State Guard Protective Services

[2015] FWC 7702

[2015] FWC 7702

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

State Guard Protective Services
(AG2015/4413)

COMMISSIONER GREGORY MELBOURNE, 11 NOVEMBER 2015

Application for approval of the State Guard Protective Services Pty Ltd 2015 EBA.

[1] This matter involves an application by Platinum ER Pty Ltd T/A Platinum Employee Relations for approval of a single enterprise Agreement known as State Guard Protective Services Pty Ltd 2015 EBA (“the Agreement”). The application is made under s.185 of the Fair Work Act 2009 (Cth) (“the Act”) on behalf of the employer State Guard Protective Services Pty Ltd (“State Guard”).

[2] After reviewing the application and the terms of the proposed Agreement the Commission sought further clarification from the Applicant’s representative about various matters. The first issue concerned whether the employees to be covered by the proposed Agreement can be said to have been “fairly chosen,” given the Employer’s Statutory Declaration made by Mr Ben Bilbilov indicates the proposed Agreement is intended to operate in New South Wales, Queensland, and Victoria, however, only five employees are now proposed to be covered by it, being 3 full-time and 2 casual employees. The Commission accordingly sought further confirmation about each of the employees employed by State Guard who are involved in the provision of security, guarding and protective services or other related activities.

[3] Further detail was also sought about the rosters and working hours to be worked by the employees. A further concern was also raised about how the overtime entitlements for part-time employees in the Agreement compare with those in the underlying Security Services Industry Award 2010. The Applicant’s representative subsequently provided updated details about the number of employees employed by State Guard, indicating there were now two casual employees in Queensland, one full-time employee in New South Wales, and five employees in Victoria, being two full-time and three casual employees. It also indicated that an undertaking could be provided, if requested, in regard to the overtime arrangements for part-time employees. Examples were also provided of the rosters being worked by the existing employees. This document was headed “Stateguard Master Roster.”

[4] The Commission indicated in response it continued to have some issues to do with the application and the terms and conditions contained in the proposed Agreement, and advised the matter would be set down for hearing to enable any further evidence and submissions to be provided in support of the application.

[5] The hearing proceeded on 9 November by telephone. The Applicant’s representative, Mr Michael Corrigan from Platinum Employee Relations, was granted permission to appear under s.596(2)(b) on the basis his involvement would enable State Guard to be represented more effectively. It was understood Mr Bilbilov from State Guard would also participate in the proceedings, however, he was not able to be contacted on the contact number provided. However, Mr Corrigan indicated he had appropriate instructions from his client and the hearing could proceed.

[6] Mr Corrigan’s submissions indicated State Guard currently has eight employees in total involved in security, guarding, protective services or related activities. It also employees three other employees who have management or accounts responsibilities. He also indicated the services provided under other contracts that State Guard has are delivered by sub-contractors, rather than by directly engaged employees.

[7] Mr Corrigan’s submissions also made reference to what can be described as the reconciliation provision contained in sub clause 13.1 of the proposed Agreement. It follows immediately after the classification and wage rate table and states:

“Employees will not be disadvantaged over the life of the Agreement when their terms and conditions under the Agreement are compared to the Security Services Award 2010 (the Award) as amended during the life of the Agreement; and

● All employees including casual employees covered by the Agreement will be entitled to a reconciliation on an annual basis, to establish whether for work performed under the Agreement in the preceding year, the employee’s total remuneration is less than the employee would have received under the Awards; and

● Where an employee terminates employment, that employee is entitled to a reconciliation for the year or part of a year immediately preceding termination of employment; and

● Where a reconciliation establishes that an employee has been paid less under the Agreement than the employee would have been paid for performing the same work under Award, the employee will be reimbursed for the difference between the amount paid under the Award and the amount paid under the Agreement.” 1

He indicated that an additional undertaking could be offered to provide that this entitlement to a reconciliation on an annual basis was varied to provide instead that the entitlement existed on a monthly basis if this assisted in responding to any concerns the Commission had about the Agreement meeting the requirements of the “better off overall” test.

