Swicker’s Kingaroy Bacon Factory Pty Ltd

[2021] FWC 5033

[2021] FWC 5033

FAIR WORK COMMISSION

REASONS FOR DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Swicker’s Kingaroy Bacon Factory Pty Ltd
(AG2021/5909)

DEPUTY PRESIDENT ASBURY BRISBANE, 23 AUGUST 2021

Application for approval of the Swickers Kingaroy Bacon Factory Enterprise Agreement 2021 – Whether stand down provision in Agreement causes it to fail the better off overall test – Agreement approved.

Background

[1] Swicker’s Kingaroy Bacon Factory Pty Ltd (the Applicant) applied to the Fair Work Commission (the Commission) under s. 185 of the Fair Work Act 2009 (the FW Act) for approval of the Swickers Kingaroy Bacon Factory Enterprise Agreement 2021 (the Agreement). The Applicant filed a Form F16 Application for approval of an enterprise agreement (other than a greenfields agreement) (Form F16) and Form F17 Employer’s statutory declaration in support of an application for approval of an enterprise agreement (other than a greenfields agreement) (Form F17).

[2] The Agreement is a single enterprise agreement that is expressed to be binding on the Applicant and its employees performing work in the classifications contained in the Agreement. The Agreement is also expressed to be binding on the Australasian Meat Industry Employees Union (the AMIEU) and the Bacon Factories' Union of Employees (the BFUE). The AMIEU and the BFUE filed Form F18 Declarations in relation to the approval application indicating that the Unions supported the approval of the Agreement and gave notice pursuant to s. 183 of the Act that they wished to be covered by the Agreement but disagreed with some of the statements made by the Applicant in its Form F17 Employer statutory declaration.

[3] Issues in relation to the operation of certain clauses and whether the Agreement passes the Better Off Overall Test (BOOT) were identified by the Commission’s Agreement Team and the matter was allocated to me for consideration as to whether the Agreement should be approved. I corresponded with the Applicant, the AMIEU and the BFUE in relation to the matters raised by the Agreement Team and the Unions and sought submissions to address these issues and indicated that I would consider any undertakings filed by the Applicant.

[4] After considering the submissions and undertakings offered by the Applicant I again corresponded with the parties and indicated my provisional view that the response from the Applicant and the undertakings offered addressed my concerns and that I intended to approve the Agreement if no objections or views in relation to the undertakings were received by 12.00pm on 21 July 2021.

[5] Correspondence was received from the AMIEU on 21 July 2021 stating that the AMIEU had no objection to the undertakings but considered that the undertakings collectively failed to address the AMIEU’s concerns that the Agreement failed the BOOT and set out reasons for its position. The BFUE did not provide a response. Also on 21 July 2021, a notice of listing was issued advising that a hearing would be conducted on 26 July 2021, to deal with the AMIEU’s objection to the approval of the Agreement.

[6] At the hearing the parties accepted that the issue of the stand down provisions in the Agreement was the only outstanding issue. Other issues identified by the Commission and by the AMIEU and the BFUE have been addressed by further submissions from the Applicant or by undertakings which were published with my Decision approving the Agreement.

[7] The AMIEU’s objection to approval of the Agreement centres on clause 14 which provides for the Applicant to stand employees down in certain circumstances. The AMIEU asserts that the clause allows for stand downs in potentially broader circumstances than those in s. 524 of the FW Act, which would apply if employees were covered by the Meat Industry Award 2020 (the Award) and that for this reason, the Agreement does not pass the BOOT. The AMIEU’s submissions were supported by the BFUE.

[8] At the conclusion of the hearing, I indicated that I did not accept the submissions of the AMIEU and that a Decision approving the Agreement would issue immediately. 1 I also outlined the basis upon which I rejected the AMIEU submissions and had decided to approve the Agreement and stated that I would provide more detailed reasons for the Decision in due course. These are my reasons.

