Falcon Mining Pty Ltd

[2021] FWC 6424

[2021] FWC 6424

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Falcon Mining Pty Ltd
(AG2021/7588)

FALCON MINING ENTERPRISE AGREEMENT 2021

Mining industry
DEPUTY PRESIDENT COLMAN	MELBOURNE, 24 NOVEMBER 2021

Application for approval of the Falcon Mining Enterprise Agreement 2021 – better off overall test – black coal industry – contingent award benefits – maximum term contracts – relevance for BOOT of benefits not prescribed by the agreement

[1] This decision concerns an application made by Falcon Mining Pty Ltd (Falcon) under s 185 of the Fair Work Act 2009 (Act) for approval of an enterprise agreement known as the Falcon Mining Enterprise Agreement 2021 (2021 Agreement). The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), which was a bargaining representative for the agreement, opposed the application on the basis that the agreement does not pass the ‘better off overall’ test (BOOT).

[2] Section 186(2)(d) of the Act provides that, before the Commission approves an enterprise agreement, it must be satisfied that it passes the BOOT. Section 193 states that an agreement passes the BOOT if:

“… the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.”

[3] The CFMMEU sought to be heard in respect of its objection to the approval of the 2021 Agreement. Pursuant to directions, the union filed submissions setting out the grounds of its objection. Falcon filed a submission in reply. The application for approval of the 2021 Agreement was listed for hearing on 17 November 2021.

[4] The CFMMEU advanced five grounds on which it contended that the Commission could not be satisfied that the 2021 Agreement passed the BOOT in respect of particular categories of employees employed under the 2021 Agreement, namely: those employed in the entry level classification of inexperienced mineworker; employees engaged on maximum term contracts, who would be excluded from redundancy benefits; production workers engaged on a casual basis, for which no provision is made in the Award; employees undertaking shift work on weekends, whose penalties under the Award would be compounding; and employees who receive an aggregated rate of pay under clause 13.6 of the 2021 Agreement.

Rate of pay for ‘inexperienced mineworkers’

[5] The CFMMEU submitted that the rate of pay prescribed in clause 13 of the 2021 Agreement for the entry level classification of ‘inexperienced mineworker’ ($24.38 per hour) was lower than the rate of pay for the equivalent classification in the Black Coal Mining Industry Award 2010 (Award), which is ‘mineworker induction level 1’ ($25.03). The union’s submission is correct. However, in response to concerns raised by the Commission prior to the CFMMEU’s request to be heard, Falcon had offered an undertaking under s 190 of the Act, whereby it would increase the rate of pay for the inexperienced mineworker to $25.50. During the hearing, Falcon stated that it would provide an additional undertaking, pursuant to which it would extend the $350 weekly attendance bonus provided under clause 14 of the 2021 Agreement to inexperienced mineworkers, who had been excluded from the bonus arrangements. In its written submissions, the CFMMEU had contended that, taking the first undertaking into account, the wage rate for inexperienced mineworkers in the 2021 Agreement would only marginally exceed the Award rate, and that this margin needed to account for the fact that rates of pay under the 2021 Agreement compensate for all allowances, disabilities and tools that would otherwise be provided under the Award (see clause 13.2 of the 2021 Agreement), such that the Commission could not be satisfied that a person employed as an inexperienced mineworker would be better off overall under the 2021 Agreement than under the Award. At the hearing, the CFMMEU acknowledged that an undertaking to extend the bonus to inexperienced mineworkers would improve the position of these workers under the 2021 Agreement, but did not concede that, as a result, the agreement would necessarily pass the BOOT in respect of this classification of employee.

[6] I consider that the revised rate of pay for inexperienced mineworkers, together with the payment of the $350 weekly attendance bonus, will mean that these employees receive more pay under the 2021 Agreement than they would receive under the Award by a margin that is sufficient to ensure that employees employed in that classification remain better off overall under the 2021 Agreement than under the Award, despite the fact that the Agreement does not make provision for allowances in the Award. In reaching this conclusion, I have had regard to the document submitted by the CFMMEU summarising the value of the allowances in the Award. Many of these allowances are contingent. The higher pay that inexperienced mineworkers will receive under the Agreement will ensure that they remain better off overall under the 2021 Agreement than under the Award.