[8] The Commission indicated in response it would give consideration to this proposal. It also advised that a recent Full Bench decision had considered the appropriateness or otherwise of such reconciliation clauses, and the relevance of that decision in the circumstances of this matter would be considered. It was also indicated that, if necessary, a further hearing could be convened to progress these considerations.

[9] The Full Bench decision referred to was handed down on 13 August 2015 in the matter of Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and Australian Manufacturing Workers’ Union v Main People Pty Ltd 2 (“Main People”). It involved an appeal from an earlier decision of a single member which approved an Agreement in conjunction with the acceptance of various undertakings. The Full Bench was required to consider a range of issues in the appeal proceedings. However, in terms of the present matter it is noted that the decision of the Deputy President at first instance considered undertakings which included the following:

“2. All Employees will be paid more under this Agreement than they would have been paid under the Metals Award if it applied to the work carried out by them from time to time.

…

6. An Employee may request a reconciliation once year on termination to establish whether there is an amount which is required by this undertaking to be paid to them.” 3

The Deputy President concluded in response:

“[23] Similar undertakings to those proffered by the employer in this case have been accepted in any number of agreements approved by the Commission. I accept the undertakings provided by the employer and I am satisfied that they meet the concerns in relation to whether the Agreement passes the BOOT. I am also satisfied that the undertakings do not cause financial detriment to any employee and that they do not result in substantial changes to the Agreement.” 4

[10] As indicated, that decision was taken on appeal. In its decision the Full Bench summarised the respective positions of the parties to the proposed undertakings set out above. The position of the Union Appellants was summarised as follows:

“(1) Paragraph 2 of the undertaking was in the nature of an assertion about the effect of the Agreement, and did not confer any entitlement upon employees. The Commission therefore could not have been satisfied under s.190(2) that it met the concern in relation to the better off overall test.

(2) Alternatively, if paragraph 2 is to be read with paragraph 6 as conferring an entitlement, it is an entitlement that causes financial detriment to employees covered by the Agreement because it only requires payment annually or upon termination, as compared to s.323 of the FW Act which requires wages to be paid at least monthly. The Commission could not therefore have been satisfied under s.190(3)(a) that accepting the undertaking was not likely to cause financial detriment to any employee covered by the Agreement.” 5

[11] The Full Bench summarised the submissions of the Respondent on the following basis.

“(1) Paragraphs 2 and 6 of the undertaking, when read together, clearly conferred an entitlement upon employees covered by the Agreement and an obligation on Main People. If Main People does not meet its obligation to pay employees more than what they would have received under the Manufacturing and Associated Industries and Occupations Award 2010 (Metals Award) 7, it is liable for a contravention of s.50 of the FW Act.

(2) The undertaking provides a financial benefit, not a detriment, to employees covered by the Agreement. Paragraph 6 is not to be read as meaning that any top up payment required by paragraph 2 is only to be made annually, since the payment of wages provisions in clause 9 of the Agreement requires weekly payment of wages.” 6

[12] In the course of coming to a decision the Full Bench set out, in the following terms, the relevant statutory requirements to be satisfied in dealing with an application for approval of a proposed Agreement, including those to do with when an Agreement can be approved with undertakings:

“Statutory framework

[23] Section 186(1) of the FW Act establishes a "basic rule" that where an application for approval of an enterprise agreement is made under s.185 (which prescribes the time in which such an application must be made and its content), the Commission must approve the agreement if the requirements in ss.186 and 187 are met. Sections 186 and 187 set out a range of approval requirements. Section 186(2) sets out approval requirements in relation to the safety net, and relevantly provides as follows:

186 When the FWC must approve an enterprise agreement—general requirements

…

(2) The FWC must be satisfied that:

…

(d) the agreement passes the better off overall test.

[24] Section 193 prescribes what is necessary to pass the better off overall test. It relevantly provides:

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.

…

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.

[25] The "fairly chosen" approval requirement is contained in s.186(3) and (3A), which provides:

Requirement that the group of employees covered by the agreement is fairly chosen

(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.

(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.

[26] It is not necessarily the case that, where an agreement does not satisfy all of the approval requirements in ss.186 and 187, the application for approval of the agreement must be dismissed. Section 190 allows for an agreement to be approved with undertakings. It provides:

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

(2) 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.