Agreement and legislative provisions

[9] Section 524 of the FW Act provides as follows in relation to stand downs:

“524 Employer may stand down employees in certain circumstances

(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:

(a) industrial action (other than industrial action organised or engaged in by the employer);

(b) a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;

(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

(2) However, an employer may not stand down an employee under subsection (1) during a period in which the employee cannot usefully be employed because of a circumstance referred to in that subsection if:

(a) an enterprise agreement, or a contract of employment, applies to the employer and the employee; and

(b) the agreement or contract provides for the employer to stand down the employee during that period if the employee cannot usefully be employed during that period because of that circumstance.

Note 1: If an employer may not stand down an employee under subsection (1), the employer may be able to stand down the employee in accordance with the enterprise agreement or the contract of employment.

Note 2: An enterprise agreement or a contract of employment may also include terms that impose additional requirements that an employer must meet before standing down an employee (for example requirements relating to consultation or notice).

(3) If an employer stands down an employee during a period under subsection (1), the employer is not required to make payments to the employee for that period.”

[10] The Agreement at clause 14 also deals with stand downs as follows:

“14.1 The Employer may stand down Employees on any day or days or part of a day or days, without pay, where the Employee cannot be usefully employed because of something that happened relating to:

(a) Industrial action

(b) A breakdown of machinery or equipment for which the Employer cannot reasonably be held responsible; or

(c) A stoppage of work for any cause for which the Employer cannot reasonably be held responsible.

14.2 The following is a non-exhaustive list of the occurrences which may lead to an Employee being stood down:

(a) a failure in delivery of livestock, spares, consumables or packaging by reason of any circumstance beyond the control of the Employer;

(b) any break down of essential services, e.g., water, gas, electricity;

(c) an act of God;

(d) any break down of machinery;

(e) industrial action impacting on the business;

(f) a cessation of kill by direction of the DAWR;

(g) genuine case of a shortage of livestock;

(h) cancellation of a livestock sale;

(i) cancellation of operators (service kill) requirements;

14.3 Where a full time Employee has not been notified of the stand down prior to the start of the normal shift and the Employee attends for work, such Employee shall be provided with four (4) hours’ work or payment for four (4) hours.

14.4 Where a full time Employee has already commenced a shift and they are stood down, such Employee shall be paid for hours worked prior to stand down with a minimum of four (4) hours’ for the day.

14.5 Where an Employee is required to remain on the premises pending being requested to resume work, the Employee shall be paid for such time they are required to remain on the premises.

14.6 Where an Employee is stood down, the time not worked and not paid shall not be taken into consideration in the averaging of hours in a settlement period.

14.7 Where a casual or part-time Employee is stood down after they commence work they shall be entitled to payment for the applicable minimum engagement period.”

[11] In relation to the BOOT, s. 193 provides as follows:

“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.

FWC must disregard individual flexibility arrangement

(2)  If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.

When a greenfields agreement passes the better off overall test

(3)  A greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that 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 subsection 182(4) or 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.”

Submissions

[12] The Form F18 filed by the AMIEU indicated that the AMIEU disagreed with statements made on the Applicant’s Form F17 in relation to the following matters:

“Clause 14: Stand Down

2. The wording of this clause is somewhat confusing, but it appears to be broader in scope than the provisions of Section 524 of the Fair Work Act ("the Act). While it is possible for an Award employee to have a which specifies stand down in a broader range of circumstances than in Section 524, this can only be done by way of contact, and hence requires the employee's Agreement. An employee under the Enterprise Agreement is subjected to broader stand down provisions than Section 524 even if the employee does not agree to them, and hence is not better off than an Award employee.

3. Section 524 of the Act allows an employer to stand down an employee who cannot be usefully employed "because of11 one of the specified circumstances. While clause 14.1 uses the same specified circumstances, it allows a stand down of an employee who cannot be usefully employed because of "something that happened relating to those circumstances. In other words, a stand down may occur where a stoppage of work does not occur because of (for instance) industrial action, but merely because of "something that happened relating to industrial action. While the full ambit of such a provision is not clear, it is potentially much wider than the statutory provision.