[7] The union had further submitted that under the Award, a mineworker induction level 1 employee would progress to the classification of mineworker induction level 2 / mineworker training (which attracts an hourly rate of $25.51) at the conclusion of mine site induction, which would presumably be a relatively quick process, and that by contrast under the 2021 Agreement an inexperienced mineworker working underground does not move to the next classification of ‘experienced underground mineworker’ until they have twelve months of mine site experience. The CFMMEU said that there was a real possibility therefore that during the first year of employment, underground mineworkers would receive less remuneration under the 2021 Agreement than they would have done under the Award because they would have progressed more quickly to the higher classification under the Award, which is one cent higher than the agreement’s entry level rate (as affected by the proposed undertaking). However, this contention has been eclipsed by the company’s further undertaking to afford inexperienced mineworkers the $350 weekly bonus. Even if classification progression from entry to second level under the 2021 Agreement is slower than would be the case under the Award, inexperienced mineworkers will be better off overall under the 2021 Agreement.

Fixed term and fixed task employment

[8] The CFMMEU’s second contention was that the 2021 Agreement did not pass the BOOT in respect of employees employed on maximum term contracts, because such employees might be deprived of access to redundancy payments, whereas under the Award this would not be the case. The argument ran as follows. There is a distinction between genuine fixed term contracts which must run for their full term, and maximum or ‘outer limit’ contracts which may be terminated during the term. Both the 2021 Agreement and the Award exclude employees on fixed term contracts from redundancy benefits, using almost identical language (compare clauses 12.1 of the 2021 Agreement with clause 14.2(b) of the Award). But the meaning of ‘fixed term’ in the 2021 Agreement is broader than that in the Award, because clause 8.2 states that the company may employ persons ‘in fixed-term (including maximum term) and fixed task employment’, whereas there is no indication in the Award that a fixed term contract includes a maximum term contract. Therefore, under the 2021 Agreement, the exclusion from redundancy of employees on fixed term contracts includes employees on maximum term contracts. Under the Award however, the exclusion applies only to employees on genuine fixed term or a specified task contracts. The result is that employees on maximum term contracts would be excluded from redundancy payments under the 2021 Agreement, whereas under the Award they would not be excluded. This was said to be a detriment for employees who might be employed on maximum term contracts under the 2021 Agreement, which should weigh in the analysis of the BOOT.

[9] The company contended that the exclusion in clause 12 of the 2021 Agreement was in the same terms as that in clause 14.2(b) of the Award and that therefore employees on fixed term contracts could not be any worse off under the 2021 Agreement than under the Award in respect of redundancy benefits.

[10] In considering maximum term contracts, it is necessary to distinguish two situations. In one, the maximum term contract expires and terminates in accordance with the agreement of the parties. There is no termination at the initiative of the employer. In this situation, both under clause 12 of the 2021 Agreement and clause 14 of the Award, the employee is not entitled to redundancy payments, because there is no termination at the employer’s initiative (clause 12.2 of the 2021 Agreement, clause 14.2(a) of the Award). The ‘exclusions’ are simply irrelevant. There is no occasion to consider them, because the primary provision conferring a redundancy benefit has not been engaged.

[11] In the second situation, the employer terminates the maximum term contract before its maximum term has been reached. In this scenario, there has clearly been a termination at the employer’s initiative. If the reason for the termination is that the employer ‘no longer requires the job done by the employee to be done by anyone’, the primary provisions in both clause 12.2(a) of the 2021 Agreement and clause 14.2(a)(i) of the Award (they use the same language) would be enlivened. One would then need to consider whether the exclusions applied.

[12] In my view, there is some doubt as to whether the ‘exclusions’ are genuine exclusions in the sense that they disengage the application of the redundancy provisions in respect of employees on particular contracts. It is possible that the provisions are simply for the avoidance of doubt and illustrate the application of the primary rule in particular circumstances, relevantly confirming that a situation where a fixed term or fixed task contract expires on its terms will not be a case of redundancy. I appreciate that clause 12.1 of the 2021 Agreement and clause 14.2(b) of the Award refer only to the fact of employees being engaged on certain types of contract, and not to the expiry of the relevant term or task, but on one view this is what the provisions have in mind. It is not clear why a person who is engaged on a fixed term contract but who is dismissed before the end of the term for reason of redundancy should not be entitled to redundancy payments. One explanation might be that an employee on a ‘true’ fixed term contract would be entitled to be paid out the balance of the term. But if the ‘exclusions’ in the 2021 Agreement and the Award are for the avoidance doubt and simply illustrate the workings of the primary provision, then there would be no BOOT concern about the position of employees on maximum term contracts, because the primary provisions in each of the two instruments are the same: if a maximum term contract is terminated early because the employer no longer wants the job done by anyone, redundancy must be paid, as there has been a termination of employment at the employer’s initiative for the prescribed reason.

