Margin Brothers Pty Ltd T/A Campbell IGA Friendly Grocer
[2010] FWA 2105
•15 MARCH 2010
[2010] FWA 2105 |
|
DECISION |
Fair Work Act 2009
s.185—Approval of enterprise agreement
(AG2009/20477)
Wholesale and retail trade | |
COMMISSIONER CAMBRIDGE | SYDNEY, 15 MARCH 2010 |
Application for approval of the Margin Brothers Pty Ltd Enterprise Agreement 2009.
[1] An application has been made for approval of an enterprise agreement known as the Margin Brothers Pty Ltd Enterprise Agreement 2009 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Margin Brothers Pty Ltd (the Employer). The Agreement is a single-enterprise agreement.
[2] The Agreement was made during the bridging period 1 as defined in the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act), accordingly, when considering whether to approve the Agreement I have taken into account the provisions of Part 2–4 of Chapter 2 of the Act as modified by Schedule 7 of the Transitional Act.
[3] The application was lodged at Sydney on 23 December 2009. The application included a Statutory Declaration of Matthew Farrah, made on behalf of the Employer and dated 22 December 2009, (the Declaration). The Declaration stated that the Agreement was made on 17 December 2009, thereby satisfying the 14 day lodgement time limit established by subsection 185 (3) of the Act.
[4] Part 2-4 of the Act includes various procedural requirements that must be satisfied before Fair Work Australia (FWA) can approve of an enterprise agreement. In this instance FWA identified certain concerns that related to both the procedural requirements and terms of the Agreement that appeared to offend the no-disadvantage test. These concerns were documented and provided to the Employer.
[5] Subsequently FWA received correspondence dated 5 February 2010, from the Employer’s representative, Enterprise Initiatives Pty Ltd (EI Legal). This correspondence provided responses to the concerns raised by FWA. On 2 March 2010, FWA held a Hearing at which time Ms A Grant appeared for the Employer and there was no appearance by or on behalf of the employees to be covered by the Agreement.
Procedural Concerns
[6] One of the procedural requirements contained in Part 2 – 4 of the Act is specified by subsections 180 (5) and (6) which state as follows:
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.
[7] Further, it is important to note the following provisions of sections 186 and 188 of the Act:
186 When FWA must approve an enterprise agreement—general requirements
Basic rule
(1) If an application for the approval of an enterprise agreement is made under section 185, FWA must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: FWA may approve an enterprise agreement under this section with undertakings (see section 190).
Requirements relating to the safety net etc.
(2) FWA 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…
[Emphasis added]
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 FWA 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.
[Emphasis added]
[8] According to the Declaration, the Agreement, if approved, would apply to 23 employees in total, 17 of which were under 21 years of age. Only 10 of the 23 employees voted in the ballot to approve the Agreement and 9 voted in support of the Agreement. FWA raised concern that apparently a significant number of employees did not vote, such that there were sufficient numbers who did not vote to potentially change the outcome of the ballot. Ms Grant referred to the provisions of subsection 182 (1) of the Act which states:
182 When an enterprise agreement is made
Single-enterprise agreement that is not a greenfields agreement
(1) If the employees of the employer, or each employer, that will be covered by a proposed single-enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement.
[Emphasis added]
[9] Consequently the Agreement was made in compliance with subsection 182 (1) of the Act. In passing it should be noted that these provisions create significant potential for agreements to be made without majority support of the employees who are to be covered by the agreement and thus open the prospect for undemocratic outcomes. In this instance the concerns raised by FWA were related to the provisions of s. 188 of the Act and whether FWA could be satisfied that the Agreement had been genuinely agreed to by the employees. These concerns were amplified by two particular issues.
[10] Firstly, 17 of the 23 employees to be covered by the Agreement were under the age of 21 and therefore the provisions of subsection 180 (5) obtain some significance. In particular FWA sought evidence to establish what reasonable steps the Employer took to ensure that the terms of the Agreement and the effect of those terms were explained to the young employees in an appropriate manner taking into account the particular circumstances and needs of the young employees. In this regard, the Declaration included the following:
“For Employees who were under 21 years of age, the Employer took all reasonable steps to ensure that these particular Employees were involved in these staff meetings and that they each understood the terms of the proposed Margin Brothers Pty Ltd Enterprise Agreement 2009 and the effect of those terms.”