[27] Section 191(1) identifies the legal effect of an undertaking given in relation to a single-employer enterprise agreement as follows:

(1) If:

(a) the FWC approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b) the agreement covers a single employer;

the undertaking is taken to be a term of the agreement, as the agreement applies to the employer.” 7

[13] In considering the proposed undertakings contained in paragraph 2 and paragraph 6 the Full Bench came to the following conclusions.

“[38]Second, we do not consider that paragraphs 2 and 6 of the undertaking, read together, are such as to have permitted satisfaction under s.190(2) that the concern that the Agreement did not pass the better off overall test had been met. In considering whether to accept an undertaking relevant to a better off overall test concern, it is necessary to analyse the undertaking to ensure that it is expressed in a way which allows it to be enforced as a term of the Agreement in accordance with s.191. An undertaking which is uncertain, ambiguous or merely aspirational such that it does not establish an enforceable entitlement for the purpose of s.191 is unlikely to meet a concern that an agreement does not pass the better off overall test.

[39]Paragraphs 2 and 6 are incapable of meeting the concern that the Agreement did not pass the better off overall test for the following reasons:

(1) Paragraph 2 is expressed in terms which make it unclear whether it is intended to give rise to an entitlement or is merely an assertion about the effect of the Agreement if approved.

(2) Even if paragraph 2 is read as if it is intended to create an entitlement, it is entirely unclear what the entitlement created by the paragraph is. To the extent that it purports to increase the rates of pay specified in the Agreement by an amount that would make employees better off than under the Metals Award, it is entirely unclear what the amount of that increase is or what the new rates of pay are to which the employees are entitled. In the event that an employee alleged a breach of the Agreement by Main People, it would be impossible for a claimant employee or a court with jurisdiction to enforce the Agreement to quantify how much, if anything, was owed to the employee. Paragraph 2 lacks sufficient certainty to constitute an enforceable entitlement.

(3) When read with paragraph 6, it is clear that to the extent that paragraph 2 purports to create a pay entitlement, it is an entitlement which is only payable annually and upon request. We reject the submission that the undertaking is to be read with the payment of wages provision in the Agreement itself, since paragraph 6 establishes a specific payment mechanism in respect of "an amount which is required by this undertaking to be paid ...". Any entitlement to a wages top-up which is only payable on this basis cannot be considered more beneficial than the payment entitlements under the Metals Award, where the full rate must be paid by the employer in each pay period (specified as weekly or fortnightly).” 8

[14] The Full Bench concluded by indicating:

“[40] We therefore consider that the Decision was attended by appealable error. Permission to appeal is granted because the errors we have identified were jurisdictional in nature (going as they did to the power of the Commission to approve the Agreement), and because the issue concerning the undertaking raised by this appeal is likely to have relevance to the Commission's enterprise agreement approvals processes generally. For the reasons we have identified, we uphold the appeal and quash the Decision.” 9

[15] The Full Bench also decided the application should be re-determined and indicated it would be referred to a single member of the Full Bench for this purpose. It also noted the Agreement might be approved if a reformulated undertaking was provided. However, it set out certain provisos in this context, which included the following requirements:

“(4) requires the employer to pay to each employee, within each pay cycle, a total amount which is a specified and not nominal monetary amount more than the amount of pay the employee would have received if paid under the relevant award for the work performed in that pay cycle; and

(5) provide the employee, each pay cycle, with a reconciliation which identifies how the payment amount in (4) was calculated.” 10

[16] The circumstances before the Full Bench and those in the present matter are different in some respects, however, I am satisfied they can still be considered to be analogous. On the one hand the Full Bench was dealing with a reconciliation proposal provided by way of additional undertakings to the original Agreement. In the present matter the reconciliation commitment is contained in sub clause 13.1 of the proposed Agreement, as set out at an earlier point in this decision. It is also now proposed to be supplemented by an additional undertaking, indicating the entitlement to a reconciliation occurs on a monthly, rather than an annual basis as originally proposed. However, despite these differences I am satisfied the intent and effect is the same as the reconciliation proposal considered by the Full Bench.