4. Further, clause 14.2 of the Agreement purports to provide a non-exhaustive list of occurrences which may justify a stand down of an employee. The problem that arises is that the listed circumstances include some situations which would justify stand downs, and others which would not. In particular, a cancellation of a livestock sale would not normally justify a stand down, absent other circumstances which prevented the purchase and deliver of stock. Similarly, there are many instances of 'livestock shortage' which would not justify stand downs. Obtaining the necessary raw materials and inputs is a matter which is generally the responsibility of the business/employer. If supply of livestock is uncertain, then the Award makes provision for daily hire employment, which includes a loading of 10% to base rates of pay. The employer has elected not to make use of daily hire employment, and should not be permitted to obtain the flexibility of daily hire employment by expanding the operation of its stand down clause.

5. The AMIEU submits the stand down clause should be subject to an undertaking to the effect that the stand down will only be exercised in respect of a circumstance for which the company cannot reasonably be held responsible.

[13] In an email dated 21 July 2021, the AMIEU provided a further explanation in relation to its position as follows:

“The AMIEU notes that the Employer states it does not understand the AMIEU objection in relation to the stand down clause. The point is simply this: An award-covered employee cannot be stood down for those circumstances encompassed by Section 524 unless the employee agrees to be bound by a broader stand-down clause. The AMIEU concern is that an employee covered by the proposed agreement can be stood down in a broader range of circumstances than those permitted by Section 524, regardless of whether the employee agrees to that broader range or not.  The fact that an employee can be subjected to such broader stand down provisions without his or her agreement means they are not better off than an award-covered employee.  Effectively, the employer is seeking to obtain the flexibility of daily-hire employment without the 10% loading that daily hire employment attracts.”

[14] The AMIEU also said in correspondence that the employer asserts that the scope of the stand down clause is not broader than the FW Act and that the Union has real concerns that this is incorrect. However, if the Applicant was to give an undertaking that the stand down clause would only apply in those circumstances identified in Section 524 of the Act, this would address the AMIEU’s concerns.

[15] In oral submissions at the hearing the AMIEU contended that the Agreement provides for stand downs in broader circumstances than s. 524 of the FW Act, on the basis that the Agreement refers to employees not being able to be usefully employed “because of something that happened related to” the listed matters and s. 524 states that a stand down may be undertaken where employees cannot be usefully employed “because of” one of those circumstances. Further, the AMIEU contended that s. 524 of the FW Act provides that employees may be stood down where they cannot be usefully employed because of industrial action, other than industrial action organised or engaged in by the employer, while the Agreement simply provides that employees can be stood down because of something that happened related to industrial action and does not exclude industrial action organised or engaged in by the employer.

[16] While acknowledging that the BOOT involves a comparison between employees and prospective employees and an award covered employee at the test time, and the Award does not contain stand down provisions, the AMIEU contended that it is relevant to the BOOT that an award covered employee would be subject to the provisions of s. 524 of the FW Act and would not be subject to any other stand down provisions unless the employee agreed to those provisions.

[17] While on the surface clauses 14.1 and 14.2 of the Agreement seem to mirror s. 524 of the FW Act, those provisions contain additional words that the AMIEU is concerned expands their operation. In this regard replacing the term “because of” with the term “because of something that happens relating to” one of the listed circumstances is potentially broader. In this regard, the AMIEU said that clause 14.2 then provides a list of circumstances in which employees may be stood down, which is not exhaustive. Further, the limiting words “beyond the control of the employer” are found in 14.2(a) but not in the other circumstances listed in 14.2(b) – (i).