[13] It is not necessary for me to form any concluded view on this point. I do not propose to reprise the authorities on the meaning of ‘fixed term’ contracts (see Khayam v Navitas[2017] FWCFB 5162 (Navitas) and the cases to which it refers). Navitas dealt specifically with the meaning of s 386 of the Act, which is in different terms to the relevant provisions of the two instruments in the present matter. I will proceed on the basis that there is, as the CFMMEU contends, a detriment accruing to employees employed on maximum term contracts under the 2021 Agreement, namely that they are excluded from the agreement’s redundancy benefits.

[14] In considering the extent of this detriment, it is necessary to take account of the minimum redundancy entitlements of employees under the National Employment Standards (NES). The BOOT requires consideration of whether all employees would be better off ‘if the agreement applied to the employee than if the relevant modern award applied to the employee’. The scope of the inquiry goes beyond a comparison of the content of the instruments and includes the consequences of the application of those instruments to an employee. As clause 14.1 of the Award points out, the Award’s redundancy provisions constitute an ‘industry-specific redundancy scheme’. Section 123(4)(b) of the Act states that the redundancy benefits in Subdivision B of Division 11 of the NES do not apply to an employee ‘to whom an industry-specific redundancy scheme in a modern award applies’ (emphasis added). However, when the 2021 Agreement is in operation, the Award and its industry-specific redundancy scheme will not apply to any employee covered by the Agreement, because an award cannot apply to an employee at a time when an enterprise agreement applies to their employment (see s 57). During that time, the redundancy provisions in the NES will not be excluded by an industry-specific redundancy scheme: they will apply to employees covered by the Agreement (s 61(1)). (Note that the exclusion of the NES redundancy provisions that is found in s 123(4)(c) does not appear to be relevant here because the 2021 Agreement sets out its own redundancy provisions, rather than incorporating the Award’s industry-specific redundancy scheme by reference.) Therefore, an employee employed under the 2021 Agreement on a maximum term contract who was dismissed during the term of the contract, and who (according to the hypothesis) was excluded from the redundancy benefits in the 2021 Agreement, would continue to be entitled to the redundancy provisions in the NES. Of course, s 123 excludes from the operation of Subdivision B employees employed ‘for a specified period of time’. But if one assumes, as I have for the sake of exploring the extent of the potential detriment apprehended by the union, that a ‘fixed term’ contract is one that is not terminable during its term, the same meaning would be given to the expression ‘specified period of time’. This would be consistent with the decision of the majority in Navitas, albeit in the context of s 386. On this basis, s 123 would not exclude an employee on a maximum term contract from redundancy benefits under the NES.

[15] In weighing the extent of the possible ‘redundancy detriment’ accruing to an employee on a maximum term contract under the 2021 Agreement, one would need to compare the redundancy benefits that such an employee might receive under the NES (which would apply because the agreement applied to the employee) with the redundancy benefits that would apply under the Award. At the hearing, there was some discussion about the circumstances in which the NES redundancy provisions are in fact more generous than those in the Award. It is clear however that in the first year of employment, the Award is more generous, because it provides a minimum benefit for all employees; and in later years, the Award formula will generally produce higher redundancy payments. I note that employees on fixed term contracts (however described) would not necessarily be employees who would accumulate large amounts of service, although they might do so in some cases. I have considered the various permutations and margins of differentials between the NES and the Award redundancy provisions, but do not propose to set them out here. I have also taken into account the fact that both the 2021 Agreement and the Award exclude from redundancy those situations where an employee’s job is no longer required due to the ordinary and customary turnover of labour, and that in some circumstances where a maximum term contract might be terminated, this provision might be engaged.

