AMMA Workplace Policy Advisor Tegan Morris (pictured) examines the Construction, Forestry, Maritime, Mining and Energy Union’s (CFMMEU) contention that the Karijini Rail Pty Ltd enterprise agreement was not genuinely agreed to by the two employees who voted.  It highlights the legitimate needs of employers to establish enterprise agreements with smaller cohorts of employees to provide commercial certainty and the nuanced application of the new power of the Fair Work Commission (FWC) to overlook minor procedural errors.

Background

Railtrain Group Pty Ltd (Railtrain) has several subsidiary companies that supply train drivers and labour services to rail and mining companies. Railtrain’s subsidiary TRRC had provided 50 rail crew employees to operate trains on the Roy Hill mine network, TRRC’s only client, under a contract that operated until 31 October 2018.

In June 2018, Roy Hill advised Railtrain that it was prepared to offer a four year contract for the supply of train drivers if Railtrain could make a new enterprise agreement with rates and other conditions matching the commercial contract.

In order to obtain the Roy Hill contract, Railtrain made the decision to make an enterprise agreement with its newly incorporated subsidiary, Karijini Rail Pty Ltd (Karijini), as the employing entity under the agreement.

There were two vacancies under the TRRC contract at the time the decision was made to establish a new enterprise agreement and Railtrain recruited two train drivers employed by Karijini to fill those vacancies.

The two employees commenced in July 2018 and were placed on secondment with TRRC until 1 November 2018 when the contract with Roy Hill expired.

While completing induction training in their first two weeks, the employees were also involved in bargaining for the new enterprise agreement. Only three entitlements presented in the enterprise agreement were more beneficial, or not conferred by, the relevant modern award. These entitlements were the base rates of pay, overtime and shift work.

During bargaining discussions one of the employees asked how the salary was made up for different shift patterns and weekend work under the proposed enterprise agreement. Karijini advised the employee that their ‘IFA varies the way the allowances are paid to create a flat rate, this rate will encompass all penalties; the current rate in your letter of offer is well in advance of the enterprise agreement rate and needs to pass the BOOT.’

Karijini’s explanatory document provided information about the remuneration under the proposed enterprise agreement and referred to minimum base rates of pay, casual loading of 25% and shift loading of 25% on top of the minimum base rate of pay.

Karijini believed the two employees, who had significant experience as train drivers in the region working under similar conditions, posed intelligent questions and amendments throughout bargaining. The ballot was conducted on 2 August 2018 and there was a unanimous vote to approve the enterprise agreement.

On 5 September 2018 Roy Hill advised TRRC it had decided not to renew the contract for the supply of the rail crew on the Roy Hill mine network. Roy Hill informed Karijini on the same day it had successfully secured the new contract. Roy Hill highlighted the importance of continued labour supply and agreed to engage the existing TRRC employees until 1 November 2018.  Once the TRRC contract expired, the employment of all TRRC employees was transferred to Karijini.  The transferred employees were employed on maximum term contracts with recognition of prior service with TRRC.

The CFMMEU made a number of objections to the approval of the enterprise agreement. The CFMMEU submitted that the primary purpose for Karijini’s employment of the two train drivers was to make the enterprise agreement, rather than to perform work, as Karijini did not have any contracts to supply workers at the time the enterprise agreement was made.

It also argued that Karijini had provided only a summary of the terms of the enterprise agreement to the two employees and had not taken all reasonable steps to explain the terms of the enterprise agreement and their effect to the two employees.

The CFMMEU submitted the agreement did not pass the BOOT because it provided a number of less beneficial terms, or terms that did not have an equivalent provision in the relevant modern award. The CFMMEU’s final objection concerned the annual leave clauses which it alleged contravened the NES.

Decision: the agreement lacked reasonable explanation

Deputy President Beaumont found the enterprise agreement was not genuinely agreed to by the two employees due to Karijini’s failure to comply with s 180(5) of the Fair Work Act 2009 (Cth) (FW Act) in taking reasonable steps to ensure that the terms of the agreement were explained to the employees.

The Deputy President noted the two employees were new to Karijini, which was only newly established, and Karijini was not rolling over an existing enterprise agreement with which the employees were familiar.

Deputy President Beaumont found it was reasonable for the employee to ask how the salary would be made up particularly when the base rate of pay was said to be inclusive of allowances and there was a simple shift loading of 25%. She also found that the employee’s question had remained unanswered, except for some information about an individual flexibility arrangement, which was not an adequate response.

The question in this decision was whether the agreement would have been genuinely agreed to had it not been for a minor procedural or technical error made under s 188(1)(a) of the FW Act where Karijini did not meet the requirements in s 180(5) to adequately explain the terms of the proposed enterprise agreement and their effects.

The Deputy President advised she would issue directions to the parties to address this point, in addition to whether an undertaking may meet the concern identified in this decision.

The Deputy President found no other grounds that demonstrated the enterprise agreement had not been genuinely agreed to.  She was satisfied the issues relating to the BOOT and the NES were addressed by appropriate undertakings and did not prevent the enterprise agreement being approved.

The Deputy President rejected the claim by the CFMMEU that the two employees who negotiated the enterprise agreement were not covered by the enterprise agreement because Karijini did not yet have a contract to perform work.  Deputy President Beaumont found the two train drivers had been engaged for the ‘primary purpose’ of driving trains for Karijini on the Roy Hill network and were already performing work on a secondment agreement between Karijini and TRRC.

Implications

There are legitimate reasons for employers to seek approval of an enterprise agreement at a time when there are only a small number of employees employed. Some examples of this include to attract talent while the business grows and to provide certainty when taking part in a commercial tender process.

Having a set of terms and conditions in place provides stability and commercial certainty to a business. It is also important to ensure investors have confidence that projects are able to get off the ground and become operational.

Along with commercial certainty, having an enterprise agreement in place offers a degree of industrial stability for a business.

Agreements with small voting cohorts are still assessed against a stringent approval process prescribed under the FW Act and employees still need to be better off overall under the proposed enterprise agreement.

This theme is one of the Australian Labor Party’s key workplace policies for the upcoming Federal Election to prevent employers from making enterprise agreements with small voting cohorts that will apply to a larger workforce in the future.

In October 2017, Opposition Workplace Relations spokesperson Brendan O’Connor announced that Labor would legislate to make it clear that workers who vote on an agreement must be broadly representative of the workers who will ultimately be covered by the enterprise agreement.

Any legislative changes to the number of employees who can vote on enterprise agreements or the makeup of employees to be covered by an enterprise agreement will introduce inflexibilities into the enterprise agreement making process. AMMA will continue to monitor any developments and advocate for employers to continue to make genuine enterprise agreements with small cohorts of employees.

For more information about this decision or advice on enterprise bargaining, contact a workplace relations specialist at your local AMMA office.