Endacom Pty Ltd
[2018] FWC 5556
•17 SEPTEMBER 2018
| [2018] FWC 5556 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Endacom Pty Ltd
(AG2018/2477)
COMMISSIONER RIORDAN | SYDNEY, 17 SEPTEMBER 2018 |
Application for approval of the Endacom Pty Ltd Enterprise Agreement 2018.
[1] Endacom Pty Ltd (the Applicant) has made an application under section 185 of the Fair Work Act, 2009 (the Act) seeking approval of the Endacom Pty Ltd Enterprise Agreement 2018 (the Agreement).
[2] Approval of the Agreement is opposed by the Australian Workers’ Union (the AWU).
[3] In accordance with section 596 of the Act, leave was granted at the Hearing on 3 September 2018, for Mr Rod Marshall from FCB Workplace Law to represent the Applicant. The AWU was represented by its Legal Officer, Mr Alistair Sage.
[4] Witness Statements were attested by Mr Enda Flannery, the Managing Director of the Applicant and Mr Kevin Fahy, a carpenter employed by the Applicant.
Legislative Framework
[5] The relevant provisions of the Act in relation to this application are:
Section 180 Employees must be given a copy of a proposed enterprise agreement etc.
Employees must be given a copy of a proposed enterprise agreement etc.
Pre-approval requirements
(1) Before an employer requests under subsection 181(1) that employees approve a proposed enterprise agreement by voting for the agreement, the employer must comply with the requirements set out in this section.
Employees must be given copy of the agreement etc.
(2) The employer must take all reasonable steps to ensure that:
(a) during the access period for the agreement, the employees (the relevant employees ) employed at the time who will be covered by the agreement are given a copy of the following materials:
(i) the written text of the agreement;
(ii) any other material incorporated by reference in the agreement; or
(b) the relevant employees have access, throughout the access period for the agreement, to a copy of those materials.
(3) The employer must take all reasonable steps to notify the relevant employees of the following by the start of the access period for the agreement:
(a) the time and place at which the vote will occur;
(b) the voting method that will be used.
(4) The access period for a proposed enterprise agreement is the 7-day period ending immediately before the start of the voting process referred to in subsection 181(1).
Employees must be given copy of disclosure documents etc.
(4A) If an organisation gives the employer a document under section 179 by the end of the fourth day of the access period for the agreement, the employer must take all reasonable steps to ensure that the relevant employees:
(a) are given a copy of the document as soon as practicable after it was given to the employer; or
(b) are given access to a copy of the document as soon as practicable after it was given to the employer and have access to that copy throughout the remainder of the access period for the agreement.
Note: This subsection is a civil remedy provision (see Part 4-1).
(4B) If the employer is required to prepare a document under section 179A, the employer must take all reasonable steps to ensure that the relevant employees:
(a) are given a copy of the document by the end of the fourth day of the access period for the agreement; or
(b) are given access to a copy of the document by the end of that fourth day and have access to that copy throughout the remainder of the access period for the agreement.
Note: This subsection is a civil remedy provision (see Part 4-1).
(4C) The employer must not knowingly or recklessly make a false or misleading representation in the document that the relevant employees are given a copy of or access to under subsection (4B).
Note: This subsection is a civil remedy provision (see Part 4-1).
Terms of the agreement must be explained to employees etc.
(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.
(6) Without limiting paragraph (5)(b), the following are examples of the kinds of employees whose circumstances and needs are to be taken into account for the purposes of complying with that paragraph:
(a) employees from culturally and linguistically diverse backgrounds;
(b) young employees;
(c) employees who did not have a bargaining representative for the agreement.
Section 181 Employers may request employees to approve a proposed enterprise agreement
(1) An employer that will be covered by a proposed enterprise agreement may request the employees employed at the time who will be covered by the agreement to approve the agreement by voting for it.
(2) The request must not be made until at least 21 days after the day on which the last notice under subsection 173(1) (which deals with giving notice of employee representational rights) in relation to the agreement is given.
(3) Without limiting subsection (1), the employer may request that the employees vote by ballot or by an electronic method.
Section 186 When the FWC must approve an enterprise agreement--general requirements
(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).
Requirements relating to the safety net etc.
(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; and
(b) if the agreement is a multi-enterprise agreement:
(i) the agreement has been genuinely agreed to by each employer covered by the agreement; and
(ii) no person coerced, or threatened to coerce, any of the employers to make the agreement; and
(c) the terms of the agreement do not contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.); and
(d) the agreement passes the better off overall test.