[18] The AMIEU submitted that something may occur which is beyond employer’s control in circumstances where steps to mitigate that event may be within the employer’s control. As an example, the Union said that cancellation of a livestock sale or service kill would not necessarily permit a stand down and sourcing stocks is a thing for which the employer could usually be held responsible. If a service kill was cancelled and the employer had not taken reasonable steps to replace the stock, this would not be something beyond the employer’s control and a stand down under s. 524 would not be permitted.

[19] In response to the Applicant’s submissions, the AMIEU said that any advantages provided for in clause 14 of the Agreement, are contingent on certain circumstances, and there is no way of calculating benefits to employees if those provisions apply to them. Further, the AMIEU said that while an enterprise agreement can contain terms relating to standing down employees, this does not remove the effect of such terms from consideration of whether the Agreement passes the BOOT.

[20] The Applicant’s initial written response to the stand down issue raised by the AMIEU focused on the Agreement stand down provision in relation to industrial action and said that industrial action organised or engaged in by the employer would fall under 14.1 (c) of the Agreement as it would clearly not fall into “any cause for which the Employer cannot be reasonably be held accountable”. The Applicant also offered an undertaking to clarify that clause 14.1(a) of the Agreement does not include industrial action organised or engaged in by the employer.

[21] In a further written response to the matters raised by the AMIEU, the Applicant said that it did not fully understand the AMIEU’s concern in relation to the stand down clause. Specifically, the Applicant did not understand the reference to a contract or the relevance of an individual employment contract to the approval of an Enterprise Bargaining Agreement. The Applicant further submitted that there is no term in s. 524 which provides for exclusive application of an employment contract. It is accepted industrial practice that an agreement which is approved by a valid majority of employees, applies to all employees covered by the agreement and there is no requirement to obtain individual agreement to any of the provisions of an enterprise agreement.

[22] The Applicant also said that s. 524 clearly contemplates that stand down terms may be included in an enterprise agreement and does not limit the content of an enterprise agreement to only those matters in s. 524(1) of the FW Act. It does however prevent an employer using section 524 (1) if those same circumstances are covered in an enterprise agreement.

[23] Further, the Applicant said that clause 14 of the Agreement does not go beyond s. 524 of the FW Act, other than where it provides clarity as agreed between the parties, or where more beneficial terms are provided. Clause 14.2 merely establishes what the parties have agreed, as part of the negotiations, as circumstances which fall within the parameters set out in clause 14.1. The Applicant also submitted that by virtue of clause. 14.1 of the Agreement, a stoppage of work has to be for a reason that is beyond its control and that industrial action organised or initiated by the Applicant could not fit within this description as it would be something within the control of the employer.

[24] The Applicant further submitted that clause 14 in its current form has been in earlier versions of the Agreement since 2008 and has never been used. The stand down provisions could not be a BOOT issue, because the FW Act clearly addresses the issue of stand downs and also allows a contract of employment or an enterprise agreement to provide for employees to be stood down in different or broader circumstances than those in s. 524 of the FW Act.

[25] The Applicant also pointed to the fact that the Award does not provide for stand downs and clause 14 of the Agreement provides for some more beneficial terms than are found in s. 524 of the FW Act, by providing guarantees and commitments to employees if stand downs are implemented. It was also submitted that the clause was negotiated consistent with what the Applicant could do under s. 524 of the FW Act. While maintaining that the stand down clause in the Agreement does not give rise to a BOOT issue, the employer contended in the alternative, that even if the clause does raise a BOOT issue, then the Agreement as a package, and the stand down clause itself, contains benefits which offset any disadvantage to employees.

Consideration

[26] The circumstances in which an employer may stand down an employee under the FW Act are set out in s. 524(1). By virtue of s. 524(2) of the FW Act an enterprise agreement or a contract of employment may provide for an employer to stand down an employee. Where the agreement or contract provides for the employee to be stood down in one or more of the circumstances set out in s. 524(1) the employer may not stand down the employee under s. 524(1) because of that circumstance and must stand the employee down as provided in the enterprise agreement or contract of employment.