[17] As indicated, the Full Bench concluded that the undertakings could not be accepted under s.190(2) of the Act because if the intent was to create an entitlement it was extremely unclear what it was. To the extent that it would increase the rates of pay it was unclear what the amount of that increase would be, and what would be the new rate of pay an employee would be entitled to. The Full Bench concluded this, in turn, raised issues for any potential enforcement of an employee’s entitlements. A similar position applies in the circumstances of the present matter.

[18] The Full Bench also concluded that an annual reconciliation entitlement was at odds with the relevant Award entitlement, which provides that payment of wages be made weekly or fortnightly. In the present matter the Applicant’s representative has proposed a further undertaking, which would entitle an employee to have a reconciliation carried out on a monthly basis. However, this still compares unfavourably with the provisions in clause 19 of the underlying Security Services Industry Award 2010, which provides for payment of wages on either a weekly or fortnightly basis.

[19] In summary, I am not satisfied the current reconciliation proposal, as set out in sub clause 13.1 of the Agreement, and varied by the proposed undertaking, can be accepted based on the decision of the Full Bench in Main People. As the Full Bench also found it does not require the employer to pay to each employee in each pay cycle a total amount, which is a specified amount, and is more than the amount of pay the employee would have received if employed under the Security Services Industry Award 2010 for the work performed in that pay cycle. It follows from this conclusion that it is not appropriate to accept that the provisions in sub clause 13.1 of the proposed Agreement, and the additional undertaking, can act to satisfy the requirements of the better off overall test in the event the Agreement is found to contain terms and conditions that do not satisfy the requirements of the test.

[20] Having come to this conclusion I have also considered the application and the terms and conditions contained in the proposed Agreement in the light of the requirements to be satisfied in regard to the better off overall test. In this context I have had particular regard to the rosters now being worked by the employees to be covered by the Agreement that were provided by the Applicant’s representative in response to the Commission’s earlier request for additional information. As part of this exercise I have reviewed the rosters using both the pay rates contained in the proposed Agreement and those contained in the underlying Security Services Industry Award 2010.

[21] Without going to the detail of each of those particular roster arrangements one example will suffice. It sets out the roster for a casual employee. In the first week that employee would be rostered on Monday, Tuesday and Wednesday and would commence work at 9 p.m. and conclude at 5 a.m. In the second week they would be rostered to work on Thursday, Friday, Saturday and Sunday, again commencing work at 9 p.m. and concluding at 5 a.m. on each shift. The Agreement contains various set hourly rates for this work depending on whether it is performed on a roster involving Monday to Friday only, Monday to Saturday only, or Monday to Sunday.

[22] By contrast the Award provides for additional penalty rates for the night span of 21.7% and 30% for an employee working a permanent night span, together with penalty rates of time and a half for work on Saturday, double time for work on Sunday, and double time and a half for work on public holidays. When a comparison is carried out of the above rosters, based on the rates contained in the proposed Agreement and those contained in the Award, that assessment indicates an employee working those rosters would be worse off under the terms contained in the proposed Agreement. As such the Agreement does not satisfy the requirements of the better off overall test. It also follows from the conclusions reached about the reconciliation provisions that it is not appropriate for these to now be used as a mechanism to enable the requirements of the better off overall test to be satisfied in circumstances where the terms and conditions contained in the proposed Agreement do not otherwise satisfy that test.

[23] I have therefore concluded that the terms and conditions contained in the proposed Agreement do not satisfy the relevant statutory requirements. The application is accordingly dismissed.

COMMISSIONER

Appearances:

Mr Michael Corrigan appeared on behalf of Platinum ER Pty Ltd.

Hearing details:

2015:

Melbourne (by telephone):

9 November.

 1   Proposed State Guard Protective Services Pty Ltd 2015 EBA at cl.13.1

 2   [2015] FWCFB 4467

 3   [2015] FWC 2560 at [14]

 4   Ibid at [23]

 5   [2015] FWCFB 4467 at [19]

 6   Ibid at [21]

 7   Ibid [23]-[27]

 8   Ibid at [28]-[39]

 9   Ibid at [40]

 10   Ibid at [41]

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