Note 1: For when an enterprise agreement has been genuinely agreed to by employees, see section 188.
Note 2: The FWC may approve an enterprise agreement that does not pass the better off overall test if approval would not be contrary to the public interest (see section 189).
Note 3: The terms of an enterprise agreement may supplement the National Employment Standards (see paragraph 55(4)(b)).
Requirement that the group of employees covered by the agreement is fairly chosen
(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.
(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.
Requirement that there be no unlawful terms
(4) The FWC must be satisfied that the agreement does not include any unlawful terms (see Subdivision D of this Division).
Requirement that there be no designated outworker terms
(4A) The FWC must be satisfied that the agreement does not include any designated outworker terms.
Requirement for a nominal expiry date etc.
(5) The FWC must be satisfied that:
(a) the agreement specifies a date as its nominal expiry date; and
(b) the date will not be more than 4 years after the day on which the FWC approves the agreement.
Requirement for a term about settling disputes
(6) The FWC must be satisfied that the agreement includes a term:
(a) that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:
(i) about any matters arising under the agreement; and
(ii) in relation to the National Employment Standards; and
(b) that allows for the representation of employees covered by the agreement for the purposes of that procedure.
Section 187 When the FWC must approve an enterprise agreement--additional requirements
Additional requirements
(1) This section sets out additional requirements that must be met before the FWC approves an enterprise agreement under section 186.
Requirement that approval not be inconsistent with good faith bargaining etc.
(2) The FWC must be satisfied that approving the agreement would not be inconsistent with or undermine good faith bargaining by one or more bargaining representatives for a proposed enterprise agreement, or an enterprise agreement, in relation to which a scope order is in operation.
Requirement relating to notice of variation of agreement
(3) If a bargaining representative is required to vary the agreement as referred to in subsection 184(2), the FWC must be satisfied that the bargaining representative has complied with that subsection and subsection 184(3) (which deals with giving notice of the variation).
Requirements relating to particular kinds of employees
(4) The FWC must be satisfied as referred to in any provisions of Subdivision E of this Division that apply in relation to the agreement.
Note: Subdivision E of this Division deals with approval requirements relating to particular kinds of employees.
Requirements relating to greenfields agreements
(5) If the agreement is a greenfields agreement, the FWC must be satisfied that:
(a) the relevant employee organisations that will be covered by the agreement are (taken as a group) entitled to represent the industrial interests of a majority of the employees who will be covered by the agreement, in relation to work to be performed under the agreement; and
(b) it is in the public interest to approve the agreement.
(6) If an agreement is made under subsection 182(4) (which deals with a single-enterprise agreement that is a greenfields agreement), the FWC must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work.
Section 188 When employees have genuinely agreed to an enterprise agreement
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);
(ii) subsection 181(2) (which requires that employees not be requested to approve an enterprise agreement until 21 days after the last notice of employee representational rights is given); and
(b) the agreement was made in accordance with whichever of subsection 182(1) or (2) applies (those subsections deal with the making of different kinds of enterprise agreements by employee vote); and
(c) there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees.
Section 190 FWC may approve an enterprise agreement with undertakings
Application of this section
(1) This section applies if:
(a) an application for the approval of an enterprise agreement has been made under subsection 182(4) or section 185; and
(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.
Approval of agreement with undertakings
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.
Undertakings
(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:
(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.
FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.
Signature requirements
(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.
Agreement Approval Process
[6] Whilst the Commission was not supplied with a copy of the Notice of Employee Representational Right (NERR), Mr Flannery testified that it was issued to all 48 employees at a meeting on 9 May 2018.
[7] A second meeting with all employees was conducted on 25 May 2018. At the meeting, all employees were handed a copy of the proposed Enterprise Agreement and a copy of the Modern Award. Mr Flannery acknowledged that no bargaining had actually taken place.
[8] Shortly after handing the employees a copy of the proposed Agreement, Mr Flannery testified that he went through each clause of the Agreement by reading out the terms of each clause. Mr Flannery attested that a number of questions were answered by either himself or his Senior Project Director, Mr Derek Callaghan.
(my emphasis)
[9] Mr Flannery stated that he advised the employees at this meeting that a further meeting to vote on the Agreement would occur on 4 June 2018.
