in predecessor agreements may also be relevant to the extent of the explanation of the term that is required.
[33] We see no reason why, in reaching a state of satisfaction about whether the employer has taken all reasonable steps to ensure the terms of a proposed agreement and the effect of those terms are explained to employees, the Commission should not consider the terms of a current agreement and the extent to which their effect has been changed by the proposed agreement. To form the necessary state of satisfaction about whether reasonable steps were taken by an employer to explain the terms of an enterprise agreement and their effect, the Commission may consider it relevant to take into account a range of facts and circumstances including: the terms of the agreement itself; the context in which it was negotiated; the history of instruments regulating terms and conditions of employment of employees; other relevant statutes particular to the employees or the work covered by the agreement or the industry in which that work is performed; the nature of the work covered by the agreement; the identity and work history of the employees who were requested to approve the proposed agreement; and matters particular to the employees to whom the explanation was provided, such as their qualifications, skills and other considerations of the kind referred to in s. 180(6) of the FW Act.
[34] We also do not accept the submission that consideration of effects of the terms of an agreement in the manner undertaken by the Deputy President exposes employers to unnavigable consequences or unworkable outcomes. Where an employer has negotiated an enterprise agreement which brings about a material change to terms and conditions of employment which could be detrimental to employees, we see nothing unworkable or unreasonable in a requirement that the employer take reasonable steps to explain the effect of the relevant terms to employees. The extent of the explanation that will be necessary will depend on the circumstances of the case and the relevant considerations that we have set out above.
[35] In the circumstances of the case under appeal, it was open to the Deputy President to consider the terms of the current 2014 agreement and whether there was a failure on the part of Diamond Offshore to explain the difference between certain of those terms and the terms of the proposed Agreement in forming his view about whether the requirements of s. 180(5) had been met. This was particularly the case having regard to the significance of the reduction in the casual loading to which we have earlier referred. We see no error in principle with the approach adopted by the Deputy President in this regard. We also do not accept that in taking this matter into account the Deputy President had regard to an irrelevant consideration.
[36] In forming his view that Diamond Offshore had not met the requirements of s 180(5) of the FW Act, the Deputy President considered the Form F17 Employer declaration and a Power Point presentation forwarded to him by Diamond Offshore. The Form F17 and Power Point presentation were provided in response to a query about whether there would be a reduction in the quantum of casual loading to which employees were entitled under the 2014 agreement when they were asked to approve the proposed agreement which reduced that entitlement. The Power Point presentation did not refer to the casual loading which had been the subject of enquiry by the Deputy President. An unsworn statement was made in an email to the effect that the relevant employees were informed that the casual loading in the Agreement was reduced from 25% to 20%, but this rose no higher than the level of assertion. On the basis of the evidence before the Deputy President it was open to him to find that Diamond Offshore had not established that the requirements in s. 180(5) had been met.
[37] In the circumstances of the case before the Deputy President, we can discern no error in the approach to considering whether the requirements of s. 180(5) had been met. The Deputy President did not act on a wrong principle or mistake the facts. The Deputy President did not allow extraneous or irrelevant matters to guide him in the exercise of the discretion under s. 180(5) of the FW Act or in forming his state of satisfaction about whether those requirements had been met. This is also not a case where the Decision imposes an unreasonable or unjust outcome so that it could be inferred, in the absence of apparent error, that there has been a failure on the part of the Deputy President to exercise the discretion entrusted to him to determine whether the requirements in s. 180(5) had been met so that the agreement had been genuinely approved as required by s. 188 of the FW Act.”
[35] I agree with and, with respect, adopt the reasoning of the Full Bench in Diamond Offshore.
