McMahon Services Australia Pty Ltd
[2024] FWCA 4190
•28 NOVEMBER 2024
| [2024] FWCA 4190 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
McMahon Services Australia Pty Ltd
(AG2024/3584)
MCMAHON SERVICES AUSTRALIA PTY LTD (SCAFFOLDING) ENTERPRISE AGREEMENT 2024
| Building, metal and civil construction industries | |
| DEPUTY PRESIDENT COLMAN | MELBOURNE, 28 NOVEMBER 2024 |
Application for approval of the McMahon Services Australia Pty Ltd (Scaffolding) Enterprise Agreement 2024
McMahon Services Australia Pty Ltd (McMahon) has made an application under s 185 of the Fair Work Act 2009 (Act) for the Commission to approve the McMahon Services Australia Pty Ltd (Scaffolding) Enterprise Agreement 2024 (Agreement). The Construction, Forestry and Maritime Employees Union (CFMEU), a bargaining representative for the Agreement, lodged an F18 declaration by which it objected to the application on the grounds that the Commission could not be satisfied that the group of employees covered by the Agreement was ‘fairly chosen’ (see s 186(3)) or that the Agreement passed the ‘better off overall test’ (BOOT) against the Building and Construction On-Site Award 2020 (Building Award) (see s 186(2)(d)). It further contended that the Commission could not be satisfied that the Agreement was genuinely agreed to by employees because McMahon had not complied with s 180(5) by taking all reasonable steps to ensure that the terms of the Agreement were explained to employees (ss 186(2)(a) and 188(4A)). The CFMEU asked to be heard on its objections. The parties filed written submissions and materials pursuant to my directions.
Fairly chosen
The CFMEU contended that the group of employees covered by the Agreement was not fairly chosen because it was not relevantly distinct and unfairly excluded other employees. Clause 1.5.1 states that the Agreement is made between McMahon and employees of the company who are employed in its ‘Scaffolding operational unit’ and who are employed in one of the classifications listed in clause 4.1.1.1. These classifications are yard hand, driver/general hand, labourer, basic ticketed scaffolder, intermediate scaffolder, advanced scaffolder, and yard leading hand. Clause 1.5.1 does not explicitly state that the employees it describes are those ‘covered’ by the Agreement, however it is clear that this is its purpose. Clause 1.5.1 then goes on to state:
‘For clarity, this Agreement does not apply to employees covered in any other business unit including, but not limited to, the Events business unit.’
The CFMEU said that because the Agreement did not cover all of McMahon’s employees, s 186(3A) of the Act required that the Commission take into account whether the chosen group was ‘geographically, operationally or organisationally distinct’, and that in this case the chosen group was none of these things. It said that, based on information available on McMahon’s website, the events business unit involved storage, dispatching, distribution, installation and maintenance of temporary scaffolding, but that this was also the work of the scaffolding operational unit. The CFMEU said that there was no geographical, operational or organisational distinction between the construction and events parts of the company’s scaffolding business, and that it was unfair for the Agreement to cover the former, which was part of the work of the scaffolding unit, but not the latter.
The CFMEU submitted that employees in the events unit used the same scaffolding yard as all other scaffolding employees, and were formerly managed by one person, Claude Scalzi. In this regard, the CFMEU had in 2023 objected to an application for approval of an enterprise agreement made by McMahon in terms similar to the Agreement (the application was later withdrawn) and had relied on a witness statement of its organiser, Mr Hera-Singh, who described his discussions with Mr Scalzi about the company’s intention at that time to separate the two sides of its scaffolding business into construction and events. The CFMEU said that Mr Hera-Singh’s evidence in the earlier matter, which was repeated in the present proceeding through a new statement, supported its contention that the scaffolding operational unit was not distinct, and that the group of employees covered by the Agreement was not fairly chosen. It said that the fact that there had been a proposal to separate the two sides of the business showed that they were, or at least had been, one and the same unit. The CFMEU said that in these circumstances, the Commission could not be satisfied that the group of employees covered by the Agreement was geographically, operationally or organisationally distinct, and that this weighed strongly in favour of a conclusion that the group was not fairly chosen.
The CFMEU submitted that the exclusion of employees in the events part of McMahon’s business was unfair as it was contrary to the interests of those employees. It said that the unfairness was underscored by the fact that McMahon considered such ‘off-site’ employees to be covered by the Miscellaneous Award 2020 (Miscellaneous Award) and that it appeared that there would be one group of offsite workers covered by the Agreement and another that was excluded from it and covered instead by the Miscellaneous Award. The CFMEU further submitted that the work of employees in the events unit was functionally indistinguishable from work that was covered by the Agreement, and that, consistent with the observations of the Full Bench in Aerocare [2017] FWCFB 5826 at [30], this weighed in favour of a conclusion that the group covered by the Agreement was not fairly chosen.