The Agreement
[10] This type of Agreement is not unique in the construction industry, where the wage rates contained in the Agreement are not consistent with the actual rates paid to the employees. In this Agreement, a CW5 tradesperson is to be paid $23.08 per hour, whilst in reality, tradespersons are paid $40 per hour, a base rate differential of $642.96.
[11] The AWU challenged a number of other provisions in the Agreement in relation to the BOOT.
[12] The Applicant provided an undertaking 1 at the Hearing which states:
“TO: Fair Work Commission
11 Exhibition Street
MELBOURNE VIC 3000
UNDERTAKING AG2018/2477- Endacom Pty Ltd Enterprise Agreement 2018
I am authorised to make this undertaking on behalf of Endacom Pty Ltd (Endacom). Endacom makes the following Undertaking under section 190 of the Fair Work Act 2009 (Cth) in connection with the Endacom Pty Ltd Enterprise Agreement 2018:
1. Clauses 5.1 and 5.2 will be read and applied on the following basis:
"5.1 The ordinary hours of work will be thirty eight (38) per week, worked between 7.00am and 6.00pm, Monday to Friday, subject to this clause 5. The provisions of clause 33.1(c)-(e) of the Award shall be incorporated into this Agreement.
5.2 The ordinary working hours will be worked in a twenty (20) day four (4) week cycle, Monday to Friday inclusive, with eight (8) hours worked for each of nineteen (19) days and with 0.4 of an hour on each of those days accruing towards the twentieth (20th) day, which will be taken as a paid day off. The twentieth (20th) day of that cycle will be known as the rostered day off (RDO). A rostered day off will be taken on the fourth Monday in each four week cycle, except where it falls on a public holiday, in which case the next working day will be taken instead or at some later date in circumstances where an Employee requests to accrue the RDO in accordance with clause 5.5. Where Endacom and a majority of Employees agree, another day may be substituted for the nominated rostered day off referred to above."
2. Clause 5.5(a) will be read and applied on the following basis:
"(a) Where an Employee elects to accrue an RDO, as outlined in clause 5.2 above, an Employee may request to take an RDO at another mutually convenient time as agreed between the Employee and Endacom owing to the needs of the business. Endacom shall not unreasonable refuse any such request."
3. Clause 6.1 will be read and applied on the following basis:
"6.1 Employees shall be paid at the applicable hourly rate appropriate to their classification level, plus any applicable allowances set out in the Award, from the first full pay period following commencement of the Agreement:"
4. Clause 6.3 shall be deleted.
5. Clause 7.2(a) will be read and applied on the following basis:
"(a) Annual leave shall be taken at a mutually agreeable time, provided that excessive leave accruals will be dealt with in accordance with clauses 38.6,
38.7 and 38.8 of the Award.
6. Clause 7.3(c) will be read and applied on the following basis:
"(c) In cases where an Employee takes personal/carer's leave on the day before or after the weekend, public holidays, leave or rostered days off, or where there is a pattern of single day absences then the Employee will be required to provide Endacom with a medical certificate or a statutory declaration where it is not reasonably practicable in the circumstances to provide a medical certificate."
7. Clause 9.3 will be read and applied on the following basis:
"9.3 If Endacom decides that an Employee's position is redundant, and that decision leads to the termination of employment of the Employee by Endacom, then subject to this clause 9, an Employee will be entitled to redundancy payments in accordance with the NES, or the Award, whichever is greater."
8. Clause 13.5(c) will be read and applied on the following basis:
"(c) during any period when the Employee is injured or incapacitated and in receipt of worker's compensation payments, Endacom will continue to provide the Employee with employer funded superannuation contributions in the amount elected while the Employee is still employed by Endacom subject to a maximum of fifty two (52) weeks."
Endacom understands this Undertaking will be taken to be a term of the Agreement pursuant to section 191 of the Act.
Signed:
Name: Derek Callaghan
Position: Senior Project Manager
Date: 24 July 2018”
[13] Relevantly the Agreement contains the following clauses:
“1.3. This Agreement:
(a) represents the consolidation of wages and conditions of employment for the Employees covered by this Agreement;
(b) subject to clause 3, constitutes the entire agreement between Endacom and the Employees as to its subject matter and supersedes all prior representations and agreements in connection with that subject matter. As such, any prior understandings, agreements, awards, entitlements, wage rates and /or allowances between the Endacom and any Employee covered by this Agreement, express or implied, cease to have any effect or application and are replaces in totally by this Agreement; and
(c) may only be altered or varied by agreement in accordance with the provisions of the Fair Work Act 2009 (Cth) (FW Act).
