Waternish Engineering Pty Ltd

[2017] FWC 153

[2017] FWC 153

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Waternish Engineering Pty Ltd
(AG2016/6806)

COMMISSIONER ROE MELBOURNE, 9 JANUARY 2017

Application for approval of the Waternish Engineering Pty Ltd Enterprise Agreement 2016. Undertakings offered insufficient to meet the BOOT.

[1] An application has been made for approval of an enterprise agreement known as the Waternish Engineering Pty Ltd Enterprise Agreement 2016 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Waternish Engineering Pty Ltd (Waternish). The Agreement is a single enterprise agreement.

[2] There were no bargaining representatives for this Agreement. The Agreement covers six employees. The Agreement replaces an earlier Agreement, the Waternish Constructions Pty Ltd Enterprise Agreement 2012. The Agreement does not cover all employees of the employer but only those in the labourer, operator, tradesperson and leading hand classifications. I am satisfied that the group is organisationally distinct and is fairly chosen. Waternish submits, and I agree, that the relevant reference instrument for the purpose of the BOOT is the Building and Construction General Onsite Award 2010. The business currently operates in South Australia but the scope of the Agreement is not geographically confined.

[3] A number of concerns regarding the Agreement were raised with Waternish. There has been extensive exchange of correspondence to provide Waternish with an opportunity to understand and respond to the concerns and offer relevant undertakings. On 14 and 15 December 2016 I advised Waternish that a hearing would be necessary to finalise the matter and that any submission and undertakings they wish to offer should be provided by no later than 20 December 2016. Submissions and proposed undertakings were received on 20 December 2016. Two affidavits were also received on 23 December 2016.

[4] The F17 Statutory Declaration signed Simon White, Managing Director, of Waternish attests to three matters which confer more beneficial entitlements on employees than the Award, namely wages “significantly above award”, daily fare allowance “above award”, and generous inclement (hot) weather provisions. The F17 attests to one matter which may be detrimental when compared to the award and that is the 5am to 6pm span of ordinary hours in the summer months when compared to the 7am to 6pm span in the Award (which can be extended to 6am by agreement).

[5] Mr White gave evidence that Waternish operates in the civil construction industry and the overwhelming majority of the work is installing and preparing water infrastructure. The main clients are SA Water, local councils and other civil construction companies.

[6] Waternish submitted on 6 December 2016 in response to concerns raised about the rates of pay that the base rates of pay inclusive of special and industry allowances and the tool allowance (for the classifications to which it applies) can be compared as follows:

Modern Award Classification	Agreement Classification	Modern Award Rate	Agreement Rate	Percentage Difference
CW1 (Level d)	Labourer/Operator (CW1-3)	$21.23	$22.79	7.35%
CW2	Labourer/Operator (CW1-3)	$21.65	$22.79	5.27%
CW3	Labourer/Operator (CW1-3)	$22.26	$22.79	2.38%
CW4	Heavy Operator (CW4-5)	$22.92	$23.43	2.23%
CW5	Heavy Operator (CW4-5)	$23.59	$23.43	-0.68%
CW3	Tradesperson (CW3-4)	$23.08	$24.06	4.25%
CW4	Tradesperson (CW3-4)	$23.75	$24.06	1.31%
CW1(level d) + Leading hand (1 person)	Leading hand (CW1-3)	$21.74	$24.00	10.40%
CW2 + Leading hand (2 to 5 persons)	Leading hand (CW1-3)	$22.80	$24.00	5.27%
CW3 + Leading hand (6 to 10 persons)	Leading hand (CW1-3)	$23.75	$24.00	1.05%

[7] Waternish provided evidence, which I accept, that they do not currently operate machinery which falls within CW5 award classification and the largest machinery they do operate falls within the CW4 classification. The Agreement allows for the engagement of persons and the performance of work within the CW5 classification and hence the BOOT could not be met based upon the rates provided under the Agreement. However, an undertaking to increase the rates for CW5 would not be a significant change to the Agreement given that there is no one currently employed in that classification.

[8] Waternish is prepared to make an undertaking to increase the rates to $24.50 for the labourer/operator; $26.00 for the heavy operator; leading hand $27.00 and tradesperson $27.00.