[16] The fact remains that the redundancy entitlements under the 2021 Agreement and the Award are contingent benefits. By contrast, the 2021 Agreement guarantees greater remuneration, because of its higher wages and the bonus. In my view, a guaranteed benefit or detriment must logically by assigned more weight in the BOOT analysis than one that is contingent. If one ignored the dimension of contingency and applied the BOOT specifically to the hypothetical employee who is made redundant, it would be relevant to consider that the employee will, prior to the redundancy, have been earning comfortably more under the 2021 Agreement than under the Award, and in doing so, the employee has been accumulating, in notional BOOT terms, ‘credits’ that offset relevant detriments, including the possibility that the employee might be made redundant and receive a lesser redundancy entitlement than under the Award. Against this, it might be said that an employee who was made redundant soon after the commencement of the agreement would have fewer remuneration ‘credits’, however there is nothing to suggest in the present case that any employees are at any particular risk of redundancy, either imminently or generally. Mr McWilliam’s statement dealt with redundancies associated with a particular contract in 2020, but I could not safely infer any current risks associated with this past event.

[17] In my view, employees are better off overall under the 2021 Agreement. They will receive more pay, by a margin that is sufficient to outweigh the Award allowances mentioned earlier as well as the possibility of receiving a lesser redundancy benefit than would have been the case under the Award.

Casual employment

[18] The CFMMEU’s third objection in respect of the BOOT concerned the detriment that it considers would accrue to production employees because of the fact that the 2021 Agreement permits their employment on a casual basis, whereas the Award makes provision for casual employment only in respect of staff employees.

[19] The CFMMEU submitted that ordinarily one would assess the BOOT for a casual employee by reference to casual employment under both the agreement and the award, but that in the case of the Award, it is not possible to compare ‘like for like’ because the Award does not permit the use of casual employment for production and engineering employees. It contended that the appropriate comparator for a casual production employee employed under the 2021 Agreement would be a full-time or part-time production employee employed under the Award.

[20] The CFMMEU submitted that simply providing a 25% loading for casual production workers, as the 2021 Agreement does, is not sufficient to compensate for the disadvantage of introducing casual employment for production work. It contended that, when conducting the BOOT, the Commission must consider all of the benefits that the Award would bestow on the employee as a permanent production worker, which they would not receive as a casual under the Agreement, including the generous redundancy and personal leave entitlements provided by the Award (see clause 14 and 26).

[21] The company contended that even if one were to compare the position of a casual production worker under the 2021 Agreement to that of a permanent production worker under the Award, the employee would still be better off overall under the Award because the 25% loading that is applied to wages results in employees receiving pay that comfortably exceeds that in the Award. It also noted that many other enterprise agreements in the black coal sector make provision for the employment of casual production workers, including the company’s own 2017 Agreement, which was made with the involvement of CFMMEU.

[22] The CFMMEU’s contentions in respect of the 2021 Agreement’s provision for casual employment for production workers are similar to those that were raised by the union before the Full Bench of the Commission in CFMEU v SESLS Industrial Pty Ltd[2017] FWCFB 3659 (SESLS). In that case, the Full Bench stated:

“[38] The union’s position is that the BOOT test can be undertaken, and that the appropriate comparator is the position of a full time or part time employee under the Award. This may seem reasonable. But is it right? We have some difficulty in identifying how the analysis of s193 leads to this outcome. Perhaps the hypothetical scenario requires a reasonable accommodation to be made of the practical circumstances that might underpin the hypothesis, and that such an accommodation could go so far as to assume that the employee had been employed on some other lawful basis under the Award – that one compare casuals under the agreement with whatever is possible under the award.

[39] We were not addressed on these issues at hearing. Given the conclusions we have reached further below, it is not necessary for us to decide them. We proceed to consider the union’s contentions in relation to the BOOT assuming (but not necessarily accepting) that the BOOT test for prospective casual employees requires a comparison between casual employment under the Agreement and part-time or full-time employment under the Award.”

[23] As will be apparent from these passages, the Full Bench did not determine that the appropriate comparator for a casual production worker under a black coal industry enterprise agreement should necessarily be that of a permanent employee under the Award. Rather, it proceeded on the assumption that this was the case without deciding the matter, and compared the benefits afforded to casuals under the agreement with the entitlements of the same classifications of employees employed on a permanent basis under the Award. Another possible application of the BOOT in such circumstances is that there simply is no comparator, because there is no such thing as a casual production worker under the Award, and the situation is analogous, for BOOT purposes, to an employee who is award free. In this regard, unlike the framework that applied under the Workplace Relations Act 1996, the Act makes no provision for the designation of an award for benchmarking enterprise agreements for employees who are not covered by an award. Nevertheless, I propose to proceed in the same manner as the Full Bench in SESLS and assume, without deciding, that the CFMMEU’s proposed Award comparator for BOOT purposes is correct.

