Stahmann Farms Enterprises Pty Ltd

[2018] FWCA 5637

[2018] FWCA 5637

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

Stahmann Farms Enterprises Pty Ltd
(AG2018/965)

STAHMANN FARMS ENTERPRISE AGREEMENT 2018-2019

Agricultural industry
COMMISSIONER MCKINNON	MELBOURNE, 12 SEPTEMBER 2018

Application for approval of the Stahmann Farms Enterprise Agreement 2018-2019.

[1] Application has been made under s.185 of the Fair Work Act 2009 (the Act) for approval of a single enterprise agreement known as the Stahmann Farms Enterprise Agreement 2018-2019 (the Agreement). The Agreement was made by Stahmann Farms Enterprises Pty Ltd (Stahmann) and its employees. The Australian Workers’ Union (AWU) was a bargaining representative for the Agreement.

[2] The Agreement will cover full time field and workshop employees engaged in farming and farm maintenance activities. The relevant awards for the purposes of the better off overall test are the Horticulture Industry Award 2010 1 (Horticulture Award) and the Manufacturing and Associated Industries and Occupations Award 20102(Manufacturing Award).

[3] On 28 March 2018, the AWU filed a Form F18 Statutory Declaration in relation to the Agreement. The AWU does not support approval of the Agreement because of concerns about rates of pay, hours of work, averaging of hours, payment for overtime and shift work, accrual of personal/carer’s leave, technological change and abandonment of employment. The AWU submits that the Agreement was not genuinely agreed to by employees as it was not properly explained to them and nor was material incorporated by reference provided. In addition the AWU submits that the Agreement contains an unlawful, ‘opt out’ clause.

Explanation of the Agreement

[4] The Agreement was made with 13 employees based in Moree, NSW. The group includes two female employees, one employee under 21 years of age and 6 employees over 45 years of age.

[5] On 16 January 2018, a Notice of Employee Representational Rights was issued to full time employees in field or workshop roles working on Stahmann’s Trawalla property at Moree NSW. On 1 February 2018, a summary of proposed changes to the Agreement was provided to all employees together with a verbal explanation. A copy of the summary document has been provided to the Commission. A meeting to discuss the summary document and proposed changes was held on 14 February 2018 and a further meeting was held on 27 February 2018. Employees were advised that they could access the modern awards from the office in accordance with a long standing practice. On 27 February 2018, employees were given a copy of the Agreement and relevant policies referred to in clause 12 (work clothing), clause 16 (Personal/carer’s leave), clause 25 (Dispute Settling Procedure), clause 26 (Counselling Procedure), clause 31 (General Standards) and clause 32 (Alcohol and drug policy).

[6] In my view, none of these policies are incorporated as terms of the Agreement. References to the policies are more akin to references to applicable legislation which operates concurrently with, but separately to, the Agreement (such as long service leave and superannuation legislation). Even so, I accept Stahmann’s submission that copies of relevant policies were provided to employees prior to commencement of the access period for the Agreement. These policies were provided to the AWU on 12 February 2018 and it is reasonable to infer from the Form F17 filed in support of the application that the same policies were those provided to employees on 27 February 2018.

[7] On 27 February 2018, employees were also given information about the voting process. A copy of the information provided to employees has been provided to the Commission. Voting on the Agreement commenced on 7 March 2018. All 13 employees voted to approve the Agreement on that day.

[8] I do not consider that there are any other reasonable grounds to believe that the Agreement was not genuinely agreed. That is so notwithstanding any deficiency in responses provided initially by Stahmann in the Form F17 statutory declaration accompanying the application, which have since been supplemented by additional information responding to concerns raised in connection with the application.

[9] Having regard to the steps taken by the employer to comply with the various pre-approval requirements in the Act including the information made available to employees and the explanation of the proposed Agreement and its likely effect on employees, I am satisfied that the agreement was genuinely agreed to by the employees covered by the Agreement.

Opt-Out Term – Unlawful term

[10] The Agreement contains a term in clause 1 that would exclude from coverage “any salaried employee contracted under common law and any casual employees employed under a modern award and any employees that are not employed directly to work on Moree farm sites.”

[11] The exclusion from coverage of casual employees reflects the intended scope of the Agreement and gives rise to a concern about whether employees who will be covered by the Agreement were fairly chosen, but it is not an unlawful term. The exclusion of contractors from coverage simply reflects the legal position that enterprise agreements only cover employees of the employer. It similarly does not give rise to a relevant concern. However, the exclusion from coverage of “any salaried employee contracted under common law” is so broad as to permit employees who would otherwise be covered by the Agreement to elect not to be covered. To that extent, the term is, in my view, an unlawful term of the type contemplated by section 194(ba) of the Act.