[9] Watermish is prepared to make undertakings which resolve a number of other concerns raised by the Commission.

● Part time ordinary hours. The Agreement does not provide for part time work to be a regular pattern of hours. Waternish is prepared to provide an undertaking that Clause 13.3 of the Award shall apply. This resolves the concern and it is not a substantive change as no part time employees are currently engaged. The undertaking does not result in any detriment to employees.

● Abandonment of Employment. I am satisfied that the provision in the Agreement which provides for automatic abandonment of employment after three days unauthorised absence is an unlawful term in breach of Section 194(d) in that it modifies the application of unfair dismissal rights in a manner detrimental to an employee. It also provides the employer with enforceable rights under the Agreement which do not exist under the Award to the detriment of employees and is therefore relevant to the BOOT. This situation is not altered by the fact that such provisions may be commonplace in common law employment contracts as such contracts do not have the same enforceability and cannot affect unfair dismissal rights. Waternish are prepared to provide an undertaking which resolves this concern and it is not a substantive change as the situations in which this may arise and be a detriment are uncommon. The undertaking does not result in any detriment to employees.

● Compassionate leave. The Agreement provision in respect to compassionate leave appears to restrict leave to family members whilst the NES applies to members of the employee’s household. Waternish is prepared to provide an undertaking which resolves this concern. As this is purely a matter of avoiding confusion and conflict between the NES and the Agreement it is not a substantial change to the Agreement. The undertaking does not result in any detriment to employees.

● Deductions from termination pay. The Agreement (Clause 34.5) allow for the employer to deduct from termination pay any money owing by an employee including for clothing, tools, keys, phones, notice not provided or other outstanding money. The Agreement (Clause 28.3) also allows for deduction of the cost of training if employment ceases within 12 months of attending training provided for by the company including any wages paid while attending training. The company will only pay for training it wants the employee to do and training delivered in evenings or on weekends will be paid at ordinary rates. I am satisfied that it is arguable that the benefit to the employee of the training directed to be undertaken by the employer compensates for the loss of penalty rates for training undertaken outside of ordinary hours. However, I am not satisfied that the benefit of the training also compensates for the requirement to repay the cost of training, including wages paid whilst attending training. Waternish gave evidence that the total sums involved are modest; e.g. working at heights $85, skidsteer ticket $945, elevated platforms $170. However, the Agreement does not restrict the type of training which may be involved. The Act allows for an enterprise agreement to contain provisions for deduction from wages but only if those provisions are reasonable. Generally an employer can only make the deductions of the sort prescribed in Clause 34.5 (other than for notice not provided) with the agreement of the worker concerned. I am satisfied that the broad scope of deductions without authorisation is unreasonable and denies an employee the reasonable opportunity to challenge the validity of claims made by the employer. The provisions provide the employer with enforceable rights that are not available under the Award. Waternish is prepared to offer an undertaking that “any deductions made from an employee’s termination pay, including amounts deducted pursuant to Clause 28.3, will not exceed the difference between the amount the employee is paid and the amount that the employee would have received if they were remunerated in accordance with the Award, plus one cent. This undertaking resolves the concerns concerning deductions from termination pay. It is not a substantive change as the situations in which this may arise and be a detriment are uncommon. The undertaking does not result in any detriment to employees.

[10] The Commission raised a number of other matters of concern the detrimental effect which I am satisfied are adequately compensated for by the proposed higher rates of pay in the undertaking offered by Waternish.

● The Agreement allows for ordinary hours from 5am without the payment of penalty. Under the Award employees would be entitled to penalty payments for work between 5am and 6am. The BOOT would not be met for a number of classifications if there were regular early starts due to this loss when compared to the Award. There is nothing to stop regular early starts given that hot weather is common in South Australia. However, I am satisfied that the higher rates of pay in the proposed undertaking are sufficient to ensure that employees under the Agreement working a full shift starting from 5am are better off than they would be working that shift under the Award.

