11 March 2015
Practice Group:
Labour, Employment
and Workplace Safety
Full Federal Court Cleans Up the Mess on Light
Brownfields Enterprise Agreements
Australia Labour Employment and Workplace Safety Alert
By Duncan Fletcher and James Parkinson
Introduction
The Full Court of the Federal Court (Court) has handed down its decision in Construction,
Forestry, Mining and Energy Union v John Holland Pty Ltd [2015] FCAFC 16 (24
February 2015) which clarifies the approval process for new enterprise agreements
which the Fair Work Commission (Commission) is to perform when considering the fairly
chosen requirements under the Fair Work Act 2009 (Cth) (Act).
The Court confirmed the finding of Justice Siopis (Siopis J) that the Full Bench of the
Commission (Full Bench) fell into jurisdictional error when it quashed Deputy President
McCarthy's approval of John Holland Pty Ltd's (Company) Western Region Agreement
Western Australia 2012-2016 (Agreement).
The Court agreed with Siopis J that it is not the task of the Commission to prospectively
consider who may be covered by an enterprise agreement when considering the fairly
chosen requirements of the Act, but who is employed at the time the agreement is made.
In reaching this decision, the Court has removed the uncertainty as to whether the
potential agreement coverage for future employees needs to be considered by the
Commission as part of the fairly chosen requirements under the Act. It makes it easier for
employers to enter into an agreement with a small number of existing employees that
may cover or apply to a much larger group of employees. These agreements have been
called 'light brownfields enterprise agreements'.
The Facts
The Company was awarded the head construction contract to build the new children's
hospital in Perth, Western Australia (WA). To undertake this project, the Company
planned to perform the vast majority of work through subcontractors and to directly
employ a small number of employees to carry out the contract.
It was expected that there would be 25 direct employees consisting of labourers, form
workers, tow crane operators, riggers and doggers.
On 12 January 2012, the Company met with three employees at a site office to make the
agreement (Agreement) pursuant to the Act. The agreement-making process was
explained at the meeting and each of the three employees appointed themselves as
bargaining representatives for the proposed Agreement.
On 13 February 2012, the three employees voted in favour of the proposed Agreement.
At the time the Agreement was made, the Company was also tendering as head
contractor for other government projects in WA. It also employed a broad range of
employees nationally in a variety of work classifications, from clerical to construction
work.
Full Federal Court Cleans Up the Mess on Light Brownfields Enterprise
Agreements
Importantly, the three employees who voted in favour of the Agreement were the only
employees covered by the Agreement and employed by the Company at the time it was
made.
The job classifications contained in the Agreement included job classifications in addition
to those which covered each of the three employees. Therefore, it was likely that
employees not presently covered by the Agreement would be covered at some point in
the future.
First Instance Decision
The Company applied for the Agreement to be approved by the Commission on 13
February 2012. On 22 March 2012, Deputy President McCarthy heard the approval
application and an objection to approval, which was lodged by the Construction, Forestry,
Mining and Energy Union (CFMEU).
Deputy President McCarthy approved the Agreement despite the objection. In
considering the fairly chosen requirements, it was held that the employees selected to
vote were, at the time the Agreement was made, operationally and geographically
distinct. Therefore, at the time the Agreement was made, there were no additional
employees within the Company who should have had an opportunity to vote on the
Agreement.
This decision was appealed by the CFMEU to the Full Bench.
The Full Bench's Decision
On appeal, the Full Bench quashed the approval decision of Deputy President McCarthy.
The key concern for the Full Bench was that the nature of clause 1.2 of the Agreement
created "significant doubt [as to whether] it would be possible to make any definitive
finding as to the group of employees covered by the agreement for the purposes of [the
fairly chosen requirements of the Act]."
The Full Bench further stated that such an assessment could only occur by analysing
"how many building and civil construction employees are now covered or may in the
future be covered by site-specific agreements. As it is not possible to identify with any
certainty the group of employees to be covered by the agreement, it is not possible to be
satisfied that the group of [three] employees was fairly chosen as required by [the Act]."
Essentially, the Full Bench was concerned that it was not in a position to know how many
employees may be covered by the Agreement in the future thereby undermining those
potential future employees' collective bargaining rights under the Act.
Justice Siopis' Decision
Siopis J quashed the Full Bench decision and found that it fell into error when
considering what future employees may be covered by the Agreement.
In reaching his decision, Siopis J stated that the Act calls on the Commission to be
satisfied that the group of employees covered by the Agreement 'was' fairly chosen. It is
of significance that the past tense 'was' is used. This directs the Commission to have
regard to the conduct of those persons who made the Agreement and not those who may
come within its scope during its nominal life.
Full Court's Decision
Justices Barker, Buchanan and Besanko confirmed Siopis J's decision that the task of
the Commission is not to consider who may or will be covered by an agreement. Rather,
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Full Federal Court Cleans Up the Mess on Light Brownfields Enterprise
Agreements
the Commission must be satisfied that the group was fairly chosen by reference to the
operational, organisational and geographical considerations as outlined in the Act.
The Court made it clear (and the parties to the appeal accepted) that there was nothing
wrong with a small group of people voting up an enterprise agreement which may, during
its nominal life, cover a wider range of employees.
However, the Court rejected the CFMEU's contention that the rights of potential
employees may be undermined. The Court emphasised that the Commission must not
only consider who was fairly chosen to vote but whether, during the life of the agreement,
employees engaged under its terms will be better off overall when compared to the
award. If the answer to this question is 'yes' then the alleged undermining of future
employee rights is mitigated, and the safety net of the Act and award system is
preserved.
Significance for Employers
The decision makes it clear that the question of whether the group of employees chosen
to vote was fairly chosen is a consideration which is fixed at the point in time the
agreement is made and by reference to the geographical, organisational and operational
distinctions outlined in the Act.
The previous case law on point required employers to predict who may or will come
within the scope of the agreement. The Court's decision reintroduces certainty in the
agreement making process and clarifies how an employer should go about selecting
which employees to ballot. This means that 'light brownfields agreements' are a
legitimate industrial relations strategy for employers to consider.
Authors:
Duncan Fletcher
duncan.fletcher@klgates.com
+61.8.9216.0923
James Parkinson
james.parkinson@klgates.com
+61.8.9216.0948
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