[24] As they have done in the present case, the CFMMEU submitted to the Full Bench in SESLS that a 25% loading was not sufficient to compensate for the disadvantage of the introduction of casual employment for production work. The Full Bench said:

“[44] The union further submits that, whilst the Agreement provides for a 25% loading for casuals, this is not sufficient to offset the detriments referred to above. In particular, it says that a 25% loading has not been independently assessed, in terms of being an appropriate recompense for casual status in the context of the Award, because no casual employment exists under that Award (except for staff employees). Whilst such a loading might be appropriate for the Metal, Engineering and Associated Industries Award 1998, this does not mean it is appropriate for the Award, which has the higher benefits referred to earlier. Any casual loading in the Award would, it is said, need to be higher than 25%. The union relied on the decision in Site Fleet Services, where Commissioner Roe accepted that a casual loading greater than 25% would be required in the industry in order to compensate for relevant detriments.

[45] We recognise that the Award provides for benefits that exceed those in the NES, and that in important respects the conditions in question are those which do not apply to casual employees (leave, notice of termination, and redundancy). However, it is also the case that the Award provides for casual employment of employees in staff classifications, and that a casual loading of 25% is provided. This does not necessarily mean that a 25% loading would necessarily be appropriate, as an award standard, for production and engineering employees; as the Full Bench noted in the Modern Award review case referred to above, this is a question that needs to be resolved by reference to an appropriate evidentiary merit case. However, for the purposes of the BOOT, we consider that the presence in the Award of a 25% loading for casual staff employees is a matter which can be taken into account in considering the adequacy of the 25% loading in the Agreement for BOOT purposes.

…

[50] Satisfaction of the BOOT under s186(2)(d) is a jurisdictional prerequisite for the approval of an enterprise agreement. It also is a matter that involves the exercise of discretion, and involves a degree of subjectivity or value judgement. The issue before us is whether the Commissioner made an error of the kind described in House v The King in making his decision.

[51] We do not consider that any such error was made in the Commissioner’s application of the BOOT, or his decision to approve the Agreement. The Agreement incorporates the Award, and guarantees that employees will receive 1% more than the remuneration they would have received under the Award. The casual engagement of production and engineering employees is not permitted under the Award; it is permitted under the Agreement, but affords a 25% loading. In our view, the Commissioner’s conclusion that the Agreement satisfied the BOOT was not affected by appealable error.” (Footnotes omitted)

[25] The significance of the decision in SESLS is not that a 25% loading will necessarily be sufficient to render casual black coal industry production workers better off overall under an enterprise agreement than they would be under the Award. However, this loading was a relevant matter to be considered in applying the BOOT. In the context of an enterprise agreement that afforded employees a rate of pay that was 1% above the Award rate, the Full Bench in SESLS considered that it was open to the member at first instance to conclude that the agreement passed the BOOT. A similar conclusion was reached by the Full Bench in CFMMEU v CoreStaff NSW Pty Ltd[2019] FWCFB 5916 at [23].

[26] I accept that some employees would consider a casual mode of engagement to be less beneficial than permanent employment, but in my view, it would be wrong to assume that all employees would necessarily have this view. In this regard, the Full Bench in SESLS stated:

“[41] The CFMEU contends that inherent in full-time or part-time employment is a relatively high level of job security, which is not reflected in casual employment. We were taken to a decision of Commissioner Saunders in which the proposition was accepted that casual employment provisions under an enterprise agreement were less beneficial to employees than those under the Award, essentially for this reason. Casual employment provides an additional mode of engagement which some employees may prefer; there may be less job security, but there is correspondingly less commitment, and higher (loaded) remuneration, albeit to compensate for leave and other benefits of permanent employment not being available. New employees would presumably agree to casual employment upon their engagement and there is no suggestion of existing permanent employees being forced onto such arrangements. Further, as to the question of security of employment, full-time and part-time employees can be engaged on fixed term contracts; it is not necessarily the case that their employment is more secure, although this will often be the case.