[12] Stahmann has given an undertaking to address the concern.

Coverage

[13] Clause 4 of the Agreement incorporates the Horticulture Award and the Manufacturing Award to the extent of inconsistency, but the wording of the term incorporating those awards is unclear because it also specifies the relevant award classifications for the purposes of the Agreement. An argument could be made that the effect is to only incorporate the specified classification descriptions. Read in that way, concerns might arise about whether the group of employees was fairly chosen and whether employees would be better off overall under the Agreement.

[14] In my view, it would not be a fair reading of clause 4 as a whole to construe it as incorporating only the award classification descriptions referred to in clause 4.1.

[15] Clause 4 is not well drafted. It is headed “Relationship Awards”. Clause 4.1 provides that the Agreement is read in conjunction with the Horticulture Award “classification level 4” and the Manufacturing Award “classification level C10”. Clause 4.2 provides that where there is any inconsistency between the agreement and the awards, the agreement will prevail.

[16] The Agreement does not contain classification descriptions. Clause 1 refers to employees employed in a “classification contained in Schedule 1” and Schedule 1 contains pay rates for “Field Employees” and “Workshop Employees”. No inconsistency could thus arise between the Agreement and the classification descriptions in the relevant awards.

[17] That said, clause 4.2 must be assumed to have some meaning. In my view, the clear intention, read in context and having regard to its evident purpose, is to adopt the common approach used in enterprise agreements where relevant modern award terms are incorporated, but only to the extent of inconsistency.

[18] Stahmann has given an undertaking to clarify the intended operation of the Agreement in this way to address the concern. The AWU submits that the undertaking amounts to substantial change. In my view, the undertaking confirms but does not change the operation of clause 4. The reference to award classifications in clause 4.1 is simply a reference to relevant award classifications (and corresponding rates of pay) for the purposes of the better off overall test. If it were otherwise, the result would still be the same, because except for rates of pay and classification descriptions, the modern awards apply in the same way to each classification. The undertaking does not result in substantial change to the Agreement.

Fairly chosen

[19] The Agreement only covers full time employees employed in farming and maintenance work. It does not cover casual employees who are employed at peak harvest times. As noted above, this gives rise to a concern about whether the group of employees was fairly chosen.

[20] Stahmann has made detailed submissions on the issue, explaining that the enterprise agreement replaces successive prior agreements all with the same limitation on scope. The Agreement provides for annualised wages and entitlements for its permanent employees taking into consideration that there will be peaks and troughs in work over the year because of the agricultural nature of the business and seasonal work patterns that are a feature of the industry in which it operates. Casual employees are typically engaged only during harvest periods and their shorter periods of employment do not fit well with an annualised employment arrangement. The work of casual employees is different to the work of permanent employees, who are engaged in day to day farming and maintenance operations throughout the year in addition to harvest work in peak periods. Casual employees are not covered by the current enterprise agreement that covers Stahmann and its employees.

[21] In my view, the decision to limit coverage of the Agreement to full time employees reflects the operational distinction between Stahmann’s permanent and short term harvest workforces, the latter being a recognised feature of the agricultural industry. It is also relevant that the Agreement is specifically designed to address certainty of arrangements for long term employees in a way that may not be appropriate for a shorter term workforce. I am satisfied that the group of employees is fairly chosen.

National Employment Standards

[22] Clause 16 of the Agreement deals with personal / carer’s leave and provides for accrual of leave in a manner that may exclude the National Employment Standards (NES).

[23] Clause 33 of the Agreement deals with abandonment of employment. The clause is consistent with the Manufacturing Award but may operate in a way that excludes the notice of termination provisions of the NES. Stahmann has given an undertaking to address the concern.

[24] Average weekly hours of work under the Agreement are 45.6 hours per week. I am satisfied that these hours are reasonable for the purposes of section 62 of the Act having regard to the industry covered by the Agreement and the nature of work required.

Better Off Overall Test

[25] The Agreement provides for annualised salary arrangements designed to reflect typical annual work patterns in the business. This includes regular start and finish times, work days and roster pattern changes. Field Workers are compensated for 70 hours overtime at double time. Workshop employees typically work less than the annual planned hours. Planned irrigation work of two weeks day shift and two weeks night shift is incorporated into the field work roster. There is no provision for confined spaces allowance for workshop employees as it is not relevant to their work.