3. Relationship with other industrial instruments
3.1. Pursuant to section 257 of the FW Act, the modern award known as the Building and Construction General On-site Award 2010 (Award) (as in force at the date this Agreement was approved by Employees) is, subject to this clause 3, incorporated into this Agreement.
3.2. Where there is any inconsistency between the terms of this Agreement and the Award, the terms of this Agreement shall apply to the extent of the inconsistency and/or to the extent that this Agreement deals with the same subject matter.
6. Wage Rates
6.1. Employees shall be paid at the applicable hourly rate appropriate to their classification level, including any applicable allowances set out in the Award, from the first full pay period following commencement of the Agreement:
Level | Minimum Hourly wage |
Level 9 (ECW 9) | $25.41 |
Level 8 (CW/ECW 8) | $24.97 |
Level 7 (CW/ECW7 | $24.38 |
Level 6 (CW/ECW 6) | $23.69 |
Level 5 (CW/ECW 5) | $23.08 |
Level 4 (CW/ECW 4) | $22.40 |
Level 3 (CW/ECW 3) | $21.72 |
Level 2 (CW/ECW 2) | $21.10 |
Level 1 (CW/ECW 1) | |
CW/ECW 1 (level d) | $20.68 |
CW/ECW (level c) | $20.29 |
CW/ECW 1 (level b) | $20.01 |
CW/ECW 1 (level a) | $19.630 |
[14] Mr Flannery stated that the Agreement was explained to the workers and that he believed everybody was happy.
[15] Mr Flannery testified that he could not recall if any employee returned their NERR and that no bargaining had occurred between management and any employee or bargaining representative. The following interaction between myself and Mr Flannery occurred at the hearing:
“PN123
Were there any discussions between management and any of the employees in that 14 days about the provisions of the agreement?---Well, not really. They all seemed happy enough. I mean you talk to people, they're happy with the rates of pay, they're happy with their hours. They're all, you know - no one - - -
PN124
Right, so it wasn't actually - - -?---No one has ever said anything to me as bits and pieces.
PN125
Yes. So there was no actually bargaining take place for the agreement?---Well, there's no one - they were - they got everything. No one wished to - they had plenty of time to put their input in and everything. Yes.
PN126
Yes?---Everyone was happy I think, yes.
PN127
Right, and then on the meeting on the 25th you've said "Look, here's the proposed agreement the company wants. We're giving you the notice and we're going to meet back again on" - I think it was 4 June - "and have a vote". Is that right?---Yes.” 2
[16] Mr Fahy testified that he received a “bunch of documents” in May but he didn’t read any of them and didn’t ask any questions at the meeting.
Jurisprudence
[17] The Full Court of the Federal Court of Australia recently determined the necessary steps to be followed in the enterprise agreement approval process in One Key Workforce Pty Ltd v CFMEU 3(One Key):
“19 An employer that will be covered by a proposed enterprise agreement may request those employees who are employed at the time and who will be covered by the agreement to approve the agreement by voting for it: s 181(1). But before it may make such a request the employer must comply with the requirements of s 180. Those requirements, set out in s 180(2), (3) and (5), are to take all reasonable steps to:
(1) ensure that during the access period for the agreement (the seven-day period ending immediately before the start of the voting process referred to in s 181(1)), “the relevant employees” (those who are employed at the time and who will be covered by the agreement) are given a copy of the text of the agreement and any other material incorporated by reference in the agreement or that they have access throughout the access period to a copy of those materials (s 180(2));
(2) notify the relevant employees before the access period begins of the time and place at which the vote will take place and the method of voting that will be used (s 180(3)); and
(3) 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 (s 180(5)).
20 The last requirement, set out in s 180(5), loomed large in the court below. It must be read with s 180(6), which provides some guidance to employers on the form and content of the requisite explanation. Section 180(6) states:
Without limiting paragraph (5)(b), the following are examples of the kinds of employees whose circumstances and needs are to be taken into account for the purposes of complying with that paragraph:
(a) employees from culturally and linguistically diverse backgrounds;
(b) young employees;
(c) employees who did not have a bargaining representative for the agreement.”