[27] Note 1 to s. 524 indicates that an enterprise agreement may provide for an employee to be stood down in the same circumstances as are set out in s. 524 of the FW Act or for an employee to be stood down in circumstances where the employee could not be stood down under s. 524. There is nothing to indicate that an enterprise agreement cannot provide an employer with the right to stand down employees in a broader range of circumstances than are provided for in s. 524 of the FW Act.

[28] Note 2 to s. 524 states that an enterprise agreement may include additional requirements that an employer must meet before standing down an employee and gives as an example, requirements relating to notice. It follows that employees covered by an enterprise agreement which provides for stand downs may suffer advantage or disadvantage when compared with the position they would be in if they were stood down under s. 524 of the FW Act. The question is whether such advantage or disadvantage is relevant for the purpose of the BOOT.

[29] In Hart v Coles Supermarkets Australia Pty Ltd 2a Full Bench of the Commission said in relation to the BOOT:

“[6] The determination of this appeal requires us to consider, on all of the evidence before the Commission, whether the Agreement passes the BOOT. Section 193(1) of the Act provides that an enterprise agreement passes the BOOT if the Commission is satisfied, at the test time, that each award covered employee, and each prospective award covered employee would be better off if the agreement covered the employee than if the relevant modern award covered the employee. In this case the relevant modern award is the General Retail Industry Award 2010 (the Award). It is well established that the test requires the identification of terms which are more beneficial for an employee, terms which are less beneficial for an employee, and an overall assessment of whether an employee would be better off under the agreement.” 3

(citations omitted)

[30] An enterprise agreement may incorporate all or some of the terms of a modern award; override a modern award to the extent of any inconsistency; or completely override a modern award. An enterprise agreement may advantage or disadvantage employees by including, excluding or altering the effect a modern award provision. In such circumstances, the enterprise agreement operates directly on the modern award to advantage or disadvantage employees.

[31] The BOOT is expressed in broad terms and I accept as a general proposition, that employees may have rights or benefits which, while not found in a modern award, are contingent on the award applying to or covering the employees. In such circumstances the fact that an enterprise agreement comes into effect and results in a modern award which would otherwise apply, ceasing to apply in whole or in part to employees, may of itself impact those rights or benefits even where they are not provided for in the modern award. Such impact may be detrimental or beneficial.

[32] However, the BOOT requires a comparison between the terms of a modern award that would apply to each award covered employee and prospective award covered employee and the terms of the agreement which is to apply to those employees. In my view, for a right or benefit that is not a modern award term to be relevant to the application of the BOOT, there must be a direct connection between the modern award, the enterprise agreement and the right or benefit. The enterprise agreement must operate on the award, or in relation to it, so that the right or benefit is affected by the enterprise agreement displacing the award.

[33] I do not accept that the Agreement in the present case operates on the Award so that employees are disadvantaged by the fact that the stand down provisions in s. 524 of the FW Act do not apply to them. The operation of s. 524 of the FW Act is not dependent on whether an employee is or is not covered by an award. The operation of the Award is incidental to the application of s. 524 of the FW Act. The non-application of s. 524 of the FW Act to employees covered by the Agreement is not because the Agreement operates on or in relation to the Award. Rather, s. 524 of the FW Act does not apply, in accordance with the terms of that section, because the Agreement provides for stand downs in the same circumstances. This is so, regardless of the differences between the wording of clause 14 of the Agreement and s. 524 of the FW Act. The preamble to clause 14 provides that it operates because of something that happened relating to the matters in (a) – (c) of that clause. The preamble is not a circumstance but rather refers to the circumstances listed in the clause. The matters listed in (a) – (c) are “circumstances” notwithstanding that they are not described as such in the preamble. Those circumstances are the same circumstances as those in s. 524(1) (a) – (c) of the FW Act. The fact that the circumstance in clause 14.2(b) is “industrial action” and not “industrial action (other than industrial action organised or engaged in by the employer) does not change its essential nature.