[26] The Agreement provides for annual planned hours compensated by way of an annual salary arrangement. For most weeks of the year, this involves 40 hours work per week. This increases to between 50 and 68 hours in peak periods (3 weeks in the May harvest period, 3 weeks in the July harvest period and 8 weeks in the August/September pruning period). In total the annual roster assumes 4 weeks of 50 hours, 4 weeks of 66 hours and 4 weeks of 68 hours with all other weeks no more than 40 hours. The total annual planned hours are 2474 (field) and 2445 (workshop). Of these, 318 hours are assumed as overtime at time and one half and 233 hours (204 hours for workshop employees) are assumed as double time. For field workers performing irrigation work, an additional 126 hours at time and one half and 46 hours at double time are assumed. All hours worked in excess of annual planned hours are paid at double time.

[27] As the AWU submits, the hours of work in the Agreement are different to the hours of work in the relevant modern awards. There will be weeks where work under the Agreement is remunerated at a rate that is less than the relevant modern award rate. However, the reverse is also true. For the majority of weeks each year, the rate of pay under the Agreement exceeds the relevant modern award rate. That is the nature of an annualised salary arrangement in a seasonal industry where work is characterised by peaks and troughs. Contrary to the submission of the AWU that employees will not have stable working arrangements, in my view an annualised arrangement of this type will promote certainty and stability for employees because it will mean a consistent, regular income each pay period over the year.

[28] The AWU is concerned about payment during periods of inclement weather, and refers to the requirement in relevant modern awards to pay full time employees a minimum of 38 hours per week. To the extent that such a requirement operates in the manner suggested, in my view it is not inconsistent with the Agreement which provides for minimum annual planned hours and a corresponding entitlement to payment.

[29] The AWU is also concerned that the Agreement does not provide penalties for shift work. I do not agree with the submission. The Agreement provides for the particular circumstances where shift work is performed at sites covered by its terms. Stahmann submits that no employees are properly characterised as shift workers under the relevant modern awards. It says the occasional employee will be required to undertake irrigation checks for one week at a time, three to four times per year and that when that occurs, employees may work up to four hours per night but are paid 13 hours pay plus a meal allowance. Where terms of the Agreement dealing with shift work are not inconsistent with modern award terms, the modern award terms will also apply.

[30] The AWU have identified a concern that full time employees employed on a fixed term basis for the harvest period only, or who choose to leave employment immediately after harvest, may not have the benefit of the over-award component of the annual salary. I accept that this is a legitimate concern because the Agreement does not prevent this circumstance from occurring.

[31] The annualised arrangement provides for ‘time in lieu’ in a way that operates both for the benefit of the employer and employee. Additional hours worked in excess of planned hours are paid out at the end of February each year. Planned hours not worked carry over to the following year as ‘to be worked’. There are two issues with this arrangement. The first is that there is no provision for payment of additional hours on termination of employment. The second is that the arrangement makes it difficult to assess the better off overall test if planned hours are different from those set out in the annual roster, including because it is then difficult to assess the total value of hours worked in a year where time not worked has carried over from a previous year.

[32] Stahmann has given undertakings to address the concern. The undertakings formalise the annual roster arrangement and result in a net benefit to employees who work less than their annual planned hours. They also address concerns about full time employees being paid less than 38 hours per week and provide for a beneficial reconciliation of earnings for employees with less than a year of service.

[33] On balance, I am satisfied that the annualised salary arrangement will leave employees better off overall than under the relevant modern awards.

Payment of wages

[34] The AWU says the Agreement is detrimental to employees compared to section 323 of the Act, which regulates payment of wages. However, the Agreement does not displace the operation of section 323 of the Act. It is also relevant that the modern awards are both incorporated as terms of the Agreement. To the extent that the modern awards deal with payment of wages, those terms are taken to be terms of the Agreement.

Technological change

[35] The AWU says clause 23 of the Agreement, dealing with technological change, is inconsistent with clause 29.1(a) of the Agreement dealing with consultation. It is not apparent that the matter gives rise to any relevant consideration in relation to the application for approval. It does not, for example, affect the validity of the Agreement’s consultation term.

Conclusion

[36] A copy of undertakings given in accordance with s. 190 is at Annexure A. I am satisfied that the undertakings will not cause financial detriment to any employee covered by the Agreement and that the undertakings will not result in substantial changes to the Agreement.

[37] With the undertakings referred to above, I am satisfied that each of the requirements of ss.186, 187, 188 and 190 as are relevant to this application for approval have been met.

[38] The AWU was a bargaining representative for the Agreement and has given notice under s.183 of the Act that it wants the Agreement to cover it. In accordance with s.201(2) I note that the Agreement covers the organisation.

[39] The Agreement is approved and, in accordance with s.54 of the Act, will operate from 19 September 2018. The nominal expiry date of the Agreement is 31 December 2019.

COMMISSIONER

Annexure A

 1   MA000028

 2   MA000010

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