Knauf Gypsum Pty Ltd.

[2023] FWCA 715

[2023] FWCA 715

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.222 - Application for approval of a termination of an enterprise agreement

Knauf Gypsum Pty Ltd.

(AG2023/282)

USG Boral Building Products Proprietary Limited (Woodville) Enterprise Agreement 2019-2022

Storage services
DEPUTY PRESIDENT HAMPTON	ADELAIDE, 16 MARCH 2023

Application for termination of the USG Boral Building Products Pty Ltd (Woodville) Enterprise Agreement 2019-2022.

1. This decision concerns an application made on 9 February 2023 by Knauf Gypsum Pty Ltd[1] (Applicant) pursuant to s.222 of the Fair Work Act 2009 (Act) to terminate the USG Boral Building Products Pty Ltd (Woodville) Enterprise Agreement 2019-2022 (Agreement).

1. The matter was heard by the Commission at a telephone hearing convened on 6 March 2023. Mr Ward of Australian Business Lawyers appeared, with permission, on behalf of the Applicant. Ms Dooley appeared on behalf of the United Workers Union. In response to certain issues raised by the Commission, the Applicant confirmed its position in a subsequent written submission on 13 March 2023.

1. The application is for the termination of an enterprise agreement, in effect by joint agreement between the employer and the employees covered. This is provided by s.219(1) of the Act.

1. The Agreement was approved by the Commission on 20 December 2019 with a nominal expiry date of 30 September 2022. There are 7 employees presently covered by the Agreement. The Agreement covers and applies to Tradestore employees based at the Woodville and Seaford sites conducted by the Applicant in South Australia (the relevant employees). The United Workers Union is also covered by the Agreement and did not oppose this application.

1. The Storage Services and Wholesale Award 2020 (the Modern Award) covers the Applicant employer and the relevant employees,[2] but does not presently apply[3] because of the operation of the Agreement.

1. Section 219(2) of the Act provides that an (agreed) termination has no effect unless it is approved by the Commission.

1. Sections 219 to 222 of the Act provide as follows:

“219    Employers and employees may agree to terminate an enterprise agreement

Termination by employers and employees

(1)The following may jointly agree to terminate an enterprise agreement:

(a)if the agreement covers a single employer—the employer and the employees covered by the agreement; or

(b)if the agreement covers 2 or more employers—all of the employers and the employees covered by the agreement.

Note:For when a termination of an enterprise agreement is agreed to, see section 221.

Termination has no effect unless approved by the FWC

(2)A termination of an enterprise agreement has no effect unless it is approved by the FWC under section 223.

Limitation—greenfields agreement

(3)Subsection (1) applies to a greenfields agreement only if one or more of the persons who will be necessary for the normal conduct of the enterprise concerned and are covered by the agreement have been employed.

220Employers may request employees to approve a proposed termination of an enterprise agreement

(1)An employer covered by an enterprise agreement may request the employees covered by the agreement to approve a proposed termination of the agreement by voting for it.

(2)Before making the request, the employer must:

(a)take all reasonable steps to notify the employees of the following:

(i)     the time and place at which the vote will occur;

(ii)    the voting method that will be used; and

(b)give the employees a reasonable opportunity to decide whether they want to approve the proposed termination.

(3)Without limiting subsection (1), the employer may request that the employees vote by ballot or by an electronic method.

221      When termination of an enterprise agreement is agreed to

Single‑enterprise agreement

(1)If the employees of an employer, or each employer, covered by a single‑enterprise agreement have been asked to approve a proposed termination of the agreement under subsection 220(1), the termination is agreed to when a majority of the employees who cast a valid vote approve the termination.

Multi‑enterprise agreement

(2)If the employees of each employer covered by a multi‑enterprise agreement have been asked to approve a proposed termination of the agreement under subsection 220(1), the termination is agreed to when a majority of the employees of each individual employer who cast a valid vote have approved the termination.

222Application for the FWC’s approval of a termination of an enterprise agreement

Application for approval

(1)If a termination of an enterprise agreement has been agreed to, a person covered by the agreement must apply to the FWC for approval of the termination.

Material to accompany the application

(2)The application must be accompanied by any declarations that are required by the procedural rules to accompany the application.

When the application must be made

(3)     The application must be made:

(a)within 14 days after the termination is agreed to; or

(b)if in all the circumstances the FWC considers it fair to extend that period—within such further period as the FWC allows.”