[42] At the hearing, the union relied on the recent decision of the Full Bench in the 4 yearly review of modern awards in relation to casual and part-time employment in which the Bench decided not to include a casual provision in the Award. However, the Bench also noted that the introduction of a casual provision in the Award for production and engineering employees had ‘merit as a matter of broad principle,’ but that the lack of evidence before it had meant that it ‘could not formulate a provision that would achieve the modern award objective’.” (Footnotes omitted)

[27] My own assessment is that a loading of 25% is substantial compensation for the absence of conditions of employment that are an incidence of permanent employment under the Award, and associated benefits such as any increased job security. I appreciate that the entitlements of permanent employees under the Award are in various respects more generous than those in many awards. Nevertheless, as the Full Bench noted in SESLS, the Award recognises a loading of 25% as adequate for staff employees employed on a casual basis, and several of the benefits of permanent employment to which the CFMMEU refers are contingent ones, meaning that a person employed as a permanent employee under the Award would not necessary actually benefit from them. If one assumes that the union’s comparator is correct, one starts from the premise that a casual production employee has in fact been employed under the 2021 Agreement and compares the circumstances of that person under the agreement to that of a permanent production worker under the Award. However, I would note generally that the very possibility of casual employment for production workers under the Agreement may have the effect of generating employment that would not otherwise have materialised; a person who was employed as a casual employee might not necessarily have been employed at all if the possibility of casual employment under the agreement had been foreclosed.

[28] In evaluating whether all employees are better off overall under the agreement, it is necessary to consider the potential effects of the introduction of casual employment (see One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77 at [208]). I am satisfied that, save in respect of the circumstances considered in [43] below, casual production employees will be better off overall if the 2021 Agreement applied to them. I reach this conclusion assuming that the Award comparator is the position of a permanent production employee. I accept that there are certain detriments that accrue to employees employed as casual production workers, although the extent of this may depend on the worker’s point of view and personal circumstances: some employees may prefer this mode of employment and the higher weekly wages it provides. However, the 2021 Agreement provides casual production workers with a 25% loading on wages that exceed the Award rate by a comfortable margin. Casual employees would also receive the weekly $350 attendance bonus on a pro rata basis, as confirmed in the revised undertakings. Casual production workers will generally (see [43] below) receive more pay under the 2021 Agreement than under the Award and will be better off overall.

Compounding shift and weekend penalties

[29] The fourth BOOT contention raised by the CFMMEU was that under the Award, shift and weekend penalties (other than for 6 or 7 day rosters) are compounding, whereas under the 2021 Agreement, the shift loading is applied only to the ‘Base ordinary hourly rate’, resulting in a detriment to shift workers as against their position under the Award.

[30] Clause 21.2 of the Award deals with rates of pay for ordinary hours of work. It states:

“21.2 All ordinary hours worked by an employee on the following days will be paid for at the following rates:

Day of week

Rate of pay

Monday to Friday

Single time

Saturday

First 4 hours at time and a half

After 4 hours at double time

Sunday

Double time”

[31] Clause 22.2 of the Award prescribes rates for shift work. It provides:

“Rates for shiftwork are payable as follows:

Type of shift	Shift rates
Day shift	Ordinary time
Afternoon and rotating night shifts
(a) Ordinary hours	(a) 115% of the ordinary time rate
(b) Overtime hours 6 or 7 day roster	(b) Overtime penalty rate plus 15% of the ordinary time rate for time worked
(c) All others	(c) Overtime penalty rate
Permanent night shift
(a) Ordinary hours	(a) 125% of the ordinary time rate
(b) Overtime hours 6 or 7 day roster	(b) Overtime penalty rate plus 25% of the ordinary time rate for time worked
(c) All others	(c) Overtime penalty rate”

[32] The CFMMEU contended that the reference in clause 22.2 of the Award to ‘ordinary time rate’, which is not defined in the Award, means the variable rate of pay for working ordinary hours as set out in clause 21.2. of the Award. I agree. This was the conclusion of the Full Bench in its decision concerning the 4-yearly review of modern awards in respect of the Award ([2020] FWCFB 5908 at [55]). As the Full Bench noted, the reference to ‘ordinary time’ and ‘ordinary time rate’ in clause 22.2 conveys a collective description of the different rates of pay that apply to the working of ordinary time in clause 21.2. Had it been intended that the ‘ordinary time rate’ should be the rate of pay for working on weekdays, the expression ‘single time rate’ could have been used, or ‘base rate of pay’, which is defined in clause 3 of the Award as the rate of pay for ordinary hours of work but not including overtime or penalty rates. At the hearing, Falcon conceded that the Award penalties were compounding.