[36] Most recently another Full Bench again endorsed the approach in One Key. 40
[37] In Falcon Mining, her Honour set out some of the matters to be considered concerning the “relevant context” Considering those matters in the present matter, the evidence is as follows:
Contextual issue | Evidence in present matter |
Size of the employer | The size of the employer unknown. Despite being provided an opportunity to file evidence, the employer elected not to do so. Obviously, from the declaration we know that the employer employs 26 people. It was also declared that the Agreement covered all employees of the employer. However, that is not necessarily an indication of the size of the employer. |
Resources of the employer including available mechanisms and available resources to provide an explanation. | Unknown. Despite being provided an opportunity to file evidence, the employer elected not to do so. |
The role and qualifications of the persons who provided the explanation. | Unknown. Despite being provided an opportunity to file evidence, the employer elected not to do so. |
Whether the capacity or the ability of employees to receive an explanation is impacted by issues such as language, literacy, access to electronic media, out work, rosters, the locations at which work performed, travel to and from remote location or the availability of employees to receive an explanation. | Unknown. Despite being provided an opportunity to file evidence, the employer elected not to do so. The Statutory Declaration (in answer to question 2.8) states that “there were no relevant employees with special needs identified, however, each employee was invited to communicate any questions or queries, or to seek further clarification.” In answer to question 4.3 we are told that there are no employees from non-English speaking backgrounds. The only demographic disclosed is 3 casual employees. |
[38] In the present matter the evidence establishes that nothing was done to explain the terms and the effect of the Agreement other than emailing the table (reproduced above) to the employees. There were no meetings. There were no discussions with any bargaining representative. There was no discussion with any other representatives of the employees. One email with the comparative table was all that was sent to employees.
[39] To the extent that Mr Gallagher declared that the “comparison table … set out the differences between [the employees’] wages, entitlements and condition:
• under the Award;
• currently being received; and
• under the enterprise agreement”,
it did so in an incomplete manner.
[40] While it is not expected that an employer will set out all the terms of the Award and how it compares to the enterprise agreement, as the AWU correctly pointed out in the present matter, the Award deals with 31 clauses and 9 schedules of entitlements and the comparison table only dealt with 7 issues. One of the matters dealt with in the comparison table was an NES, rather than, Award entitlement.
[41] To the extent that the Agreement includes a range of Award entitlements in a composite rate, as a matter of fact and law, it constitutes a loss of those entitlements under the Award. It is no answer to that fact to say, as Drilling Industries contended, it is no loss because it is included in the composite rate. At a minimum there should be an explanation about all that is being lost and included in the composite rate. That did not occur in the present matter. The AWU criticism of the table is valid.
[42] Award entitlements omitted from the Agreement include:
a) Clause 15.3 – living away from home allowance,
b) Clause 15.6 – accident pay,
c) Clause 24.3 – additional time off or overtime rates for over-cycle work,
d) Clause 15 – allowances, including leading hand, electrical licence allowances, industry allowance and overtime meal allowance,
e) Clause 26 – shiftwork, overtime and penalty rates, and
f) Clause 27.5(b) – annual leave loading.
[43] Not all of these lost entitlements are included in the table distributed by Drilling Industries. The composite rate is said to include only:
a) Base rate of pay,
b) Industry allowances,
c) Overtime and penalties, and
d) Annual leave loading.
[44] In circumstances where a number of Award entitlements were being replaced by the proposed composite daily rate what was explained in the comparison table was inadequate. I note that the purpose of the explanation to be provided by an employer is to enable employees to be informed about the terms and the effect of the proposed agreement such that they cast a vote armed with that information. On the material before me that did not occur. It may be that nothing more was needed and that the employees understood the content of the comparative table. That could have been established if Drilling Industries has decided to file any evidence about the same; either from any of the affected employees or by a representative of the company. That did not occur.
[45] In its submissions Drilling Industries contended that “several of the employees took up this offer [to seek additional information] and DIA responded accordingly.” However, the submission was not supported by any evidence about what explanations were sort and how they were responded to.
[46] For the reasons above I have concluded that I am not satisfied that Drilling Industries took all reasonable steps to ensure that the terms of the Agreement and the effect of those terms were explained to the relevant employees. Consequently, Drilling Industries did not comply with the pre-approval step mandated by section 180(5)(a). For this reason the Agreement cannot be approved.