● Overtime meal allowance. The Agreement provides a meal allowance of $14.50 where an employee is required to work more than 12 hours whereas the Award provides a meal allowance of $14.54 where an employee, other than an operator, is required to work overtime for at least one and a half hours. Waternish has given evidence that it is not common for its employees to work overtime. I accept that evidence but there is nothing in the Agreement which prevents further overtime being worked and the BOOT should be conducted against what the Agreement provides. However, I am satisfied that the higher rates of pay in the proposed undertaking are sufficient to ensure that employees under the Agreement working 1.5 hours overtime on a shift are better off than they would be working that shift under the Award notwithstanding the non-payment of meal allowance.

● Definition of continuous shift worker. The Agreement definition of a continuous shift worker is a person who is regularly rostered to work ordinary hours on Saturday and Sunday. This is more restrictive than the Award definition which requires a system of consecutive shifts for at least six days. Waternish gave evidence which I accept that shift work is ad hoc and rare. It is possible that this might change in the future. However, given the size and nature of the business I am satisfied that the difference between the Award and the Agreement conditions for eligibility are not significant. It is unlikely that a business of the size and nature of Waternish would operate a system of consecutive shifts for at least six days.

● Annual leave loading for shift workers. The Agreement provides for a 17.5% leave loading but does not provide for the additional shift penalties provided for in the Award. I am satisfied that the higher rates of pay in the proposed undertaking are sufficient to ensure that employees the Agreement working shift work would still be better off notwithstanding the lower annual leave loading. I also consider that a high incidence of shift work is unlikely.

● Meal breaks for shift workers. Under the Award such meal breaks would be paid but under the Agreement they are unpaid. I am satisfied that the higher rates of pay in the proposed undertaking are sufficient to ensure that employees the Agreement working shift work would still be better off notwithstanding the unpaid meal breaks. I also consider that a high incidence of shift work is unlikely.

● Span of hours for shift workers. The times when shift penalties apply are less beneficial than the Award. Under the Agreement afternoon shift does not apply to shift unless it starts at or after 12pm whilst under the Award it applies to a shift which starts at or after 10am. This affects the penalty payments and the application of paid as opposed to unpaid meal break. Waternish provided evidence that shift work is occasional and irregular given the nature of the business. I accept this evidence and that it is unlikely that this will change in the future. It is possible to construct a scenario where an employee may not be better off as a result of this provision but in all likely scenarios the higher rates of pay offered in the proposed undertaking are sufficient to ensure that employees are better off.

[11] There were four other matters of concern which were raised by the Commission. They are redundancy, allowances, inclement weather and accident make up pay. During the hearing of the matter I advised Waternish that I did not consider the undertakings offered were sufficient to deal with these matters and explained the reasons why I had come to this preliminary view. In response the company proposed some variations and additions to their undertakings. I will deal with each of these in turn.

Redundancy

[12] The Agreement does not include the industry specific redundancy scheme at Clause 17 of the Award. The Agreement provides for redundancy in accordance with the NES. Under the NES severance payments are only payable in a redundancy situation. Under the Award the employees would be entitled to severance payments in all circumstances where an employee, other than a casual, ceases to be employed other than for reasons of misconduct or refusal of duty. The redundancy benefit can be up to 8 weeks’ pay. The rates of pay in the Agreement are at least 10% above the Award base rates when the proposed undertaking is taken into account. This 10% adequately compensates for the matters listed earlier but there is insufficient buffer remaining when all of those factors are taken into account to cover the potential disbenefit associated with redundancy. For an employee with one year of service the 2.4 weeks of redundancy pay is 4.65% of annual base salary. In response the company during the hearing offered to increase the rates of pay by a further $1 per hour. I am satisfied that this is sufficient to ensure that the employees are Better Off Overall under the Agreement.

Allowances

[13] The Agreement does not include a large number of allowances which are included in the Award such as first aid allowance, multi-story allowance, insulation, hot work, confined space, wet work, dirty work and other special rates. I am satisfied that a number of the allowances in the Award such as multi-storey, underground allowance, laser allowance, carpenter diver, coffer dam, scaffold, asbestos and dual lift have no application to the type of business conducted or likely to be conducted by Waternish. The Agreement does not prohibit such work but because it is unlikely to occur I consider that the higher rates of pay in the proposed undertakings are sufficient to ensure that employees are Better Off Overall notwithstanding the failure to include these allowance. However, Mr White for Waternish accepts that confined spaces, wet work, dirty work, toxic substances and live sewer works allowances would be applicable to some of the work performed by Waternish. First aid allowance is also applicable.