[11] FWA was not provided with any further evidence regarding any steps that the Employer took which specifically related to the young employees. It appeared that the apparent requirement to have the young employees attend at two staff meetings represented the extent to which the Employer believed that it had addressed the particular circumstances and needs of the young employees. In this regard, during the Hearing on 2 March 2010, FWA inquired as to whether there had been any step taken to invite parental involvement in any aspect of the Agreement approval process. Ms Grant advised that she had no instructions regarding this particular issue.
[12] The second issue of concern as to whether the provisions of section 188 of the Act could be satisfied involved an unusual matter relating to the employee representative signature that appeared at Schedule B - Signatures to the Agreement. The employee representative signature appeared to have been crossed out. This apparent irregularity was raised with the Employer and a further Statutory Declaration of Matthew Farrah was provided. This further Statutory Declaration contained the following:
“1. After I signed the Schedule B signature page to the proposed Margin Brothers Pty Ltd Enterprise Agreement 2009 on behalf of the Employer, I marked with a line where the Employee Representative was to sign and have their signature witnessed.
2. The line that is shown through the Employee Representatives [sic] signature was marked on the Schedule B Signature page before the Employee Representative signed and his signature witnessed.”
[13] Unfortunately Mr Farrah did not attend to provide witness evidence at the Hearing. The material provided by Mr Farrah in his further Statutory Declaration must on any objective analysis, require further explanation. It is at best, peculiar that anyone would mark a half page signature box with an unbroken line from bottom left hand corner to top right-hand corner as a means to indicate to someone else where they should sign the document. During the Hearing FWA was provided with the original signature page of the Agreement document. An examination of this document appeared to show that the line across the employee representative signature box was made after the other writing. The unbroken line across the signature box appeared to have been made over the other writing that appeared therein.
[14] The concerns about compliance with s. 188 of the Act were not the only matters of concern with the application. A number of terms contained in the Agreement require mention in regard to the no-disadvantage test.
No-Disadvantage Test Concerns
[15] The relevant reference instrument for the no-disadvantage test was identified to be the Retail and Wholesale Industry – Shop Employees – Australian Capital Territory – Award 2000 (the Award).
Dismissal with 1 Day’s Notice
[16] Clause 5.1 of the Agreement provided for termination of an employee on 1 day’s notice during the probation period. There appeared to be no similar provision in the Award. Ms Grant submitted that because the Agreement was made during the bridging period the relevant sections of the Workplace Relations Act 1996, (the WR Act), in particular s. 638, would be applicable to the Agreement and thereby permit the 1 day notice for termination of employment.
[17] Ms Grant acknowledged that from 1 January 2010, s. 117 of the Act would need to be observed and therefore 1 week notice of termination of employment would apply, contrary to the 1 day notice contained in clause 5.1 of the Agreement. Ms Grant further submitted that as the no-disadvantage test had to be made at the test time, the 1 day notice provision should not represent any disadvantage. Although I accept that this approach is correct, there is questionable practical utility in having a lesser term expressed in the Agreement which is to be disregarded in favour of a more beneficial term which is absent from the document.
No Minimum or Maximum Engagement
[18] Clause 5.3 of the Agreement appeared to provide a minimum engagement period for a casual employee of 1 hour. Clause 13.4.3 (g) of the Award stipulated a 3 hour or in some circumstances a 2 ½ hour minimum engagement for casuals. During the Hearing on 2 March, Ms Grant suggested that clause 5.3 of the Agreement was not a provision that went to minimum engagement at all and the following exchange occurred:
“THE COMMISSIONER: If I accept that what you're saying is wrong and that I'm misguided by that, what would the minimum engagement for a person be?
MS GRANT: We don't have minimum engagement.
THE COMMISSIONER: So you could engage me for 10 minutes?
MS GRANT: That could potentially be the case, but that certainly wouldn't be the intention of that particular clause. It's really just to provide for completeness the definition of a casual employee.
THE COMMISSIONER: So in fact my concern about there being only a minimum engagement of one hour arises incorrectly from that provision, but in fact there is no minimum engagement term at all anywhere if this instrument is approved?
