Full decision here.

Introduction

In this Full Bench appeal application, the union challenged a previous decision of the FWC to approve an agreement on the basis that:

  • The employer did not take all reasonable steps to explain the terms of the Agreement and the effect of those terms to employees;
  • It did not pass the better off overall test; and
  • Questioned the voracity of the undertakings.

This is a great leaning tool for anyone who deals with enterprise bargaining.

Background

  • On 13 August 2018, the company-initiated bargaining for a proposed agreement and gave to its employees employed at the time who would be covered by the proposed agreement a Notice of Employee Representational Rights.
  • On 28 August 2018, employees were provided with a copy of the proposed agreement and a notice titled “How and When for Approval Notice”, which was said to contain information about the time, place and method of the vote to approve the Agreement
  • On 5 September 2018, at 1:30 pm a meeting was held with employees for the purpose of explaining the terms of the Agreement, at which an opportunity was provided to employees to ask questions about the terms of the Agreement.
  • At that meeting a copy of the Agreement and a document described as a “summary sheet” said to outline clauses which had changed from the enterprise agreement that then covered the employees was given to relevant employees.
  • Voting for the Agreement commenced and concluded on 5 September 2018.
  • The Agreement was made on that day when 40 valid votes were cast and 39 of the employees who cast a valid vote, voted to approve the Agreement.
  • At the time the Agreement was made.
  • The agreement replaced another agreement and the BOOT was based on the relevant award.
  • On 20 August 2019, the agreement was approved with undertakings, despite opposition from the union.

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The Union appealed the decision

Whilst providing a number of reasons (grounds) for the appeal, the union seemed particularly grumpy at the company’s correspondence with its employees, submitting that:

 “…by distributing to its employees, a letter on 15 December 2017, that provided employees with the option to elect to have a Union or Non-Union Agreement, the Applicant purported to discourage it employees from engaging in collective bargaining for a Union Enterprise Agreement”.

The union being particularly concerned in the wording:

“…the employees would be out of a job, working in labour hire, and that the company will be closed within six months [should it agree to a union agreement]”.

The union submitting that the Applicant’s conduct failed to meet the obligation under the Act…to “[refrain] from capricious or unfair conduct that undermines freedom of association or collective bargaining”.

The Full Bench referenced the Explanatory Memorandum to the Fair Work Bill 2008 which gave the following examples of capricious or unfair conduct by an employer:

“The good faith bargaining requirements are generally self-explanatory. The last requirement, ‘refraining from capricious or unfair conduct…’ is intended to cover a broad range of conduct. For example, conduct may be capricious or unfair conduct if an employer:

  • fails to recognise a bargaining representative;

  • does not permit an employee who is a bargaining representative to attend meetings or discuss matters relating to the terms of the proposed agreement with fellow employees;

  • dismisses or engages in detrimental conduct towards an employee because the employee is a bargaining representative or is participating in bargaining; or

  • prevents an employee from appointing his or her own representative.”

The decision-in-chief decided that the letter in question did not consider the conduct of the Applicant amounted to capricious or unfair conduct:

“The Applicant clearly made a forceful expression of their choice of participants in the Agreement, but nonetheless they presented their employees with a choice of a union or non-union agreement. I am satisfied that that the Applicants actions have not undermined the good faith bargaining requirements of the Act.”

Genuinely agreed

The Full Bench stated that arriving at a state of satisfaction as to whether an employer has complied with the obligations in s.180(5):

“…depends on the circumstances of the case. The focus of the enquiry involves considering and evaluating the steps taken to comply, and then assessing whether the steps taken were reasonable in the circumstances and whether these were all the reasonable steps that should have been taken in the circumstances”.