[14] The provisions of the Agreement in respect to fares and travel and living away from home differ from those in the Award. The fares and travel allowance is $18 whilst the Award allowance is $17.43. I am satisfied that this slight increase in the allowance is adequate compensation for some more minor entitlements in respect to travel and living away from home which are not included in the Agreement but which are found in the Award. The increase is not sufficient to compensate for the absence of other allowances.

[15] In respect to the first aid allowance Mr White gave evidence that generally the supervisors who are not covered by the Agreement are the first aid officers. On a small number of occasions the leading hand may be designated to do this. I am satisfied that the Award requires that a person appointed to carry out first aid duties is paid the allowance for duties as they may arise and not just for the period of time when the qualification may be utilised. The Award states that the allowance is “to compensate that person for the additional responsibilities, skill obtained and time spent acquiring the relevant qualifications”. I am not satisfied that first aid allowance is adequately compensated for by the proposed undertaking concerning the base rates of pay.

[16] In respect to confined spaces, wet work, dirty work, toxic substances and live sewer works allowances, Mr White provided estimates of the proportion of days worked when these disabilities may arise and Waternish submit that the annual value of the allowances under the Award for that time is $452 per year per employee or approximately 22 cents per hour. Given that it is not uncommon for Waternish to perform work which involves confined spaces, wet work, dirty work, toxic substances and or live sewer works the proportion of that work obtained by Waternish may well change in the future.

[17] In response the company during the hearing offered to increase the rates of pay by a further $1 per hour. I am satisfied that this is sufficient to ensure that the employees are Better Off Overall taking into account the disbenefits associated with the redundancy provision and the possibility that disabilities and first aid allowance might apply for a greater amount of time in the future.

Inclement weather

[18] The Award provides as follows:

23.1 This clause applies to general building and construction and the civil construction sector only.

23.2 Inclement weather means the existence of rain or abnormal climatic conditions (whether hail, extreme cold, high wind, severe dust storm, extreme high temperature or the like or any combination of these conditions) where it is not reasonable or it is unsafe for employees to continue working in those conditions.

23.3 The employer or its representative, when requested by the employees or their representative, must confer within a reasonable time (which does not exceed 60 minutes) for the purpose of determining whether or not the conditions referred to in this clause apply.

23.4 The time of the cessation of work due to inclement weather and the resumption of work after a period of inclement weather has ended will be recorded by the employer.

23.5 When inclement weather conditions exist an affected employee is not required to commence or continue to work where it is unreasonable or unsafe to do so. In cases where emergency work is required or it is necessary to complete a concrete pour already commenced to a practical stage, work may occur or continue provided that such work does not give rise to a reasonable concern on the part of an employee undertaking the work of an imminent risk to their health or safety.

23.6 Where a concrete pour is completed in accordance with clause 23.5, work will be paid at the rate of double time calculated to the next hour, and in the case of wet weather, the employee will be provided with adequate wet weather gear. If an employee’s clothes become wet as a result of working in the rain during a concrete pour the employee will, unless the employee has a change of dry working clothes available, be allowed to go home for the remainder of the day without loss of pay.

[23.7 substituted by PR538792 ppc 15Jul13]

23.7 Where an employee is not able to perform any work at any location because of inclement weather, the employee will receive payment at the ordinary time hourly rate for ordinary hours. Payment for time lost due to inclement weather is subject to a maximum of 32 hours pay in any four week period for each employee. Payment is subject to adherence to the terms of this clause.

[23.8 renumbered as 23.8(a) by PR538792 ppc 15Jul13]

23.8 (a) If an employee commences employment during a four week period the employee will be credited with:

● 32 hours where the employee commences on any working day within the first week;

● 24 hours where the employee commences on any working day within the second week;

● 16 hours where the employee commences on any working day within the third week; and

● eight hours where the employee commences on any working day within the fourth week in any four week period.