[18] At first instance, Flick J held that “there was no agreement within the meaning of Part 2-4 (of the Act) on which the purported agreement could operate”. His Honour was of the view that the employer had failed to take all reasonable steps to ensure that the terms of the Agreement and their effect had been properly explained to the employees. The Full Court explained the decision by Flick J in the following manner:
“74 The jurisdictional error in respect of s 180(5), his Honour held, occurred because the Commissioner failed to consider the steps that OKW had taken to comply with the requirements, focussing instead on the advice it had given to the Commission, and/or because a pre-condition for the exercise of the Commission’s power to approve the agreement had not been satisfied (namely, that OKW had not complied with s 180(5)).
75 His Honour found that, on the evidence before him, OKW did little more than read to the employees parts of the Agreement and certainly did not explain the effect of its terms. Accordingly, he held that all reasonable steps had not been taken and that there had been a “manifest failure” on the part of the employer to comply with s 180(5). He noted in particular that no guidance was given to any of the three employees as to the manner in which the Agreement affected their personal interests. At [109] his Honour said:
Such reasons as were provided by the Commissioner at para [9] of his reasons for decision expose jurisdictional error. Little, if any, consideration was given to what were the “steps” in fact taken by the employer or the adequacy of those steps. Such consideration as was given was more directed to the subject-matter of the information communicated rather than to the content of the information communicated or the effectiveness of the communication of that information or (for that matter) what was not communicated.”
[19] The Full Court went on to say:
“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.
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?”
(my emphasis)
[20] In relation to section 186(2)(a) the Full Court said:
“156 … What is required by s 186(2)(a) is genuine agreement. To construe that requirement as mandating an informed and genuine understanding of what is being approved is consistent with the text of the provision (as defined) and accords with its underlying purpose.”
“170 … his statutory task required a consideration of whether the three employees who approved the Agreement were likely to have understood the terms of the Agreement and its effect and whether by reason of that factor, there were reasonable grounds for believing that the Agreement had not been “genuinely agreed” to.”
“172 Nevertheless, the primary judge was correct to find that the Commissioner fell into jurisdictional error by failing to have regard to the content and terms of the explanation OKW purportedly provided the employees before they cast their votes. In addition the Commissioner’s decision was affected by jurisdictional error because he failed to appreciate that, in determining whether the relevant employees had genuinely agreed to the Agreement he needed to consider whether they were likely to have understood its terms and effect.”
(my emphasis)
Consideration
[21] Mr Marshall submitted that the Agreement was not complex or comprehensive in that it incorporates the Modern Award except for the modified terms of the Agreement. In general, I agree with this summation and that of Mr Flannery, ie that the Agreement provisions are self-explanatory except, in my view, for clauses 1.3 and 5 of the Agreement. Clause 1.3, has the effect of reducing every employee’s rate of pay to the Award rate.
[22] Mr Fahy testified that he has an agreement with Mr Flannery to pay above the minimum rates contained in the Award and that he trusted Mr Flannery not to break his word.
[23] The evidence of Mr Fahy in these proceedings identified an employee who simply trusted his employer to “do the right thing”. Naively, in my view, Mr Fahy stated that if Endacom reduced his rate of pay then he would simply negotiate a new rate. Mr Fahy failed to understand that he would be bound by the Agreement and its provisions. It is evident that Mr Flannery did not explain the intent or purpose of this provision. Mr Flannery read this provision to the employees and then told them that he would not decrease their existing rates. In my view, this is not a satisfactory explanation of the terms of the Agreement. I adopt the reasoning of Flick J at first instance in One Key in relation to this issue.
[24] Relevantly, Mr Flannery testified that he read each clause of the Agreement to the employees at the meeting on 25 May 2018.
[25] In relation to clause 1.3 of the Agreement, Mr Flannery stated:
“PN106
How did you explain that clause to the employees?---Well, that – I just read it out. I mean, nothing – nothing changes; I told them that. So that clause is the same as any other clause. It's not – the rates didn't change. None of the rates changed, so I'm not - -
PN107
But that clause allows you to pay people the enterprise agreement rate of pay, which is some $17, almost $17 an hour less than Mr Fahy. Now, what my question is: did you explain to him and to the other workers that once this enterprise agreement is approved by the Fair Work Commission that you can drop their rate of pay by some 40 to 45 per cent?---Well, to be honest with you, I didn't, because they know it to be – they wouldn't work with that.
PN108
I'm not - - -?---Yes.
PN109
I'm not talking about the practicalities of the construction industry?---Yes.