[34] If I am wrong about my view that clause 14 of the Agreement does not give rise to a BOOT issue, I am satisfied that the Agreement passes the BOOT in any event. The rates in the Agreement are between 7.41% and 52.61% above those in the Award and the Agreement provides for other benefits in excess of the Award including increased entitlements for some employees to severance payments, enhanced entitlements to rest pauses and additional superannuation contributions. Further, clauses 14.3 and 14.4 provide for payments to employees for periods which they would not be entitled to be paid for under s. 524 of the FW Act. When these matters are considered, I am satisfied that employees are better off overall than they would be if the Award applied.

[35] I accept that the terms in clause 14 of the Agreement differ to those in s. 524 of the FW Act. In this regard, I note that the effect of the agreement providing that employees may be stood down because of something related to the specified circumstances may be a wider formulation than s. 524 which provides that employees may be stood down because of one of the specified circumstances. However, the effect of the distinction is hypothetical and there was no specific submission as to how this could impact on employees. I do not accept that this is such a significant departure from the provisions in s. 524 of the FW Act as to cause the Agreement to fail the BOOT.

[36] I also note that the reference to industrial action as a reason for standing down employees is not limited to industrial action other than that organised or engaged in by the employer. In my view the distinction is mitigated by the provision in clause 14.1(c) to the effect that a stoppage of work giving rise to a right to stand employees down must be for a cause for which the employer cannot be reasonably held responsible. It is difficult to conceive of industrial action organised or engaged in by an employer for which the employer would not be responsible. The Applicant’s representative submitted that this is the Company’s view in relation to the operation of clause 14.1(a).

[37] In any event, the employer provided an undertaking which will be a term of the Agreement, that for the purposes of clause 14.1(a) industrial action does not include industrial action organised or engaged in by the employer. It is also the case that the examples of circumstances in which employees may be stood down in s. 14(2) of the Agreement are governed by the matters in clause 14.1 which (when regard is had to the undertaking in relation to 14(1)(a)) requires that each circumstance in which a stand down is effected must be beyond the reasonable control of the employer.

[38] I also accept the Applicant’s submission that the fact that s. 524 of the FW Act does not prevent an enterprise agreement or a contract of employment from providing for employees to be stood down in a wider range of circumstances than those in s. 524(1) of the FW Act, mitigates against the stand down provisions in the enterprise agreement being a BOOT issue. A contract of employment is generally entered into when employment commences and there is no prohibition on offering a contract of employment containing a stand down provision in broader terms than those in s. 524, at the point of engagement and making employment contingent on accepting the contract. A valid majority of employees voted to approve the Agreement containing the stand down term and other provisions which benefit all employees, including those who may have voted to reject the Agreement.

[39] Finally, the uncontested submission of the Applicant’s representative was that all enterprise agreements entered into by the Applicant since 2006 have included the same or a substantially similar provision, including the Swickers Kingaroy Bacon Factory Enterprise Agreement 2016 which the Agreement under consideration replaces. If the Agreement subject of these proceedings was not approved the 2016 Agreement would remain in operation. To refuse to approve the present Agreement on the basis of the stand down provisions in clause 14, would result in employees being denied the benefits in that Agreement and being subjected to the same stand down clause which the AMIEU contends results in the Agreement failing the BOOT.

Conclusion

[40] On the basis that I was satisfied that the statutory requirements for approval of the Agreement were met, I determined to approve the Agreement and issued a Decision to that effect on 26 July 2021.

DEPUTY PRESIDENT

Appearances:

Ms C Laird of Mazars HR Pty Limited for the Applicant.

Mr C Buckley for the AMIEU.

Mr S Vaughan for the BFUE.

Hearing details:

26 July.

2021.

By telephone.

Printed by authority of the Commonwealth Government Printer

<PR732844>

 1   [2021] FWCA 4498.

 2   [2016] FWCFB 2887.

 3 Ibid at [6].