[23.8(b) inserted by PR538792 ppc 15Jul13]

(b) The first period will be deemed to commence on the first Monday after 28 December 2009 and subsequent periods will commence at four weekly periods thereafter, provided that a calendar that was being used immediately before 15 July 2013 may still apply.

23.9 An employee working on a part-time basis pursuant to clause 13—Part-time weekly hire employment, will be entitled to payment on a pro rata basis according to the number of ordinary hours agreed to be worked in the four week period. The method of calculation of a part-time daily hire employee’s proportionate employment will be as follows:

32 x	Number of hours agreed to be worked during the four week period
152

23.10 Inclement weather occurring during overtime will not be taken into account for the purposes of this clause and employees will not be entitled to any payment for stoppages because of inclement weather that occurs outside of ordinary hours.

23.11 Employees on a portion of a site not affected by inclement weather must continue to work even though employees working on other areas of the site may have stopped work because of inclement weather.

23.12 Subject to the availability of alternative work in an employee’s classification, an employer may require employees to transfer:

(a) from a location on a site where it is unreasonable and/or unsafe to work because of inclement weather, to another area on the same site, where it is reasonable and safe to work; and/or

(b) from a site where it is unreasonable and/or unsafe to work because of inclement weather, to another site, where it is reasonable and safe to work, and where the employer, where necessary, provides transport.

23.13 Additional wet weather procedure

(a) Remaining on site

Where, because of wet weather, the employees are prevented from working:

(i) for more than an accumulated total of four hours of ordinary time in any one day; or

(ii) after the meal break, as provided in clause 35.1, for more than an accumulated total of 50% of the normal afternoon work time; or

(iii) during the final two hours of the normal work day for more than an accumulated total of one hour;

the employer will not be entitled to require the employees to remain on site beyond the expiration of any of the above circumstances.

Where, by agreement between the employer and the employees, employees remain on site beyond the periods specified above, any such additional wet time will be paid for but will not be debited against the employees’ hours. Wet time occurring during overtime will not be taken into account for the purposes of this subclause.

(b) Rain at starting time

Where the employees are in the sheds, because they have been rained off, or because it is at starting time, morning tea, or lunch time, and it is raining, they will not be required to go to work in a dry area or to be transferred to another site unless:

(i) the rain stops; or

(ii) a covered walkway has been provided; or

(iii) the sheds are under cover and the employees can get to the dry area without going through the rain; or

(iv) adequate protection is provided.

Protection must, where necessary, be provided for the employees’ tools.

[19] The Agreement provision is inferior to the Award provision in many respects including:

● The definition of inclement weather in the Agreement is confined to situations where the work is unsafe. That is employees may be required to work where it is safe but unreasonable.

● The Award requirement for consultation to determine whether or not weather is inclement is not included.

● There is no requirement to record when work stops and resumes for inclement weather

● There is no requirement to stop work in inclement weather

● The Agreement provides that an employee will not be entitled to payment for non-working time due to hot weather where the Award provides for such payment.

● The Agreement does not allow employees to leave the site during extended wet weather

● The Agreement requires employees to walk through the rain without adequate protection to go from the shed to work station whilst the Award specifically prohibits this

● The Agreement excludes casuals from payment for inclement weather.

[20] Watermish has offered an undertaking to allow employees to leave the site in certain restricted circumstances. However, I was not satisfied that employees will be Better Off Overall in absence of an undertaking that addressed all of the deficiencies with the Agreement inclement weather clause. In response at the hearing the company agreed to offer a more comprehensive undertaking in respect to inclement weather. I am satisfied that this resolves the matter.

Accident make up Pay.

[21] The Agreement does not include provisions for accident pay which is provided for under clause 27 of the Award. Waternish submit, and I accept, that the SA legislative provisions are superior to the accident make up pay provisions of the Award. However, the Agreement is not confined to SA. Although it is not likely that the company will operate outside SA in the short term, this cannot be excluded. Accident make up pay can have a significant impact on affected individuals and hence I cannot be satisfied that the BOOT is met unless there is an additional undertaking that the award provision will operate in the event that the company does operate outside SA. During the hearing the company agreed to provide an undertaking to this effect.

