Furnace Solutions Pty Ltd

[2017] FWC 1444

[2017] FWC 1444

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Furnace Solutions Pty Ltd
(AG2016/7656)

COMMISSIONER WILLIAMS PERTH, 13 MARCH 2017

Application for approval of the Furnace Solutions Pty Ltd Enterprise Agreement 2016.

Introduction

[1] Furnace Solutions Pty Ltd (the Applicant) has made an application under section 185 of the Fair Work Act 2009 (Act) for the approval of the Furnace Solutions Pty Ltd Enterprise Agreement 2016 (the Agreement).

[2] The Construction Forestry Mining and Energy Union (CFMEU) wrote to the Commission requesting copies of the application and other materials filed in support of the application and objecting to the Commission approving the Agreement.

[3] Accordingly the Commission, as currently constituted, wrote to the Applicant on 6 February 2017 advising of the correspondence from the CFMEU and asking the Applicant if there were any exceptional circumstances which would prevent the Commission providing the materials the CFMEU requested. 1 The Applicant did not provide any submission objecting to the provision of these materials to the CFMEU and accordingly the Commission provided these to the CFMEU.

[4] The Commission’s letter to the Applicant also referred to the objections raised by the CFMEU to the Agreement being approved and advised it was the Commission’s preliminary view that the Agreement did not meet the better off overall test (BOOT) provided for in section 193 of the Act and inviting the Applicant to provide a response to the CFMEU’s objections if they wish to proceed with the application.

[5] The Applicant replied on 16 February 2017 providing an undertaking it is submitted addressed the concerns raised in the CFMEU’s correspondence.

[6] The undertaking involves 11 separate matters which specify changes to the wording in the Agreement of subclauses 5.4, 5.5, 6.1 (which involved increases to the rates of pay ranging from 4.1% up to 8%), clause 7, subclauses 8.2, 11.1, clause 13 and subclause 22.9 and an undertaking as to the operation of subclause 22.6, also a commitment to apply the special rates in clause 22 of the Building and Construction General On-Site Award [MA000020] (the Award), which clause is 9 pages of the Award, and finally to provide any greater entitlement in clause 17 of the Award rather than the redundancy provisions at clause 23 of the Agreement.

[7] The CFMEU were provided an opportunity to consider the undertaking proposed by the Applicant and advise their view. They did so by letter on 24 February 2017. The CFMEU’s view was that there were still numerous provisions within the Award which provided conditions and benefits to employees which the Agreement did not deal with. The CFMEU also submitted that the undertakings proposed would result in substantial changes to the Agreement and so were contrary to section 190(3)(b) of the Act. The CFMEU submitted that the Agreement with those undertakings bore no real resemblance to the Agreement upon which the employees had voted.

[8] The Applicant was provided with an opportunity to respond and did so by providing a revised undertaking (attached to this decision) which involved 9 separate matters specifying changes to the wording in the Agreement of subclause 5.5, changes to 6.1 (which involved additional increases to the rates of pay), changes to the wording of subclause 6.5, an undertaking regarding the application of subclause 6.6, changes to the wording in clause 7, and subclauses 8.2 and 22.9, including an additional subclause 8.6 and finally a commitment to apply 10 of the special rates in clause 22 of the Award.

[9] Set out below is a table showing the original wage rate in the Agreement voted on by employees with the corresponding wage rate provided for in the second undertaking and the respective percentage increase this represents.

Classification	Agreement	Second Undertaking	% increase
Trades assistant	$21.00	$24.85	18.3%
Machine operators	$21.25	$25.25	18.8%
Rigger/Dogman	$22.50	$26.65	18.4%
Tradesperson	$22.50	$27.25	21.1%
Leading Hand	$24.35	$28.55	17.3%

[10] I note the second undertaking included changes to the wording of clause 6.5 so that it states an employee’s current rate of pay would not be reduced as a result of the establishment of the Agreement and that pay rates will be reviewed by the employer on an annual basis starting on the second anniversary of approval of the Agreement.

The legislation

[11] Section 193 of the Act deals with the BOOT and is as follows:

“193 Passing the better off overall test

When a non greenfields agreement passes the better off overall test

(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section 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.

FWC must disregard individual flexibility arrangement

(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.

...