Compliance with the Better Off Overall Test
[47] It is important to note that a finding that less beneficial terms were not explained to employees does not necessarily mean that an agreement fails the BOOT. That is a different test. In the present matter I identified the less beneficial terms above primarily in the context that they were not explained to employees. That may not always be necessary were the wages are so significantly higher than the Modern Award that the wages “buy out” the less beneficial terms. In the present matter that is arguably the case. The wages are significantly higher than the Award. Nonetheless, it would have been reasonable for Drilling Industries to explain the less beneficial terms in order to ensure that the vote meant that the employees were genuinely agreeing to the Agreement. In the absence of such an explanation I am not satisfied the Agreement was genuinely agreed to.
[48] Having decided the Reasonable Explanation Question against the Applicant it is unnecessary for me to decide the BOOT Questions. However, for completeness, and if I am wrong about the Reasonable Explanation Question, I am also not satisfied that the Agreement passes the BOOT.
[49] In relation to the BOOT the AWU submitted that:
45. The rolled-up rates of pay in the Agreement do not pass the BOOT.
46. Attached to these submissions are two analyses of the Agreement rates of pay against the rates of pay in the Award (at the time the Agreement was made). Both analyses show the Agreement to fail the BOOT.
47. We additionally note that for the purposes of the analyses, we did not include some allowances provided by the Award but omitted from the Agreement, such as the leading hand allowance, electrical licence allowance and overtime meal allowance. The addition of these allowances will further add to the detriment of employees covered by the Agreement.”
[50] In relation to the BOOT Drilling Industries submitted that:
5. Content of Agreement
5.1 At paragraphs 42 to 44 in its submissions, the AWU submits that the Agreement cannot pass the Better Off Overall Test (BOOT) on the basis that clause 9.2(f) of the Agreement states that the rates of pay in the Agreement may be re-calculated should an employee perform work in accordance with a different roster cycle than that specified in the Agreement.
5.2 As a matter of practicality, although DIA usually rosters its roster cycle on an even time roster, with 21 consecutive days of 12 hours per day on-duty, followed by 21 days off-duty, it is not always possible for DIA to determine in all instances the roster cycle a client may require for a particular rigging project.
5.3 In terms of the calculation, clause 9.2(f) states that the rates of pay may be re-calculated in accordance with the roster change and in accordance with the Agreement, this being a calculation using the same hourly base rates and composite rates.
5.4 In the event DIA does propose to introduce a change to the roster cycle for a particular rigging project, then DIA is required to consult with the employees in accordance with consultation provisions contained at clauses 9.3(b) and 32 of the Agreement.
6. The Better Off Overall Test
6.1 At paragraphs 45 to 47 of its submissions, the AWU contends that the rolled-up rates of pay contained in the Agreement do not pass the BOOT. In support of this contention, the AWU provides two analyses of the Agreement rates of pay against the rates of pay contained in the Award.
6.2 In its analyses, the AWU have compared the permanent and casual night shift rates under the Award (as they were prior to 1 July 2019) with that of the Agreement.
6.3 DIA consider that the analyses provided by the AWU are misleading as the each of the employees work a mixture of day and night work, and when annualised, they are better off overall.
6.4 In regard to the AWU's further assertion that the omission of the leading hand allowance, electrical licence allowance and overtime meal allowance from the analyses will further add to the detriment of employees covered by the Agreement, DIA refutes this and repeats and relies on the reasons set out in the preceding paragraph.
[51] In reply the AWU submitted that:
The Better Off Overall Test
44. The applicant has erroneously stated that the analyses provided by the AWU in terms of BOOT are misleading because current employees work a mixture of day and night work, and when annualised, the employees are better off overall. 41
45. On the basis of the above submission, the AWU submits the following:
45.1 firstly, that the applicant has misapprehended the scope of the better off overall test, specifically that the BOOT is not based on what roster cycle or shifts the employees currently work, but what roster cycle or shifts the Agreement allows the employees to work; and
45.2 secondly, that this is essentially a concession from the applicant that the rates of pay in the Agreement do not pass the BOOT as an employee is required to work a mixture of day and night shifts in order to be better off overall than if the Award applied to the work they perform.
[52] In the Statutory Declaration accompanying the application to approve the Agreement the employer gave the example of one classification being “classification 5, advanced specialist.” It appeared, having regard to this single example that the Agreement passed the BOOT. Only this example was provided to employees who voted on the Agreement.