PN110
I'm talking about the wording; and what you're saying is to me is that you didn't explain it?---I read it to them. Yes, I read everything to them.
PN111
Yes, but did you explain it to them though?---Well, it's self-explanatory.
PN112
Well, the self-explanatory provision or interpretation of that clause is that they can be dropped back forty to forty-five per cent of their rate of pay?---Yes, yes, but I've told them that nothing will change, the rates of pay wouldn't change. I explained that to every one of them.
PN113
Yes. And I have no doubt that's right, and I have no doubt that - - -?---Yes. Well, that clause, Your Honour, is there, yes, but I think if you go somewhere else you'll see that I explain that nothing will change.
PN114
Yes. The problem is though that whilst that may be the case whilst you own the company, if you sold the company to another employer and they came in and saw that provision then they could apply that provision?---Well, if I saw that I'd make, I'd have it at the understanding which I wouldn't sell it anyway, but that nothing would change – I mean, that the rates – the rates are there, the government rates are good. If you start robbing people, you won't get – you won't get men.
PN115
No. Once again, you're talking about the practicality to the construction industry, and I accept that you're not going to get good people to come and work for award rates of pay in the Sydney construction industry, I accept all of that. But unfortunately that provision there allows you or a future employer to drop them back to award rate of pay and they have no recourse. For example if you entered in - if you had a dispute with your employees about an overtime rate, for example, the Fair Work Ombudsman could only apply the rates of pay contained in this enterprise agreement. Did you explain that to the employees?---Yes, we went into a lot of it in detail, your Honour, but I couldn't tell you word for word what I explained to them. You know, this is two, three, four months ago.” 4
[26] Whilst I accept Mr Flannery’s comments that he would not take advantage of this provision, the simple fact is that the provision has been placed in the Agreement by the employer for a purpose – whatever that may be in the future.
[27] The assurances given by Mr Flannery to existing employees will be of little or no consequence in any future proceedings before the Fair Work Commission (FWC). The wording of clause 1.3 is quite clear and unambiguous. Endacom is only required and obligated to pay the rates contained in the Agreement.
[28] I also have concerns in relation to the rate of pay that the Applicant could pay new employees. If it was their intention to only pay new employees the Award rate, as per clause 6.1 of the Agreement, then questions arise as to whether the Agreement has been genuinely agreed in accordance with section 186(2)(a) of the Act. Whilst not directly on point, the obiter in Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd 5, can be extended to require employees to have some relevant connection to the Agreement, on the basis that employees will generally “act from self-interest, rather than from any particular concern for the interests of future employees.”6
[29] In this circumstance, the employees have been promised that there current rates of pay would be maintained no matter what rates of pay are specified in the Agreement. In Re KCL Industries Pty Ltd 7, a Full Bench of the Commission said:
“In this matter there is an obvious disjunction between the content of the Agreement and the characteristics of those who entered into it…
In those two circumstances we do not consider that any authenticity could attach to the agreement of the two employees to the rates and conditions in the Agreement. The employees had no “stake” in the Agreement’s rates of pay, since they were assured that their existing, higher rates of pay would remain in place…”
[30] During the Conference on 23 July 2018, I invited the Applicant to submit witness statements from a representative from both management and the employees. Mr Fahy was chosen by the Applicant as the employee representative. On this basis, I have to assume that Mr Fahy is a typical employee of the Applicant. Mr Marshall described Mr Fahy as being somewhat apathetic to the information that was provided to him by the Applicant. I find this definition to be generous. The apathy displayed by Mr Fahy may simply be the result of his total support for Mr Flannery, however, Mr Fahy showed no interest in the bargaining process and had a convenient memory in relation to the explanation provided by the Applicant. I find it impossible to believe that a skilled tradesman would voluntarily vote for an Agreement that lowered his wages by some 46%. Such an outcome is contrary to both common-sense and my 30 years’ experience in dealing with the construction industry. At best, I find that Mr Fahy’s evidence was unconvincing.
[31] In accordance with section 180(6)(c) of the Act, the absence of a bargaining representative representing the employees should have resulted in the Applicant taking additional steps to explain the Agreement. Employees should have been provided with a copy of the proposed Agreement and the Award prior to the meeting on May 25. To invite 48 employees into a room, hand out copies of a brief Agreement and a very comprehensive and detailed Award, then simply read out the provisions of the Agreement and ask if there are any questions is not a satisfactory explanation of the terms and the effects of the Agreement. Such a process does not satisfy section 186 of the Act. To compound the issue, Mr Flannery allegedly advised the Employees that clause 1.3 did not apply to them even though this commitment does not appear in the Agreement nor is it contained in any written or authorised document.