MS GRANT: That's correct because there is no work parameters…” 2
Serious Misconduct for Failure to Follow Policy
[19] Clause 5.4 of the Agreement appeared to provide for dismissal from employment without notice in circumstances where serious misconduct is said to include, inter alia, the employee not complying with the policies and procedures of the employer, albeit wilful or deliberate non compliance. Clause 15.1.5 (a) of the Award provided for dismissal without notice for serious misconduct and did not suggest that serious misconduct included non compliance with the policies and procedures of the employer.
[20] On this issue Ms Grant stated that clause 5.4 of the Agreement “…is not intended to apply to employees who breach a policy or procedure of the employer that is not deemed to be wilful or deliberate…” I am not greatly comforted by this explanation. There could be numerous circumstances envisaged where an employee might deliberately fail to comply with a policy or procedure of the employer and that conduct would not on any objective and reasonable assessment, amount to serious misconduct justifying summary dismissal.
Classification at Employer’s Discretion and No Higher Duties
[21] The next issue of concern related to clause 6 of the Agreement which prescribed 3 classifications of employees. During the Hearing Ms Grant confirmed that the Employer retained complete discretion as to the classification of any particular employee. Further, in the absence of any provision to provide payment for higher duties, an employee could perform work of a higher classification for an indefinite period without either re-classification or any payment to reflect the higher duties.
Averaged Ordinary Hours Inclusive of all Penalties and Allowances
[22] The hours of work prescriptions contained in Clause 7 of the Agreement represented perhaps the most contentious issue for consideration. Clause 7.1 provided for ordinary hours of work at any time on any day if not in excess of 38 hours per week averaged over 26 weeks.
[23] The Employer contended that higher hourly rates of pay compensated for all penalty rates and other allowances that were contained in the Award. A number of “spread sheet” documents were said to demonstrate the compensation that encompassed all penalty rates in the Award that might apply to Saturday, Sunday, Public Holiday, and night/early morning work, as well as any allowances (uniform allowance was said to be the only allowance that would be applicable). These “spread sheet” documents compared the Award with the Agreement over a 52 week period and were based upon “average weekly working patterns” of employees. During the Hearing an examination of the spread sheet comparison documents was undertaken.
[24] The corollary of the analysis using two particular examples from the “spread sheet” comparison documents was that after 52 weeks of working the assumed pattern of engagement, an employee would be paid $199.28 or $299.98 more under the Agreement as opposed to the Award. This annual amount translated to 10 or 16 cents per hour and as such provided support for the Employer’s assertion that there was no disadvantage created by the “loading” of all penalties and allowances into the rate to apply to ordinary hours which can be worked at any time of the day or night on any day of the week.
[25] However, the advantageous outcome relied upon the assumed pattern of engagement over a 52 week period being maintained. If the pattern changes to include say, more Saturday or Sunday work, or more night work, or extended engagements (which under the Award attracted overtime), or if more than the assumed number of 4 Public Holidays are worked, then there is real prospect that the result would be a loss in pay under the Agreement when compared to the Award. Further, periods of employment of less than 52 weeks may also distort any valid comparisons, particularly if the period involved work on a number of Public Holidays and or weekends and nights.
Penalties to be Claimed in Advance
[26] Clause 7.3 of the Agreement stipulated that penalty payments for working “additional hours” must be claimed by the employee in advance and in writing. “Additional hours” were those outside of the ordinary hours, but the ordinary hours were established by an average of 38 over a 26 week period. Just how an employee could anticipate any “additional hours” that might occur for the future 26 week period, and when any 26 week period might start and finish, created some mind expanding challenges. The Employer was prepared to provide an undertaking to the effect that this term would be “void and of no effect.”
Preferred Hours
[27] Clause 7.4 of the Agreement provided for the working of “preferred hours” at ordinary rates. Although the Employer was prepared to give undertakings to change some of the words in this clause a fundamental difficulty remained. In circumstances where there is no minimum or maximum length of engagement the working of “preferred” hours even if only when requested by the employee, could significantly distort the pattern of engagement upon which the loaded hourly rate was constructed and thereby create a pay disadvantage when compared to the Award.
[28] In any event, the concept of “preferred” hours represents the antithesis of industrial regulation. It seems to me to be oxymoronic to create prescriptions for governing the arrangements for work and then permit individuals to agree to disregard those prescriptions.
