In a major blow to the company’s strategy of in-sourcing its labour hire workforces, last week (13 July) a majority Fair Work Commission (FWC) Full Bench found two BHP Operations Services (OS) enterprise agreements had not been “genuinely agreed”.

The Full Bench was re-determining the applications for approval of both enterprise agreements following its earlier decision to uphold an appeal by the CFMMEU, AWU, CEPU and AMWU.

The unions appealed the approval of the two agreements on several grounds, including that the agreements did not satisfy the statutory requirements for approval.

In this latest decision, which will likely prove fatal to the agreements, the Full Bench found a failure to properly explain the terms relating to setting salaries for new rosters under the agreements, meaning they could not have been genuinely agreed.

AMMA’s view is this decision is yet another example of the unnecessarily technical nature of the enterprise agreement approvals process, marred by delays and interference from non-bargaining third parties, which is damaging to employment outcomes.

Appeal upheld for failure to explain agreement terms

In the 8 May decision, the Full Bench quashed the approval of two BHP OS enterprise agreements and sought to redetermine both applications. The unions contended there were issues with the Better Off Overall Test (BOOT) and genuinely agreed tests and that the undertakings provided did not remedy a deficiency in the explanation required.

The Full Bench upheld the appeal on two grounds: that DP Boyce 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 Boyce’s satisfaction that the agreements passed the BOOT due to a reliance on erroneous comparisons of salary rates and lack of consideration of how the rates would be assessed under different rosters.

DP Colman in his own judgment agreed with the majority but found there was no fundamental error by DP Boyce in making the BOOT assessment based on a guarantee in the agreement that remuneration for new rosters would be greater than award rates.

All three members of the Full Bench agreed that OS failed to explain the terms of the agreements in relation to setting the salaries for new rosters.

To read AMMA’s case summary on the initial full bench decision click here.

Undertakings cannot fix failure to explain agreement terms

In re-determining the applications for approval of both OS agreements, the Full Bench found it necessary to deal only with the issue of compliance with s 180(5) of the Fair Work Act (FW Act) as it related to the genuinely agreed requirement in s 188(1)(a)(i).

The majority of the Full Bench rejected BHP’s view that proposed undertakings were capable of resolving the employer’s failure to take all reasonable steps to explain the terms and effects of the agreements under s 180(5).

The Full Bench found that despite s 190 providing the FWC power to accept undertakings which address non-compliance with s 180(5), that does not mean that any non-compliance is capable of being remedied that way.

“There must be a logical relationship between the identified non-compliance with s 180(5) and the undertaking proposed to remedy it,” the majority said.

The majority found “the identified failure to comply with s 180(5) was the failure to explain either the actual salary outcomes which would apply to full-time employees on alternative rosters under clause 2.1 of Schedule 1 of the Agreements or the principles by which those actual salaries would be calculated.”

In considering the proposed undertakings made by BHP, the majority said at least one would appear to address the BOOT concern, but none logically related to the identified non-compliance with s 180(5). Further, the majority noted BHP had still not disclosed the “principles” for calculating the annual salaries.

The majority found it “difficult to identify any undertaking which would address the concerns in relation to non-compliance with s 180(5)”. The majority noted it was not surprised that BHP had not made a submission that s 188(2) was applicable, given that the identified non-compliance could not be characterised as either minor or an error”.

In his dissenting judgement, DP Colman found in favour of approving the agreements subject to undertakings. The DP proposed an undertaking that employees working on new rosters will maintain their existing margin of pay above the relevant award rates. DP Colman found that the suggested undertaking would have a logical connection to the non-compliance.

The majority of the full bench concluded that it was appropriate to dismiss the applications for approval of the two agreements on the basis that it was not satisfied that genuine agreement had been reached.

In its written submissions, BHP requested a further opportunity to address any “residual concerns” the FWC may have after considering its proposed undertakings. The FWC gave BHP until yesterday (20 July) to make further submissions on the approval of the two agreements.

If BHP elects not to make further submissions, then the applications for approval of both agreements will be dismissed.

Implications for employers

This decision is further evidence that the current framework for agreement making is too technical and provides too many opportunities for objection and appeal. This has led to a serious loss of employer confidence in the utility and practicality of enterprise agreements.

Both agreements were lodged in October 2018 and some 21 months later the matters are still being determined.

Resources and energy employers regularly report unnecessary delays and interference in the agreement approval process of this type, especially where unions, often not a party to bargaining, appeal a decision of the FWC to approve an agreement.

In particular, AMMA members have reported increased frustrations with the application of the ‘better-off-overall’ and ‘genuinely agreed’ statutory tests by the FWC, 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.

Addressing the decline in enterprise agreement making through simplification is one of the five areas of Australia’s industrial relations system being closely examined by a series of Australian Government-led working groups of which AMMA has a direct representative role.

It is also one of the key reform priorities for resources and energy employers identified in AMMA’s Pathway to Productivity workplace reform campaign and will remain a high priority in AMMA’s post-pandemic IR reform framework.

AMMA encourages any members with practical case studies, evidence or any other feedback related to the agreement making process to get in touch with the AMMA Policy team via [email protected].