McMahon contended that the Commission should be satisfied that the group of employees covered by the Agreement was fairly chosen. It said that the scaffolding business unit was clearly operationally and organisationally distinct from the events business unit, and that there was nothing unfair about the coverage of the Agreement. It relied on the evidence of Ian Miller, the manager of its scaffolding operational unit, the effect of which was to demonstrate that the two business areas were fully separated in mid-2023. Mr Miller’s evidence established that the two units were now parts of separate operational divisions of the company and had separate managers. Mr Scalzi had left the company and Mr Miller was recruited as the scaffolding unit manager. Mr Miller’s evidence also showed that the two units had separate employees and separate financial accounts, they operated in separate industries or markets, and they performed distinct work, using separate specialised equipment. The only similarities identified by the CFMEU were that the equipment used by the two units was housed in the same large commercial premises, and that both units used scaffolding componentry, however each unit was a separate subtenant at the premises and had its own space, and each was operationally distinct at that site. In this regard the units have separate forklifts and on-charge any services that they provide to the other unit. As to the componentry, the inventories are physically distinct.
McMahon contended that the CFMEU had quoted selectively from the company’s website description of its events business unit. In fact, the website explains that the events business involves temporary grandstands, scaffolding and events infrastructure. McMahon said that scaffolding a building on a construction site was not the same thing as setting up grandstands, marquees and like structures. The skills involved in erecting scaffolding on building sites on the one hand and grandstand kits on the other hand were very different. Further, events work has a heavy focus on logistics and other componentry, such as modular seating systems, which was plainly different from erecting scaffolding on a construction site.
I find that the group of employees covered by the Agreement is operationally and organisationally distinct within the meaning of s 186(3A). I accept the evidence of Mr Miller. It was detailed, relevant and entirely credible. McMahon’s scaffolding operational unit is clearly a distinct part of the company’s business, both in terms of the work it undertakes and the services it provides to its clients, and the overall organisational structure of the company. In particular, the scaffolding business unit is separate and distinct from the events unit. That both units undertake scaffolding work and use different parts of a common yard does not alter this conclusion. The work of construction-related scaffolding is different from events-related scaffolding. It is deployed in connection with the erection of permanent structures, rather than temporary ones such as grandstands, gazebos, fences and barriers. The two units are run separately. The work they perform is not interchangeable, and is not interchanged, as Mr Miller explained. Further, the business that McMahon conducts through these two units is different. The detail of the evidence, and the accumulation of the detail, point decisively to a conclusion that the work of the two units is operationally distinct from one another, and from the other areas of the company’s business. The bigger picture is that McMahon is a large employer with a wide variety of service offerings that include operating as a head contractor and as a specialist subcontractor in various sectors, including mining, industrial services, defence support, marine and recycling. The events unit came about as a result of the company’s purchase of certain modular grandstand systems and equipment after another business went into liquidation. It evolved to become an operationally and organisationally distinct area of McMahon’s broader undertaking. My finding that the group of employees covered by the Agreement is operationally and organisationally distinct weighs in favour of a conclusion that the group is fairly chosen.
I accept the CFMEU’s contention that it is relevant, when assessing the fairness or otherwise of the chosen group, to consider the interests of those outside that group, and in this case, the interests of the employees in the events business unit. No direct evidence was led about the views of any of these employees. The union suggested that unfairness would accrue to those not covered because they would miss out on the wage increases and other benefits provided under the Agreement, and that the unfairness was compounded in the case of employees covered by the Miscellaneous Award. I disagree. The employees in the events unit and other units who are not covered by the Agreement have the right under the Act to bargain for their own agreement. In my assessment, the excluded employees have no special vulnerability or disadvantage that might militate in favour of a conclusion that they had been unfairly excluded from the coverage of the Agreement (contrast the situation in Aerocare). Further, the fact that excluded employees might be subject to the operation of an award is not of itself a matter that demonstrates unfairness, nor does unfairness arise simply from the fact that employees not covered by an agreement will be paid less than those who are so covered, as this is an ordinary consequence of bargaining. The CFMEU was evidently concerned about the prospect of the Agreement leaving outside its scope a poorly remunerated underclass of offsite workers. However, the evidence was that the events unit only employs one scaffolder, who is on a salaried contract. And even if the events business grows and hires many more workers, I see no reason why those employees, and their union, cannot bargain effectively with McMahon for a new agreement.