[33] However, in my view the terms of the 2021 Agreement operate to the same effect. Clause 16.2 of the 2021 Agreement is in the same terms as clause 21.2 of the Award. And clause 17.2 of the 2021 Agreement is the same as clause 22.2 of the Award, except that, as the union emphasised, clause 17.2 states that the shift penalty will apply to the ‘Base ordinary hourly rate’. This is defined in clause 3.1 of the 2021 Agreement as excluding ‘loadings, overtime or penalty rates, and any other separately identifiable amounts.’ This definition is almost identical to the definition of ‘base rate of pay’ in clause 3.1 of the Award, however clause 22.2 of the Award does not use that expression. In short, the 2021 Agreement applies shift penalties to the base rate of pay, whereas the Award applies shift penalties to the applicable ordinary rate, which for a Saturday or Sunday is the relevant weekend rate.

[34] However, clause 16.2 of the 2021 Agreement, like clause 21.2 of the Award, requires that all ordinary hours worked by an employee on Saturdays and Sundays be paid at the relevant weekend rates, which are the same as those in the Award. So, for example, although clause 17.2 of the Agreement applies the shift penalty to the ordinary rate, clause 16.2 applies double time to all work on a Sunday. The base rate is multiplied by the shift penalty in clause 17.2; but this amount is then multiplied by the weekend penalty in clause 16.2. (Note that the reference to ‘Base ordinary hourly rate’ that appears in clause 17.2, and which is of concern to the union, does not appear in clause 16.2). In the result, for afternoon and rotating night shifts not involving 6 or 7 day rosters, both the Award and the 2021 Agreement take the base rate and multiply it by two things, the shift penalty and the weekend penalty. The only difference is the rate of pay, which is higher under 2021 Agreement.

[35] At the hearing the CFMMEU produced a comparative table that showed the hourly rates of pay for employees working shift work on weekends under the 2021 Agreement to be much lower than the rates that would apply under the Award. However, the rates for the 2021 Agreement in this table need to be multiplied by the weekend rates: clause 16.2 is very clear that ‘all ordinary hours worked’ on weekends are paid time and a half or double-time.

[36] It will be observed that, in respect of overtime hours on 6 or 7 day rosters, the relevant rates both under the 2021 Agreement and the Award are ‘overtime penalty rate plus 15% of the ordinary time rate for time worked’ (emphasis added). This demonstrates how penalties can be rendered non-compounding – that is, by addition, instead of multiplication. It stands in contrast to the penalty arrangements discussed above. The 2021 Agreement and the Award both treat shift and weekend penalties as compounding, and the penalty rates are the same. The higher rates of pay in the 2021 Agreement mean that shift workers will remain better off overall under the 2021 Agreement than they would be under the Award.

[37] Finally, after the conclusion of the hearing, the parties submitted further communications and modelling in respect of the BOOT. The CFMMEU’s modelling showed that a casual employee who works night shift on a Sunday would not be better off overall under the 2021 Agreement unless the penalties in the agreement operated on a compounding basis. But as I have said, the penalties in the agreement are compounding, for the reasons referred to above. Further, the casual loaded rate would be the rate to which these penalties would be applied. Clause 8.6 of the 2021 Agreement states that casual employees will be afforded penalty rates for overtime, shift loading, and work performed on public holidays, in accordance with the terms of the agreement. These penalties and loadings are multiples, which would apply to the casual rate of pay.

Aggregated hourly rate

[38] The final BOOT issue raised by the CFMMEU concerned clause 13.6 of the 2021 Agreement, pursuant to which the company may at its discretion pay employees an aggregated hourly rate which takes into consideration all aspects of the work that employees are required to perform and all relevant penalties and payments. Where the company elects to pay an employee an ‘aggregated hourly rate’, clause 13.6 of the Agreement provides that ‘no penalties or additions to that rate apply’.

[39] The CFMMEU submitted that, although clause 13 provides that the aggregated hourly rate will take into consideration the various loadings and penalties, it does not provide a formula that will be used to calculate the rate, nor does it specify any particular rate. The union contended that, in the absence of any rates, or any certainty over which penalties, loadings and allowances will be operative under the ‘aggregated hourly rate’, it is not possible for the Commission to be satisfied that those employees covered by the 2021 Agreement will be better off overall. It further contended that the reconciliation provision in clause 13.7 suffered from the defects identified by the Full Bench of the Commission in SDA v Beechworth Bakery Employee Co Pty Ltd[2017] FWCFB 1664 (Beechworth Bakeries), and in particular that it was not enough for the company to conduct a review over a 12-week period.