Award covered employee

(4) An award covered employee for an enterprise agreement is an employee who:

(a) is covered by the agreement; and

(b) at the test time, is covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and

(iii) covers his or her employer.

Prospective award covered employee

(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:

(a) would be covered by the agreement; and

(b) would be covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) would cover the person in relation to the work that he or she would perform under the agreement; and

(iii) covers the employer.

Test time

(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.

FWC may assume employee better off overall in certain circumstances

(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.”

[12] Section 190 of the Act deals with undertakings in relation to enterprise agreements as follows:

“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 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.”

[13] An enterprise agreement will pass the BOOT if the Commission is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the enterprise agreement would be better off overall if the enterprise agreement applied to the employee than if the relevant modern award applied to the employee.

[14] The BOOT is not to be applied as a line by line analysis. Instead it is a global test requiring consideration of advantages and disadvantages to award covered employees and prospective award covered employees. The application of the BOOT requires the identification of terms of an enterprise agreement which are more beneficial to the relevant employees when compared to the relevant award, the terms of an enterprise agreement which are less beneficial and then an overall assessment of whether each relevant employee would be better off under the enterprise agreement.

[15] In AKN Pty Limited T/A Aitken Crane Services 2 at [34] the Full Bench explained that,

“...The undertaking facility in s.190 provides an opportunity to an employer to proffer an undertaking to address any concern which the Commission may have concerning the satisfaction of the approval requirements in ss.186 and 187. Because any such undertaking may not result in a substantial change to the agreement, the opportunity provided is necessarily limited in nature and cannot involve a wholesale reshaping of the Agreement which has already been made.”

[16] This is consistent with the limited requirements in section 190(4) of the Act that the Commission must not accept an undertaking unless it has sought the views of each person known to be a bargaining representative. Section 190 of the Act does not require the employees who voted on the original Agreement to consider the proffered undertaking but only that the more limited consultation with known bargaining representatives occur.

Consideration of the BOOT

[17] It is not in dispute that the Award covers the relevant employees. Considering the Agreement as lodged for approval I am not satisfied that it passes the BOOT. It is readily apparent that the Agreement as lodged does not include a large number of beneficial Award provisions that Award covered employees enjoy including various monetary allowances and non-monetary conditions. The rates of pay in the Agreement as lodged in some instances are below the Award and for those classifications that are above the Award they are only marginally so and do not at all amount to compensation for these absent Award entitlements.

The Applicant’s undertakings

[18] The Applicant has now proposed a second revised undertaking on the basis that it cures any BOOT deficiencies and submits that the Commission should accept the undertaking and so approve the Agreement.

[19] The CFMEU in its submissions raise the view that the undertaking involve substantial changes to the Agreement and so should not be accepted by the Commission. The Applicant’s submission on this point was limited to arguing the undertaking simply involved clarifications of provisions.

[20] An undertaking given by an applicant pursuant to section 190 of the Act may be accepted if the Commission is satisfied that the undertaking is not likely to cause financial detriment to any employee covered by the Agreement or result in substantial changes to the Agreement.

[21] In this case I am satisfied that the second undertaking offered by the Applicant is not likely to cause any financial detriment to any employee covered by the Agreement.

[22] The second undertaking given by the Applicant is designed to ensure that the Agreement, when read in conjunction with the undertaking, satisfies the BOOT and as such there is no barrier to the Agreement being approved. The undertaking in this matter however is not limited to minor changes which simply clarify terms of the Agreement. Instead the undertaking includes significant changes to the wage rates in the Agreement, changes to the wording of multiple clauses in the Agreement, the inclusion of new provisions in the Agreement and the calling up of allowances as they operate in the Award to now be entitlements under the Agreement which had previously been silent on these matters.

[23] Consequently I find that the proposed undertakings considered as a whole are likely to result in substantial changes to the Agreement. Therefore section 190(3)(b) of the Act prevents the Commission accepting the written undertaking to satisfy the concerns the Commission has regarding this Agreement. For certainty my view on this is the same for both the first and the second undertaking that the Applicant has proposed.

Conclusion

[24] The Agreement does not satisfy the BOOT and as a result this application for the approval of the Agreement is hereby dismissed.

COMMISSIONER

 1   [2016] FWCFB 8413 at [28].

 2   [2015] FWCFB 1833.

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