1. The application was made beyond the period provided in s.222(3)(a) of the Act. That is, the agreement to terminate was made on 9 December 2022 and this application was lodged on 9 February 2023. The context for this includes that an earlier application mistakenly made under s.225 of the Act (a unilateral agreement termination application) came before the Commission in mid-January 2023 at which time it became evident that the present form of application may have been intended. That matter was adjourned for the Applicant to take legal advice and was subsequently discontinued in favour of the present application. I have exercised my discretion under s.222(3)(b) of the Act to extend the time for lodgement. I considered that it was fair to do so in all the circumstances including the explanation for the delay, the fact that the original application was made within 14 days and the prompt actions of the Applicant to seek and act on advice, the absence of prejudice caused by the delay, and the fact that there has been no evident change in circumstances since the ballot leading to the agreement to terminate. This course of action was also not opposed.

1. I observe that s.225 of the Act provides for the termination of enterprise agreements after their nominal expiry date. Such an application may be made unilaterally; that is, a single “party” to the agreement (the employer, an employee or an employee organisation that is covered) may apply without the agreement of the other parties. Different considerations apply to the potential termination of the instrument under that provision by virtue of s.226 of the Act. Although differently expressed, both agreement termination arrangements require the Commission to consider whether the termination is appropriate.[4]

1. Mr Ward, on behalf of the Applicant, submitted that the relevant parties had agreed to terminate the Agreement, that the agreement to terminate remained available to the parties notwithstanding the expiry of that instrument, and that all the requirements for a termination had been met.

1. I am satisfied that the parties can make this application pursuant to s.222 of the Act, despite the fact that the Agreement has passed its expiry date. In my view, s.222 remains available to the parties in these circumstances and there is no express or implied reason to apply the Act in a manner which means that s.226 is the only option available to parties to terminate a nominally expired enterprise agreement. That is, the Agreement continues in operation,[5] the Applicant and the relevant employees continue to be covered by the instrument, and the termination of the Agreement has been agreed following a process provided in the Act. This meets the requirements of s.219 and related provisions of the legislation.

1. Further, I consider that the apparent intention of the Act is that parties, in the circumstances evident here, effectively have two options. Make an agreement to terminate, in which case the relevant agreement-making and approval requirements will apply. Or alternatively, a single party may apply, and in that event, there are different approval requirements that apply, including a public interest test which would appear to be apposite given the capacity for a unilateral nature of the application to be made in that case.

1. I note that the approach I have adopted is consistent with other decisions of the Commission[6] and with that set out in the relevant explanatory memorandum.[7] It was also not suggested that the recent amendments[8] to s.225 (and related provisions) of the Act should lead to a different view.

1. The application was made within the further time allowed by the Commission and the required declarations that are to accompany such an application are in order.

1. I must approve the termination if the conditions set out in s.223 of the Act are met.

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

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

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

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

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

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

1. The Declaration in support of the termination provided by Mr Burbidge, Senior HR Business Partner, confirms that there are 7 employees covered by the agreement, with all casting a valid vote. 6 employees voted to terminate the agreement and did so following a process required by the Act. Section 222(1) of the Act requires that the Commission have regard to the number of employees who voted to determine whether the agreement to terminate has been made. In this case, a substantial majority of those who voted agreed and, by implication, supported this application.

1. The material provided to the employees in the lead up to the vote included the following:

·Toolbox talks to inform employees about the Applicant’s desire to terminate the Agreement.

·The main differences between the Agreement terms with the equivalent Modern Award provisions were explained to the employees at the Toolbox talks.

·A summary sheet and an example contract of employment and advice that a copy of the Modern Award which underpinned their terms and conditions would be placed on notice boards.

·Correspondence from the United Workers Union raising concerns and an accompanying document addressing the concerns raised by the Union.

·  The necessary information leading to the ballot, which included delaying the vote to provide more time for concerns to be addressed and then considered by the workforce.

1. I observe that the material provided to the employees appears to genuinely reflect the full implications of the proposed termination and is a fair comparison between the proposed new arrangements in conjunction with the modern award in contrast to the terms of the Agreement. The proposed arrangements and contracts were also modified in response to employee feedback and initial concerns. Further, the proposed termination was ultimately put to the ballot only after the Union delegate involved confirmed agreement to the proposed course of action and invited the Applicant to conduct the vote.