[32] The Agreement contains rates of pay that are now borderline or inferior to the comparable rates in the Building and Construction Modern Award. It is acknowledged by the parties that section 206 of the Act will apply to ensure that the Award rates will be paid throughout the life of the Agreement.
[33] The rates of pay at the time of making the Agreement, on June 4 2018, were marginally superior to the Award. Any deficiency in conditions of employment between the Agreement and the Award which effect an employee’s take home pay will result in the Agreement failing the Better Off Overall Test (BOOT) assessment.
[34] Concerns were raised by the Commission in relation to the banking of RDO’s. The Award states:
“33. Ordinary hours of work
33.1(a) Hours of work and rostered days off
(i) The ordinary working hours will be worked in a 20 day four week cycle, Monday to Friday inclusive, with eight hours worked for each of 19 days and with 0.4 of an hour on each of those days accruing towards the twentieth day, which will be taken as a paid day off. The twentieth day of that cycle will be known as the rostered day off (RDO), and will be taken as outlined in clauses 33.1(a)(i) to 33.1(a)(iii). Payment on such a rostered day off will include accrued entitlement to the allowances prescribed in clauses 25.2 to 25.7. A rostered day off will be taken on the fourth Monday in each four week cycle, except where it falls on a public holiday, in which case the next working day will be taken instead.
(ii) Agreement on alternate RDOs
Where an employer and a majority of employees at an enterprise agree, another day may be substituted for the nominated industry rostered day off.
(iii) Agreement on banking of RDOs
● Where employees are employed on distant work covered by clause 24.1, an employer and a majority of those employees on distant work may agree to accrue up to five rostered days off for the purpose of creating a bank to be drawn upon by the employee at times mutually agreed by the employer.
● Where the majority of the employees request consultation with their representative(s), that consultation will take place at least five days prior to its introduction.
● Any agreed arrangement must provide that 13 rostered days are taken off by an employee for 12 months’ continuous service.
…
(v) Except where agreement has been reached in accordance with clauses 33.1(a)(ii) and 33.1(a)(iii) the prescribed rostered day off or any substituted day may be worked where it is required by the employer and such work is necessary:
● to allow other employees to be employed productively; or
● to carry out out-of-hours maintenance; or
● in the case of unforeseen delays to a particular project or a section of it or other reasons arising from unforeseen or emergency circumstances on a project;
in which case, in addition to accrued entitlements, the employee will be paid penalty rates and provisions as prescribed for Saturday work in clause 37 – Penalty Rates.”
[35] The Agreement provision, states:
“5. HOURS OF WORK
5.1. The ordinary hours of work will be thirty eight (38) per week, worked between 7:00am and 6:00pm, Monday to Friday, subject to this clause 5.
5.2 The ordinary working hours will be worked in a twenty (20) day four (4) week cycle, Monday to Friday inclusive, with eight (8) hours worked for each of nineteen (19) days and with 0.4 of an hour on each of those days accruing towards the twentieth (20th) day, which will be taken as a paid day off. The twentieth (20th) day of that cycle will be known as the rostered day off (RDO), and will be taken as outlined in clause 5.5.
5.3 Notwithstanding clause 5.2 above, a part time Employee will be paid for actual hours worked and as such the part time Employee will not be entitled to accrue time towards a RDO, and further provided that the parties time Employee will not be required to work on a RDO.
5.4 Each day of paid leave taken and a public holiday occurring during any cycle of four (4) weeks will be regarded as a day worked for accrual purposes.
5.5 Rostered Time Off
(a) RDOs shall be taken at a mutually convenient time as agreed by the Employee and Endacom or in the absence of agreement, at the direction of Endacom.
(b) An Employee may accrue no more than 10 RDOs. An Employee who accrues more than 10 RDOs may be directed by Endacom to take any or all RDOs exceeding the prescribed 10 RDO limit.
(c) Where an Employee is required to work on an agreed RDO, the Employee shall be paid their ordinary hourly rate of pay that would normally apply to that day’s work and a substitute alternate RDO will be arranged.
(d) An Employee who has not worked a complete nineteen (19) day four (4) week cycle will receive pro rata accrued entitlements for each day worked in such cycle, payable for the RDO, or in the case of termination of employment.