The FB then cited a Full Bench of the Commission in The Australian Workers’ Union v Rigforce Pty Ltd  recently stated:

“. . . The nature of the requirement in s 180(5) was analysed in detail by the Federal Court (Flick J) in CFMEU v One Key Workforce Pty Ltd.  We adopt the summary of that analysis set out in CFMMEU v Ditchfield Mining Services Pty Limited, which reduced it to the following four propositions:

(1) whether an employer has complied with the obligation in s 180(5) depends on the circumstances of the case;

(2) the focus of the enquiry whether an employer has complied with s 180(5) is first on the steps taken to comply, and then to consider whether:

  • the steps taken were reasonable in the circumstances; and
  • these were all the reasonable steps that should have been taken in the circumstances;

(3) the object of the reasonable steps that are to be taken is to ensure that the terms of the agreement, and their effect, are explained to relevant employees in a manner that considers their particular circumstances and needs. This requires attention to the content of the explanation given; and

(4) an employer does not fall short of complying with the obligation in s 180(5) of the FW Act merely because an employee does not understand the explanation provided.

“Additionally, we also adopt the analysis of Gostencnik DP in BGC Contracting Pty Ltd concerning the nature of a statutory obligation to take “all reasonable steps” as follows (footnote omitted):

“A requirement or obligation to take “all reasonable steps” seems to me to require the identification of the steps a reasonable person would regard as reasonable in the circumstances that apply. Whether particular steps are reasonable will depend on the particular circumstances existing at the time the obligation arises. A requirement to take all reasonable steps does not extend to all steps that are reasonably open in some literal or theoretical sense…”

“[And in] Ditchfield Mining reproduced above makes clear, an assessment whether an employer took all reasonable steps to explain to relevant employees the terms of an agreement and the effect of those terms necessarily requires an examination of the content of the explanation given by the employer. That the content of the explanation given is an important consideration in determining whether the Commission is satisfied that an employer has complied with s.180(5) is also made clear by the Full Court of the Federal Court in One Key Workforce Pty Ltd v CFMEU. So much is evident from the following passages from the Full Court’s judgment:

“[i]n order to reach the requisite state of satisfaction that s.180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement.

“[t]he absence of that information meant that the Commission was not in a position to form the requisite state of satisfaction. Put differently, without knowing the content of the explanation, it was not open to the Commission to be satisfied that all reasonable steps had been taken to ensure that the terms and their effect had been explained to the employees who voted on the Agreement or that they had genuinely agreed to the Agreement.”

Comparison

The Full Bench in Ditchfield Mining also dealt with the issue of the extent to which an explanation involving a comparison between an agreement and an award covering relevant employees needs to be given:

“Compliance with s.180(5) will not always require an employer to identify detriments in an agreement vis-à-vis the reference instrument, or for the employer to provide an analysis between the agreement and the relevant reference instrument, particularly in circumstances where an existing enterprise agreement, not a reference instrument, applies to the employees in their employment with the employer. The question of compliance with s.180(5) is to be judged against the circumstances that pertain at the time at which compliance was required. Section 57 of the Act makes clear that a modern award does not apply to an employee in relation to particular employment at a time when an enterprise agreement applies to the employee in relation to that employment. In the present case, when the explanations were given, no enterprise agreement applied to the employees and the Award did apply. An explanation of the effect of the terms of the Agreement vis-à-vis the Award was therefore capable of being relevant to the evaluative assessment of whether all reasonable steps were taken to explain the terms of the Agreement and the effect of those terms.

“The obligation under s.180(5) to take all reasonable steps to explain to relevant employees the terms of an enterprise agreement and the effect of those terms is an important function of the agreement-making scheme established by Part 2-4 of the Act. Its evident purpose, taking into account its role in assessing whether the employees who were asked to vote to approve an agreement genuinely agreed to the agreement, is to ensure that employees are as fully informed as practicable about the terms and effect of the terms of a proposed enterprise agreement before voting on whether to approve it. An employer’s discharge of its obligation under s.180(5) is intended to enable employees to know what they are being asked to agree to, and to understand how their wages and working conditions might be affected by voting in favour of an agreement.”

The Full Bench concluding

“The relevant comparison required in order that the employees could make an informed choice whether to approve the Agreement was in this case as between the 2012 Agreement and the Agreement”. [In this case, NOT the award].