1. I am also satisfied, based upon the Declaration and the information now before the Commission, that the employees covered by the Agreement were given reasonable opportunity to decide their position and that the termination was agreed, in both cases, as required by s.223(a) and (b) of the Act respectively. Further, I find that there are no other reasonable grounds for believing that the (majority) of employees have not agreed to the termination. In that regard, I also observe that the employees were advised of the application and the hearing and provided with an opportunity to independently raise any continuing concerns with the Commission. No concerns were raised with the Commission including anything that would challenge the genuineness of the termination agreement. The involvement of the United Workers Union in the process and its position on the application also support that finding.

1. This leaves the question as to whether the Commission is satisfied that the termination of the Agreement is appropriate.

1. The Employer has provided revised contracts of employment to each of the employees that provide for wage levels well in excess of those formally established by the Agreement and the Modern Award. The contract arrangements also apply many of the more beneficial terms of the Agreement, and on others, the provisions ensure that the employees are no worse off under the new arrangements. The one significant exception is that the more generous redundancy scheme in Agreement is not retained. Whilst this is a factor militating against the appropriateness of termination, the Commission must consider the entire package of proposed arrangements including the additional or maintained benefits. Further, the proposed new arrangements provide that the Knauf Gypsum Redundancy Policy, which retains a maximum payout of 52 weeks, will be applied. In that regard, the Applicant responded to an invitation from the Commission to provide the following undertaking:

“Knauf will maintain the current terms of its redundancy policy titled ‘USG Boral Redundancy Standard Operation Procedures Policy’ as at the date of termination of the enterprise agreement for the following seven employees: (names provided), for a period of two years.”

1. The Applicant also provided an additional clarification in the following terms:[9]

“The common law contract originally advanced to the employees predated the commencement of the Fair Work Legislation Amendment (Secure Jobs and Better Pay) Act 2022 (Cth) and the commencement of Schedule 1 of the Fair Work Amendment (Paid Family and Domestic Violence Leave) Act 2022 (Cth). The following elements of the contract will be amended to ensure statutory compliance with these changes:

a)the pay secrecy clause at clause 4.4 will be removed; 

b)clause 12 will be amended to include family and domestic violence leave; and

c)the definition of confidential information in Annexure A will be amended to remove the reference to matters related to ‘terms of employment’

1. The undertaking and clarification are both appropriate, and I have relied upon them in making this decision. The change in redundancy arrangements were significant and the confirmation of the policy was an important part of the explanation provided to the employees. Although the undertaking has a time limit, it was not unreasonable to contemplate that some changes to the policy may be made in the future. I anticipate that the Applicant would follow due process should that circumstance arise.

1. Having regard to all of the circumstances including the views of the United Workers Union as a party covered by the Agreement, I consider that it is appropriate to approve the termination of the Agreement.

1. Given the above findings, the Commission is obliged to terminate the Agreement under s.222 of the Act and I so determine.

1. In accordance with s.224 of the Act, I have determined that the termination of the Agreement will operate with effect from 11.59pm 19 March 2023. This coincides with the end of the present pay period.

1. Access to a copy of this Decision is to be provided to the relevant employees for their information.

DEPUTY PRESIDENT

[1] Leave was granted to amend the name of the Applicant employer to cite the correct entity.

[2] Section 48 of the Act.

[3] Section 57 of the Act.

[4] Sections 223(d) and 226(a) of the Act.

[5] S.54 of the Act.

[6] Including Nowshire Pty Ltd [2010] FWA 2663, Guide Dogs Association of SA and NT Inc [2017] FWCA 563, Sustainable Energy Infrastructure Pty Ltd as trustee for Sustainable Energy Infrastructure Trust. [2019] FWCA 4966 and Titan Wheels Australia Pty Ltd [2020] FWCA 5715.

[7] Explanatory Memorandum to the Fair Work Bill 2008 at 924. The Memorandum makes reference to the agreed termination being available at any time whilst the enterprise agreement is in operations. S.54 confirms that a nominally expired enterprise agreement remains in operation, subject to certain caveats that are not applicable here.

[8] Because of the enactment of the Fair Work Legislation Amendment (Secure job, Better Pay) Act 2022.

[9] To deal with an issue that arose after the ballot process because of the enactment of legislation impacting upon pay secrecy arrangements.

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