A full bench of the Fair Work Commission has overturned the approval of a labour hire agreement after finding on a number of grounds that the agreement could not have been genuinely agreed to by employees.

The agreement approval was appealed by the CFMMEU, the AMWU, the AWU and CEPU, none of which were involved in negotiating the agreement, after the approval application was published 12 times on the Commission’s website.

This outcome is disappointing for employers who seek to pursue non-union or ‘baseline’ agreements which offer employers flexibility to tender for more work and pay appropriate market rates.

Fixing the enterprise bargaining system has been part of AMMA’s ongoing advocacy. In particular, AMMA continues to advocate for more agreement making options, a simplified bargaining framework and the removal of onerous requirements for employers to explain the terms of industrial instruments that are openly available to employees (including on the FWC website).

Background

Labour hire company Celotti lodged its Celotti Workforce Enterprise Agreement 2020 with the FWC for approval in February after being voted up by 91 employees. There were no unions involved in negotiating the deal and the agreement was effectively a baseline agreement which encompassed the terms and conditions of 12 different modern awards.

Employees covered by the agreement would receive all the terms and conditions in those various modern awards, but the hourly rates of pay would be at least one dollar higher than the hourly rates in those awards.

While this type of enterprise agreement is acceptable under the current bargaining framework, these baseline agreements regularly draw the attention of unions who prefer the hourly rates of pay to be contained and detailed within the agreement.

After Celotti lodged its agreement for approval, the FWC published the approval application on its website. As part of its usual practice, the FWC publishes every application for approval of an enterprise agreement and the industry in which that agreement may operate. As the Celotti Workforce agreement purported to operate across various industries with different modern awards, it was listed 12 times on the FWC website which put the application in the spotlight for multiple unions which regularly appeal such agreements.

The four unions applied to the FWC to be heard in relation to the approval of the Celotti Workforce agreement, despite none of them having been involved in the process. The FWC exercised its powers to inform itself and granted the unions the opportunity to be heard and provided them with the approval documentation for the Celotti Workforce agreement.

All four unions objected to the FWC approving the agreement and contended that the agreement was not capable of approval because the agreement was not genuinely agreed to and did not pass the better off overall test (BOOT).

The unions submitted the employees covered by the agreement could not have genuinely agreed to its terms because they had no experience in all of the different classifications in all of the modern awards that underpin the agreement.

Deputy President Lake was not persuaded by the unions’ arguments, acknowledging that Celotti provided over 1000 pages of explanatory materials which highlighted the differences between the agreement and the underlying awards.  He further noted that employees had the opportunity to contact Celotti, which some employees did, to seek further clarification about those differences.

The DP also rejected the unions’ contention that the agreement did not pass the BOOT. The DP was satisfied that the agreement passed the BOOT by virtue of wording in the agreement that the Over Agreement payment must pay rates that are already above the awards.

By applying all of the terms and conditions of a modern award and including higher rates of pay above the award rates, employees covered by the agreement are better off overall.

DP Lake rejected the unions’ contentions and approved the Celotti Workforce agreement on 1 June 2020.

Full bench stifles agreement approval six months on

The unions appealed the approval of the Celotti Workforce agreement on a number of grounds, arguing the agreement was not able to be approved because it was not genuinely agreed to by employees covered by it, that it failed to pass the BOOT and other issues about procedural fairness.

The full bench rejected the unions contention that the agreement did not pass the BOOT, accepting the Deputy President’s finding that by virtue of the wording within the agreement employees would at all material times receive at least the agreement rates.

While the full bench acknowledged that the agreement passed the BOOT, it found a number of grounds for which the agreement could not have been genuinely agreed by employees.

Celotti had provided more than 1000 pages of explanatory material in relation to the terms of the agreement and highlighted the differences between the agreement and the underlying awards. Despite this undertaking, the full bench did not consider this to be enough to satisfy the requirement to take all reasonable steps to explain the agreement.

The full bench found the comparisons between the agreement and underlying awards went no way towards explaining the effect of the agreement terms and that Celotti needed to have taken steps to ensure employees understood those differences.

The full bench also took issue with the fact that Celotti had assumed that employees had knowledge of the underlying awards and the classifications and rates of pay contained in them, finding that Celotti should have taken some steps to explain those terms and conditions within the 12 modern awards.

The full bench also agreed with the unions’ contention as to the disjunct between the agreement’s scope and the Celotti workforce, finding there was insufficient material before it to conclude that Celotti engaged at least one employee to perform work within the scope of each of the 12 modern awards.

The full bench found a number of faults in the approval process for the Celotti Workforce agreement and considered it in the public interest to grant permission to appeal.

The appeal was upheld and the application to approve the agreement was remitted for redetermination.

Implications for employers

AMMA notes the full bench handed down its decision more than six months after the workforce had voted up the agreement without any involvement from unions. Celotti already had the difficult task of getting the agreement approved in the first instance with multiple unions, which were not a party to bargaining, objecting its approval.

The agreement was then subject to a subsequent appeal process at some considerable expense to Celotti, only to find that the full bench disagreed with the original decision and overturned the approval of the agreement.

This outcome is disappointing because agreements of this type provide employers with flexibility in terms of tendering for work and paying people an appropriate market rate of pay. Decisions like this could dissuade employers from pursuing a non-union or baseline agreement which are both legitimate forms of enterprise agreements under the current system.

While the full bench pointed out some fundamental issues with the Celotti Workforce agreement which means it is not capable of being approved, it is not to say these types of agreements cannot be lodged and approved by the FWC.

AMMA has had success in getting these agreements approved for many members even in recent times. Members considering pursuing a baseline agreement should contact their local AMMA workplace consultant for support.

Further, AMMA alongside other employer representatives has been advocating for reforms to Australia’s enterprise bargaining system through the Australian Government’s IR Working Groups, many of which address the issues experienced by the employer in this case.

Amending legislation is expected to be introduced into Federal Parliament before the end of the year. For a discussion on AMMA’s advocacy and next steps, email [email protected] in the first instance.