BHP Billiton’s hotly-contested ‘Operations Services’ (OS) enterprise agreements are set to be reassessed by the Fair Work Commission (FWC) after a Full Bench overturned Deputy President Gerard Boyce’s December 2019 approval decisions.

The Full Bench comprising Vice President Hatcher and Deputy Presidents Booth and Colman on Friday (8 May 2020) found DP Boyce failed to properly consider the agreements against the statutory criteria for approval and should have had greater consideration to union objections to the deals.

Background

In January and May 2018 respectively, BHP registered OS ACPM Pty Ltd and OS MCAP Pty Ltd as companies which provide permanent roles within BHP’s mining operations across Australia (OS standing for “Operations Services”).

In October 2018, two OS enterprise agreements were lodged with the Fair Work Commission for approval.  Each of the agreements cover employees who undertake production and maintenance activities on a mining operation, respectively.

Both agreement applications were allocated to DP Boyce in January 2019 after the FWC had conducted an initial analysis of both enterprise agreements.

The CFMMEU, CEPU and AWU all sought to be heard on the approval of the enterprise agreements contending that the agreements contravened the National Employment Standards (NES), do not pass the ‘better-off-overall-test’ (BOOT) and that OS failed to undertake various pre-approval steps.

The DP issued directions requiring the parties to file relevant materials in relation to the applications and raise any additional issues. The parties had complied with the directions by April 2019. Shortly after, the unions made a request to provide further written submissions and cross examine witnesses. Both OS companies opposed these requests.

The parties were notified in May 2019 that the DP had determined not to grant the unions leave to make further submissions or cross examine witnesses, instead allowing the unions to make oral submissions at the June 2019 hearing on any matters they sought to agitate about the approval of the proposed agreements. Following the hearing, the parties filed further submissions, the last of which were made in August 2019.

In December 2019, OS provided draft undertakings addressing a number of provisions in both enterprise agreements. The FWC also emailed modelling of the salary rates to OS MCAP which suggested that the agreement did not pass the BOOT. OC MCAP responded contending the modelling was inaccurate and the agreements did pass the BOOT.

Both agreements were subsequently approved.

In January 2020, the unions appealed the approval of both enterprise agreements on several grounds, including that the DP took into account irrelevant considerations, the agreements contravened the NES, the agreements did not satisfy the statutory requirements for approval, in particular passing the BOOT and genuinely agreed test and that the undertakings provided did not remedy a deficiency in the explanation required.

There was further contention about how the BOOT would apply to new or alternative rosters that did not exist under the award.

OS submitted that permission to appeal should be refused for various reasons some of which include the unions’ claims that the agreements contravene the NES is misconceived, there was no failure to explain the terms of agreements given there is no authority to explain each and every single term of the agreements and the DP’s acceptance of undertakings to cure procedural errors was consistent with legal authorities.

Agreements fail the tests – Full Bench

The Full Bench upheld the appeal on two grounds: that the DP failed in determining that the agreements passed the BOOT and that OS had not taken all reasonable steps to explain the terms of the agreements and the effects.

VP Hatcher and DP Booth found there were two “fundamental errors” with the DP’s satisfaction that the agreements passed the BOOT, suggesting he relied on an erroneous comparison of the salary rates in the agreements against the applicable awards and he did not adequately consider how the rates would be assessed under different rosters and classifications.

Regarding the reasonable steps taken to explain the terms of the agreement, VP Hatcher and DP Booth found that OS simply “did not explain what the rates of pay would be for employees or new or alternative rosters, for casual employees, or for part-time employees.”

Further they said, “it was not reasonably open for DP Boyce to be satisfied that there had been compliance with s 180(5) (without undertakings) and therefore that the agreement had been genuinely agreed to”.

DP Colman in his own judgment agreed with the majority but on a narrower basis that there was no fundamental error in DP Boyce having assessed the BOOT based on “the guarantee in the agreement that the remuneration for new rosters will be greater than what employees would have been paid working that roster if the applicable award had applied”.

Similarly, to the majority he upheld the appeal on the ground that OS failed to explain the terms and effects particularly in relation to setting the salaries for new rosters under the agreements.

On those two grounds the Full Bench upheld the appeal, quashed DP Boyce’s decisions and would re-determine the approval applications for both agreements.

Implications for employers

AMMA is disappointed to see resource sector enterprise agreements voted up by employees and lodged with the Fair Work Commission 18 months ago subject to continued delays and uncertainty in the approvals process.

While this BHP matter has attracted some mainstream media attention, Deputy President Boyce is far from unique in having his approval of enterprise agreements overturned on appeal by a Full Bench of the FWC.

On the contrary this outcome has become commonplace.

During the past three full calendar years (2017-2019) that have been an extraordinary 716 FWC Full Bench appeals – practically one for every working day – with many matters relating to enterprise agreement approvals (see additional AMMA analysis here).

This is demonstrative of the Fair Work Act’s convoluted agreement making process which has led to a serious loss of employer confidence in the utility and practicality of enterprise agreements.

Simplifying and expediting the enterprise agreement making system has long been a high priority reform item for AMMA and its members.

In particular, AMMA members have reported increased frustrations with the application of the ‘better-off-overall’ and ‘genuinely agreed’ statutory tests by the Fair Work Commission, noting the overly-technical approach taken by many tribunal members, often including analysis of highly unlikely hypothetical scenarios, has contributed to a steep decline in the use of enterprise bargaining in recent years.

According to data compiled by the Attorney-General’s Department, the number of in-term private sector enterprise agreements halved between 2014 and 2019, from around 20,000 to just over 10,000.

Addressing the decline in enterprise agreement making through simplification is a key focus area of AMMA’s Pathway to Productivity workplace reform campaign, commencing in 2019 prior to the COVID-19 crisis, and will remain a high priority in AMMA’s post-pandemic IR reform framework to be advocated to the Morrison Government to assist with a swift economic recovery.

AMMA encourages any members with practical case studies, evidence or any other feedback related to its campaign to fix the agreement making process to get involved with AMMA’s advocacy process.

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