Finally, I do not accept the CFMEU’s contention that employees in the events unit are functionally indistinguishable from employees in the scaffolding unit. The facts of this case are very different from those that were before the Commission in Aerocare. The scaffolding operational unit is a thing of operational and business substance. It operates distinctly from other units of the company. It is both operationally and organisationally distinct. It is also geographically distinct in the sense that its work is performed mainly on building sites and in one part of an offsite yard. But in any event, s 186(3A) is cast in disjunctive terms (geographically, operationally or organisationally distinct). A finding that the group is distinctive in any of these senses tells in favour of a conclusion that the group is fairly chosen. I further find that there is nothing unusual, and nothing unfair, about the coverage of the Agreement in this case. I am satisfied that the group of employees covered by the Agreement was fairly chosen, as required by s 186(3) of the Act.
The BOOT
The CFMEU submitted that the Agreement did not pass the BOOT against the Building Award because the higher rates of pay and other benefits in the Agreement were not sufficient to compensate employees for the loss of award entitlements. It focused on several respects in which the Agreement was said to be detrimental to employees. First, in its F18, the CFMEU noted that clause 5.1.1 of the Agreement sets the start of ordinary hours at 6.00am (5.00am for a driver/general hand), whereas in the Building Award it is 7.00am, or by agreement 6.00am, with overtime or shift penalties payable in respect of earlier starts. Secondly, in its written submissions, the CFMEU said that clause 5.8.8 of the Agreement allows employees to commence work one day a week prior to 6.00am (5am for a driver/general hand) without that day’s work being considered shift work, whereas under the Building Award employees would be entitled to the broken shift loading in clause 17.1(d), which would see them paid 150% for the first 2 hours and 200% thereafter. The CFMEU attached modelling to demonstrate that a labourer would be some $89 worse off under the Agreement in a week in which the early start was worked. Thirdly, the CFMEU submitted that employees who might be required to travel to distant sites would be worse off under the Agreement, because the distant travel benefits in clause 7.2 of the Agreement were less generous than those in clause 26.4 of the Building Award.
McMahon submitted that the higher wages and other benefits in the Agreement were sufficient to render all employees better off overall than they would be under the Building Award despite the removal or alteration of benefits contained in the Award. As to the second and third matters above, McMahon said that, as Mr Miller’s evidence had shown, it was unlikely that there would in fact be early starts or travel requirements that would trigger the broken shift or distant travel benefits in the Building Award. Mr Miller said that it would be rare, if ever, that employees would commence work prior to 6.00am. He also said that since the inception of the scaffolding unit there had been no instances of employees having to travel beyond the 50km radial of the Adelaide GPO without being provided with accommodation such that the work was considered to be a case of living away from home. Nevertheless, McMahon said that it did not want to pass the BOOT on the basis of assumptions and therefore offered written undertakings to address both of these matters.
The first undertaking states that clause 5.8.8 of the Agreement will not apply to labourers. Modelling submitted by McMahon indicates that no BOOT concerns arise in respect of other employees because of the higher margin by which their rate of pay under the Agreement exceeds the relevant award rate. I agree. The second undertaking provides that labourers who more than once in a given week travel to a site that would entitle them to distant work payments under clause 26.4 of the Building Award will be subject to a reconciliation; for other employees, this will occur if they travel in this way more than 4 times in a week. The reconciliation will be conducted by the company and will ensure that the gross earnings received by the employee for the relevant period are more than they would have been under the Building Award, and if there is a shortfall, this will be paid to the employee, plus $1.00, in the next pay period. Again, the different treatment in this undertaking of labourers and other employees is a consequence of the margin by which wages under the Agreement exceed award rates. For labourers, the potential BOOT concern arises on the second occasion of a distant journey, for others it occurs on the fifth occasion.
Given the evidence of Mr Miller, the circumstances that are the subject of the undertakings are likely to be rare. Nevertheless, the matters raised by the CFMEU are sufficient for me to hold a ‘concern’ in connection with the satisfaction of the BOOT, for the purposes of s 190 of the Act. I note that to hold a concern does not signify any final conclusion that the relevant approval requirement would not be met in the absence of an undertaking to address it. It is sufficient that the Commission apprehend that an approval requirement might not be met. The undertakings meet my concerns. I am satisfied that they do not result in substantial changes to the Agreement and do not cause financial disadvantage to any employees. After the hearing, a revised version of the undertakings was submitted to the Commission with certain corrections. I sought the views of the CFMEU as a bargaining representative about the undertakings. I have decided to accept the undertakings.
I have taken into account the other respects in which the Agreement excludes or reduces an award benefit and is therefore less generous in these particular respects. I do not propose to recite them. However, having regard to the superior wages and other more beneficial conditions that employees will receive under the Agreement, and having regard also to the undertakings I have referred to above, I am satisfied that each award covered employee, and each reasonably foreseeable employee, would be better off overall if the Agreement applied to the employee than if the relevant modern award applied. In considering this matter, I have undertaken a global assessment in accordance with the provisions of s 193A, including by considering the views of the persons identified in s 193A(3).