5.6 Requirement to Work Reasonable Overtime
(a) All time worked beyond an Employee’s ordinary hours of work shall be considered overtime. Endacome may request or require an Employee to work reasonable overtime.
Notation: In determining whether the additional hours that an Employee is required or requested by Endacom to work are reasonable additional hours, all relevant factors under clause 36.1(b) of the Award will be taken into account. The relevant factors are governed by the NES.”
[36] The Award only allows for the accrual of RDO’s where employees are employed on distant work. Such a provision is logical and family friendly. An employee can accrue up to 5 RDO’s whilst on this distant work.
[37] The Agreement provision does not impose the distant work requirement to accrue RDO’s and allows for up to 10 days to be accrued. Following the provision of the Undertaking, clause 5 of the Agreement now reads:
“5.5(a) Where an Employee elects to accrue an RDO, as outlined in clause 5.2 above, an Employee may request to take an RDO at another mutually convenient time as agreed between the Employee and Endacom owing to the needs of the business. Endacom shall not unreasonable refuse any such request.”
[38] Clause 5.5(a) empowers the employee to elect to accrue the RDO. Clause 5.5(c) envisages the situation where an employee is required to work on an agreed RDO will only be paid at normal rate rather than the penalty rates for Saturday as described in clause 33.1(a)(vi) of the Award. This scenario provides a significant financial detriment to the employees.
[39] I accept that there is some benefit for employees to be able to accrue up to 5 RDO’s, even when not away from their home on distant work. Such a provision also provides a real productivity benefit for the employer in relation to the flexibility introduced into its manning availability. However, the ability to accrue 10 RDO’s leaves the provision open for abuse. It would mean that an employee by choice or through duress, could agree to work 40 hours per week for 40 weeks without an RDO. Such a provision is unacceptable, is contrary to the Award RDO provisions and undermines the Hours of Work and Overtime provisions, of the Award and provides a financial detriment to the employees.
[40] The provision alone would be sufficient for the Agreement to fail the BOOT.
[41] As a result, I find the Agreement would fail the BOOT.
Conclusion
[42] In determining this matter, I have taken into account all of the submissions and evidence that has been provided by the parties.
[43] I agree with Mr Marshall that the Act does not obligate the need for bargaining to actually occur. However, the absence of any actual bargaining or employee bargaining representative allows for a negative inference to be drawn from any casual observer in relation to the relationship between the employer and the employees. Based on the evidence of Mr Fahy, the inference most readily drawn is one of absolute trust of Mr Flannery. However, there are no guarantees that Mr Flannery will remain as the Managing Director for the life of the Agreement.
[44] Applying the obiter in One Key, I find that the Applicant has not taken all reasonable steps to ensure that the terms and effect of the Agreement were explained to the employees in an appropriate manner. Simply reading the terms of an Agreement, without the employees having prior knowledge of those terms, will never be a satisfactory explanation. Such a scenario does not give an employee time to consider the ramifications of the Agreement upon their individual circumstance. This issue is further exacerbated when the employees are not represented by a bargaining agent. Whilst a provision may be deemed to be self explanatory by the employer or one employee, another employee may be totally confused or even have a contradictory understanding of the provision.
[45] Also, a verbal assurance about not applying a particular provision of the Agreement, especially one as potentially detrimental as clause 1.3, when an employee’s wages can be reduced by 46%, does not satisfactorily or accurately explain the potential effect of that provision. I find that the employees were not provided with an explanation which would have allowed them to understand the real meaning and effect of clause 1.3 of the Agreement.
[46] I also find, for the reasons mentioned above, that the implementation of clause 5.5 of the Agreement would result in the Agreement failing to pass the BOOT. I have not made any finding on the issues raised by the AWU on the basis that the proposed Agreement has not been able to satisfy the Commission in relation to the obligatory pre approval steps and the BOOT issue that was raised by Commission.
[47] I am satisfied that the provisions of section 188 of the Act have not been met. The Agreement has not been genuinely agreed by the employees. As a result, the application is refused.
[48] I so Order.
COMMISSIONER
Printed by authority of the Commonwealth Government Printer
<PR700070>
1 Exhibit 3
2 PN123-127 Transcript 3 September 2018
3 [2018] FCAFC 77
4 PN106-115 Transcript 3 September 2018
5 [2015] FCAFC 16
6 Ibid at PN33
7 [2016] FWCFB 3048
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