“We also accept that the duration of the meeting, whilst relevant, without more is not an indicator in this case as to the adequacy of the explanation, given the number of alterations that were to be made by the Agreement to the existing terms and conditions of the affected employees.

“The difficulty however, is that the material attached to [the information statement] which was used…to explain the terms of an earlier agreement which had been withdrawn and this Agreement…relied as in part satisfying the requirement in s.180(5), is itself inaccurate or incomplete. …For example, the documents disclose “Productivity Allowance – Page 21 – Clause 26” as being raised, but not what is said about the term…”

The Full Bench also took issue with the company’s bold statement:

“Pay increases will be via productivity allowance. No one will be worse off whatever rate you are on now will either remain or increase.”

Noting that:

“Neither of these statements on their face is correct. The alteration to the productivity allowance that is brought about by the Agreement compared to the 2012 Agreement is significant. It alters from a mandatory hourly payment paid to employees covered by the 2012 Agreement for the duration of that agreement to a payment which is wholly discretionary, and which need not be made at all…the productivity allowance payments were mandatory under the 2012 Agreement, but under the Agreement these would be discretionary and could be removed for any reason. The documents say nothing about this”.

Undertakings (the process)

The DP in the decision-in-chief was criticised in its process:

“The contention that the undertakings were proffered in the usual manner is unsustainable given that [the company] did not provide any written undertakings until well after the Deputy President purported to approve the Agreement”.

“The process for proffering, accepting undertakings, assessing whether an accepted undertaking meets the requisite concern, and considering whether to approve an enterprise agreement may be summarised, chronologically as follows.

“First, there must be made an application for approval of an enterprise agreement.

“Secondly, the Commission must have a concern that the agreement does not meet one or more of the requirements set out in ss.186 and 187 of the Act. It should go without saying that the relevant concern needs to be identified by the Commission and communicated to the applicant for the approval of the agreement, and where the applicant is a bargaining representative for the agreement which is not the employer, also communicated to the employer or employers covered by the agreement. Only an employer or employers covered by an agreement can give an undertaking.

“Thirdly, there must be a written undertaking from one or more of the employers covered by the agreement and that undertaking must meet the signing requirements.

“Fourthly, the Commission must assess and be satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement.

Fifthly, before accepting an undertaking the Commission must seek the views of known bargaining representatives for the agreement.

Sixthly, if the undertaking is accepted the Commission must be satisfied that the accepted undertaking meets its concern before it may approve the agreement.

Seventhly, there is a residual discretion to be exercised whether to approve the agreement with the undertaking that has been accepted and that meets the identified concern.”

The Full Bench concluding:

“As there was no written undertaking as required before the Deputy President at or before the time that he approved the Agreement, the position at the time that he approved the Agreement was that the Agreement did not pass the BOOT. The Deputy President was not empowered to approve the Agreement in anticipation of an undertaking being given in the future. Consequently, the Deputy President erred in approving the Agreement which did not meet the BOOT requirements in s.186(2)(d) of the Act. Put another way, on the material before the Deputy President at the time that he approved the Agreement, he could not be satisfied absent the undertaking that the Agreement passed the BOOT”.

Adding:

“…The Deputy President accepted…that the CEPU was a bargaining representative for the Agreement. Thus, it was a known bargaining representative. Written undertakings cannot be accepted unless the Commission has sought the views of the known bargaining representatives”.

Commentary

 This is a great learning tool for those who dabble in the EBA business. The most important take-aways for me being:

  • Communication must be provided to the constituents of an enterprise agreement in a strictly comparable manner (eg, a table the new clause, replaces this old clause, and this is the net outcome).
  • The BOOT is undertaken against the previous enterprise agreement (so if changes are to be made maybe terminate the previous agreement first?).
  • If the agreement just falls a little bit short at the last hurdle, then undertaking must only be accepted if they are agreed by all the parties to the agreement, including the union if it is a bargaining agent.