[53] In its submissions Drilling Industries contended that “all 26 employees currently perform the roster contained in the Agreement, and as a consequence, they are already familiar with it.” However, the submission was not supported by any evidence. Further, Drilling Industries contended that, “all 26 employees are currently paid the composite rate that include the LAHA. Further, the employees also currently receive the benefit of meals and accommodation in addition to LAHA.” This submission also had not evidentiary support.
[54] However, the AWU produced 2 roster possibilities that demonstrated that the Agreement does not pass the BOOT. A level 1 employee would be worse off when compared to the Award. It is no answer to the rosters submitted by the AWU to say that the employer does not operate those types of rosters. It if it a possible roster under the Agreement then it is proper to assess it. Often an employer facing a roster that does not pass the BOOT will give an undertaking that it will not operate that roster for the life of the agreement. That did not occur in the present matter. Having been provided with an opportunity to do so, Drilling Industries offered no undertakings to address the issues raised by the Commission or the AWU.
[55] For these reasons, if it were necessary for me to decide whether the agreement passed the BOOT, I would not be satisfied that it did so.
[56] However, having decided that the Agreement cannot be approved because the mandatory pre-approval steps were not complied with, that is the end of the matter. Consequently the application for the approval of the Agreement is dismissed.
[57] An order to that effect will be issued with this decision.
COMMISSIONER
Appearances:
Hearing details:
Final written submissions:
Printed by authority of the Commonwealth Government Printer
<PR711997>
1 Clause 3.
2 Clause 4.2(a).
3 Clause 1.
4 Clause 4.1(b).
5 CFMEU v One Key Workforce Pty Ltd [2017] FCA 1266; 270 IR 410 at [97]
6 One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77; 356 ALR 535 at [112].
7 One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77; 356 ALR 535 at [115].
8 Form F17, 2.7.
9 The Hydrocarbons Industry (Upstream) Award 2010.
10 Further evidence of this allowance not being an expense-based allowance is found at cl. 15.5(b) of the Award, which deals with the adjustment of expense-based allowances. The LAHA is notably absent.
11 Fair Work Act 2009, s.180(5)(b).
12 Fair Work Act 2009, s.180(5)(a).
13 One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77; 356 ALR 535 at [115].
14 Form F16, 5.1.
15 Fair Work Act 2009, s.180(6)(c).
16 Form F16, 4.1.
17 See the comparison table.
18 Form F17, 2.6.
19 CFMEU v One Key Workforce Pty Ltd [2017] FCA 1266 (8 November 2017) [96] (Flick J).
20 One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77 (25 May 2018) [112] (Bromberg, Katzmann and O'Callaghan JJ).
21 Ibid [172].
22 Ibid [112].
23 McDonalds Australia Pty Ltd v Shop, Distributive and Allied Employees Association [2010] FWAFB 4602 (21 July 2010) [29] (Watson VP, Kaufman SDP and Raffaelli C).
24 Clause 18(b) of the Agreement.
25 Re MSS Security Pty Limited [2013] FCWA 1474 (8 March 2013) [38]-[41] (Lee C).
26 McDonalds Australia Pty Ltd v Shop, Distributive and Allied Employees Association [2010] FWAFB 4602 (21 July 2010) [34] (Watson VP, Kaufman SDP and Raffaelli C).
27 Ibid.
28 Re MSS Security Pty Limited [2013] FCWA 1474 (8 March 2013) [50] (Lee C).
29 Agreement, clauses 9.3(a), 9.3(b).
30 [2013] FWCA 1474.
31 [2010] FWAFB 4602.
32 Applicant’s outline of submissions, 2.12.
33 One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77; 356 ALR 535 at [115].
34 [2016] FWC 5315.
35 [2016] FWC 5313 at [156].
36 [2010] FWAFB 4602.
37 [2018] FCAFC 77.
38 [2018] FWCFB 1772.
39 [2018] FWCFB 6907.
40 See The Australian Workers’ Union v Gray Australia Pty Ltd as trustee for The Gray Family Trust t/a Ceres Farm & Kenrose Co Pty Ltd and Others[2019] FWCFB 4253.
41 Applicant’s outline of submissions, 6.3.
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