[40] In my view, clause 13.6 does not present concerns that might affect the BOOT. First, clause 13.6 does not absolve the company from its obligation to meet each and every payment prescribed by the 2021 Agreement. The clause simply contemplates the aggregation of all prescribed amounts and their payment through a flat rate. If the flat rate paid to employees under the clause did not fully meet every payment obligation imposed on the company by the 2021 Agreement, it would not be an ‘aggregated’ rate, but some other rate not authorised by the instrument. Secondly, the statement in clause 13.6 that, when the aggregated rate is paid, no penalties or additions to that rate will apply, simply affirms that the same penalty will not be paid twice. Falcon confirmed at the hearing that this was its intention and understanding. The statement does not mean that penalties will not be paid. The provision does not displace other obligations arising under the agreement. If an error is detected, it will be addressed in accordance with the arrangements set out in clause 13. But this is no different in substance from provisions in enterprise agreements dealing with rectification of payment irregularities. There is nothing wrong with such a provision. I do not consider it to entail a detriment.

[41] In any event, in my view the reconciliation process in clause 13.7 would be effective to ensure that employees who receive aggregated rates are not paid less than under the ordinary administration of the various payment provisions in the 2021 Agreement. Unlike the provision that was found to be defective by the Full Bench in Beechworth Bakeries, the reconciliation in clause 13.6 is initiated by the employer and creates an enforceable right to payment. The reconciliation occurs once a cycle for each existing and new roster. At the hearing, the company stated that the longest shift cycle would be 6 weeks. In addition to the employer-initiated reconciliations each cycle, the employee can request an additional review every 12 weeks.

[42] The clause provides a reconciliation both against the regular payment arrangements under the 2021 Agreement and against the Award. As to the former, again, I do not consider that the arrangements purport to depart from the employer’s payment obligations under the agreement. There is no BOOT issue here. To the extent that the reconciliation also measures actual payments against the Award, and might be relevant for BOOT purposes, it suffers from the imperfection that it guarantees to pay only the ‘higher rate’, which would mean that if an employee were paid less than the Award, clause 13.7 would require the Award based amount to be paid: but the BOOT requires employees to be better off overall, not just on par with the award.

[43] This would not matter if there were no BOOT concerns. However, the company’s correspondence to the Commission after the hearing noted the possibility that casuals working only a single specified day on a 4/3 roster, or one or two specific days in a 7/7 roster, could receive less pay under the 2021 Agreement than under the Award. It appears that these figures are predicated on non-compounding penalties, whereas I have concluded that the penalties under the agreement are compounding. However, the basis for the calculations’ conclusion that there is a possibility of a shortfall in certain instances is not entirely clear. Rather than elicit further explanations and modelling from the parties (the process has gone on long enough), I propose a simple resolution of this concern, namely that the company provide an undertaking whereby it would rectify the above mentioned deficiency in the reconciliation clause, such that it provides employees with a right to receive reconciliation payments against the Award that exceed (rather than equal) what would otherwise have been paid under the Award. Of course, the reconciliation process currently applies only to employees in respect of whom an aggregated hourly rate applies, not to other employees, and therefore, to be effective for BOOT purposes, it would be necessary to extend the reconciliation process to employees, or at least casual employees, who are not in receipt of the aggregated rate. I note for completeness that I do not consider that the working arrangements of the casual employees in the circumstances identified in the company’s correspondence are especially likely to be worked, and that to the extent that a revised reconciliation provision would be triggered and require payments to be made to such employees, it would not result in a state of affairs whereby employees were regularly receiving ‘late payments’ (see Commonwealth Bank of Australia Enterprise Agreement 2020 [2021] FWCFB 3635 at [26]).

Conclusion

[44] Subject to the revised consolidated undertakings that have been foreshadowed by the company, and the further undertaking to which I have adverted above, I am satisfied that the Agreement will pass the BOOT and that the various requirements for approval of the Agreement have been met. I will afford the company two days to submit the revised consolidated undertakings and will then formally seek the union’s views on them, as required by s 190(4).

DEPUTY PRESIDENT

Appearances:

M. Coonan for Falcon Mining Pty Ltd
L. Doust of counsel for the CFMMEU

Hearing details:

2021
Melbourne
17 November

Final submissions:

23 November 2021

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