Cashing Out of Annual and Sick Leave
[29] Clauses 9.1 and 9.2 of the Agreement appeared to have the effect of allowing for the cashing out of annual leave and sick/carer’s leave. These clauses established a loaded hourly rate which when paid, means that although annual or sick/carer’s leave can be taken, no payment is made at the time of taking the leave.
[30] Ms Grant submitted that these provisions did not represent cashing out of the leave because the entitlement to take the leave still existed albeit without payment for the period of the leave being made at the time of taking the leave. This submission would be correct in instances where an employee took the leave. The submission fails when an employee does not take the leave. In those circumstances the practical outcome remains, that is, a period of paid annual leave is not taken but instead payment is made, whether that be in the hourly rate or at some fixed point in time as a lump sum is immaterial. Consequently, in such circumstances these clauses of the Agreement breach the National Employment Standards as contained in ss. 92, 93 and 94 of the Act.
Employer Choice of Superannuation Fund
[31] Clause 13 of the Agreement stipulated that the Employer is to nominate the superannuation fund for employees’ contributions. The Award specified one particular fund for superannuation contributions. The Employer submitted that section 32C (6) of the Superannuation Guarantee (Administration) Act 1992 permits an enterprise agreement to specify a fund or funds for superannuation payments.
[32] The comparison between Award and Agreement in respect to this issue must favour the Award which specified a fund as opposed to the Agreement which provided the Employer with complete discretion to choose a fund. The provisions of clause 22 of the relevant Modern Award, the General Retail Industry Award 20120 (MA000004) are superior to the Agreement and the Award and should be adopted.
Proof of Sickness Required for All (Unpaid) Absences
[33] Clause 15.4.2 of the Agreement required proof of inability to attend in all cases of absence on sick/carer’s leave. During the Hearing Ms Grant confirmed that even in cases where sick leave was to be taken without payment for the absence (because it was loaded into the hourly rate), documentary proof of inability to attend was required.
No Payment of Wages
[34] The Agreement did not contain a payment of wages clause. Clause 20 of the Award specified a variety of matters relating to when and how wages are to be paid. In answer to the question “How and when do you get your wages?” Ms Grant said that she would have to seek instruction.
Precedent
[35] In final submissions Ms Grant said that since the commencement of the Act there had been numerous approvals of agreements that did not contain “work parameters” and were therefore similar to the terms of the Agreement. In this regard, 14 file numbers were provided as identifying agreements that had been approved by other members of FWA. Ms Grant said that this established “significant precedent” to support the approval sought in this instance.
[36] On this point I note and endorse the comments of Larkin C in Elkedra Pastoral Company Pty Ltd 3 made at paragraph 24 of that Decision.
Conclusions
[37] The Agreement if approved, would predominantly apply to young employees. Young employees are relevant employees specifically mentioned in subsection 180 (6) (b) of the Act. In this context I have carefully reviewed the evidence provided by way of the two Statutory Declarations made by Matthew Farrah, and the submissions made in support of the application.
[38] The evidence and submissions made in respect of the procedural issues raised in connection with subsection 180 (5) of the Act and other issues relevant to the provisions of s.188 of the Act have not provided a satisfactory basis upon which to conclude that the Agreement was genuinely agreed to by the employees. Therefore the Agreement does not satisfy s. 188 of the Act.
[39] Further, an examination of the contents of the Agreement as compared with the relevant reference instrument, has established that the Agreement does not meet the no-disadvantage test. Various terms of the Agreement particularly when considered in aggregate, provide manifest disadvantage to the employees that were to be covered by the Agreement.
[40] Consequently, for the reasons as stated above, the application does not satisfy the relevant requirements of the Act, nor does it pass the no-disadvantage test. Therefore the approval sought pursuant to s. 185 is refused and the application is dismissed.
COMMISSIONER
Appearances:
Ms A Grant, solicitor from Enterprise Initiatives Pty Ltd, for the applicant.
Hearing details:
Sydney.
2010:
March, 2.
1 Item 2, Part 1, of Schedule 2.
2 Transcript of proceedings 02/03/10 @ PN 66 – PN 72.
3 Elkedra Pastoral Company Pty Ltd [2010] FWA 2087, 12 March 2010.
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