Annual leave

[22] This matter only came to my attention following the listing of this matter for hearing. The Agreement clause provides that the company may direct an employee to take leave if they have accrued more than 4 weeks of leave and may require an employee to take up to five days annual leave at short notice in the case of insufficient work or unforeseen circumstances. Of course the employer does have stand down capacity in accordance with the Act. However, the Award at test time contained provisions concerning excessive leave accruals and the capacity of the employer to direct employees to take annual leave. The provisions in the Agreement are significantly detrimental to employees when compared to those provisions. I am not satisfied that the BOOT is met in the absence of an undertaking that Clause 38.6 and 38.7 and 38.8 of the Award shall apply in lieu of Clause 21.2(c) and (d) of the Agreement. During the hearing the company agreed to provide an undertaking to this effect.

Genuine Agreement

[23] In the F17 Statutory Declaration Waternish stated that there was only one matter, the issue of no penalty payment for 5am start, which was detrimental to employees when compared to the Award. I am satisfied for the reasons given earlier that there were in fact a number of matters where employees were disadvantaged when compared to the Award. It is reasonable to conclude that if the employer failed to identify these matters to FWC they also failed to identify the matters to the employees. This raises a question mark as to whether or not the requirement in Section 180(5) has been met; that is the requirement that the employer must take all reasonable steps to ensure that the terms of the agreement and the effect of those terms are explained to the relevant employees. Compliance with this section is required for FWC to satisfied pursuant to Section 188(a)(i) that there has been genuine agreement.

[24] Mr White for Waternish gave evidence that the focus of both the negotiations for the Agreement and the explanation provided to employees were the changes between the current agreement and the new Agreement. For the most part the new Agreement is the same as the old agreement save for the update of wages. An employee, Mr Stephenson, provided a statutory declaration stating that he agreed with the statement of Mr White and confirming that the explanation of the proposed new Agreement focused on the differences between it and the current agreement. The fact that Mr Stephenson did not feel coerced and was satisfied with the explanation does not address the central issue which is the responsibility on the employer to explain the effect of the terms of the agreement. Where there are bargaining representatives some of this responsibility can be taken by the bargaining representatives but in this case there were no bargaining representatives so the responsibility was solely the employer’s. The legislative scheme makes it clear that a critical issue when considering the effect of the agreement is not how it compares to an earlier agreement but rather how it compares to the relevant Award and the NES. There is therefore a real doubt about whether or not Section 180(5) was complied with.

[25] On a fine balance I have decided that Section 180(5) has been complied with. This is primarily because the matters which disadvantage employees in the main did not have an immediate and substantive impact on the existing employees. That is not to say that the matters lack impact and importance. I also take into account that FWC found, when approving the earlier agreement under the Fair Work Act 2009, that reasonable steps had been taken to explain the impact of the earlier agreement on employees. This provides some justification for the focus in explanation on the changes from the earlier agreement to the new Agreement.

Conclusion

[26] I am satisfied that the problems with this Agreement can be cured by the provision of undertakings. I am satisfied that taken as a whole the undertakings sought would not result in a substantial change to the agreement nor in financial detriment to any employee covered by the Agreement. There are no bargaining representatives who must be consulted.

[27] I am satisfied that the other statutory requirements for the approval of the Agreement have been met.

[28] If the company provides revised undertakings which in addition to those undertakings offered also include the matters raised earlier in respect to inclement weather, accident make up pay, annual leave, and increases to the rates by a further $1 per hour, I will approve the Agreement. If the undertakings are not provided then the application is dismissed due to the failure to meet the BOOT. There has been no submission that circumstances exist such that I should approve the Agreement notwithstanding that it does not pass the BOOT and I am not satisfied that public interest reasons exist in the circumstances of this case. 1 If the company is prepared to make the undertakings they must be provided in the required form by no later than 12 January 2017.

COMMISSIONER

Appearances:

Mr Tom Earls of Fair Work Lawyers for the Applicant

Hearing details:

2017.

Melbourne (VC to Adelaide):

9 January 2017

 1 Fair Work Act 2009 at s.189

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