Explanation of the Agreement
The CFMEU contended that McMahon did not take all reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained to the employees as required by s 180(5) of the Act, and that accordingly the Commission could not be satisfied that the Agreement had been genuinely agreed to by employees covered by the Agreement (see s 186(2)(a) and 188(4A). The CFMEU contended that the explanatory document that McMahon gave to employees about the Agreement was misleading in several respects.
First, it submitted that the explanation of clause 5.8.8 of the Agreement merely noted that neither the existing enterprise agreement nor the relevant awards provided for an exception that allowed work to commence before 6.00am once per week without this amounting to a morning shift. The CFMEU said that the document failed to explain that this exception was detrimental to employees compared with their existing entitlements, nor did it explain the extent of the detriment. I do not accept this. In my view it is clear from the context of the relevant passage that the exception is a detriment, and it is clear what that detriment is. Further, the introductory comments in the section dealing with clause 5.8 states that there are significant differences as against the 2017 Agreement and the Miscellaneous Award and although the Agreement is more consistent with the terms of the Building Award, there were exceptions to this. The document goes on to describe how shift work provisions will operate under the Agreement and discusses differences as against the other instruments.
The CFMEU further contended that the explanation of clause 7.2, which relates to distant travel, was deficient in stating that the benefits under the Agreement were ‘worded differently’ but ‘consistent’ with the 2017 Agreement and that there was no similar benefit in the Miscellaneous Award. Again, the CFMEU said that the document failed to identify this provision as detrimental and did not explain the extent of the difference. It said that this was an important provision that entailed significant detriment and that it ought to have been highlighted as such in the explanatory materials. However again, I consider that it is clear from the context of the document as a whole that the difference is a detriment and what the detriment is.
I am satisfied that McMahon complied with s 180(5). Further and in any event, any shortcoming in respect of the employer’s explanation of these provisions would be substantively cured by the undertakings that have been offered. It is well-established that undertakings may address concerns about compliance with s 180(5) (see CFMMEU and others v Specialist People Pty Ltd[2019] FWCFB 7919).
Other matters
Section 205A(1) of the Act states that an enterprise agreement must include a delegates’ rights term for workplace delegates to whom the agreement applies. Section 205A(2) states that if the delegates’ rights term is less favourable than the delegates rights term in one or more awards that cover the workplace delegates, the term has no effect, and the most favourable term of those in the modern awards, as determined by the Commission, is taken to be a term of the enterprise agreement. However, in cases where, contrary to s 205A(1), there is simply no delegates rights clause in the Agreement, the Act does not stipulate a consequence. Unlike the position in relation to the requirement that agreements contain flexibility and consultation clauses (ss 202(1) and 205(1)), there is no provision that deems a term to apply (contrast ss 202(4) and 205(2)). Further, the presence of a delegates’ rights term in an agreement is not an approval requirement in ss 186 or 187.
Although the Agreement does not deal expressly with delegates’ rights, its consultation and dispute resolution provisions can be regarded as constituting delegates’ rights terms within the meaning of s 12 of the Act, insofar as they confer rights on employees to be represented. Such representatives can include delegates. Once engaged by an employee for the purposes of consultation or disputes procedure representation, it can reasonably be argued that delegates have a right to participate in those processes. To the extent that these clauses are delegates’ rights terms, they are less favourable than those in the Building Award. It would be available to the Commission to determine that the delegates’ rights term in the Building Award is taken to be a term of the Agreement pursuant to s 205A(2). However, one complication with this course is s 205A(2)(a), which states that a delegates’ rights term in an agreement that is less favourable than its award counterpart has no effect. In my view the safer and preferrable course is simply for the Commission to vary the Agreement under s 218A to correct an obvious defect or irregularity (the omission of a delegates’ rights clause contrary to s 205A(1)), by inserting the delegates’ rights clause from the Building Award. I vary the Agreement accordingly.
I note that employees were provided with a notice of employee representational rights in the pre-reform format of that document. Nevertheless, I am satisfied that this is a minor procedural or technical error that did not disadvantage employees and that can be disregarded pursuant to s 188(5)). I am satisfied that the Agreement was genuinely agreed to by the employees.
Subject to the undertakings referred to earlier and which are set out in Annexure A to this decision, I am satisfied that the relevant requirements of ss 186 and 187 of the Act are satisfied and that the Commission is therefore required to approve the Agreement pursuant to s 186(1). The Agreement was approved on 28 November 2024.
DEPUTY PRESIDENT
Hearing details:
2024
Melbourne
26 November
Appearances:
T. Earls for McMahon Services Australia Pty Ltd
J. Liley for the Construction, Forestry and Maritime Employees Union
Printed by authority of the Commonwealth Government Printer
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Annexure A
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