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High Court confirms employers can make an enterprise agreement prior to operation

ALDI Foods Pty Limited v Shop Distribution & Allied Employees Association [2017] HCA 53
(6 December 2017)

In ALDI Foods Pty Ltd v Shop, Distributive and Allied Employees Association [2017] HCA 53, the High Court confirmed that an employer was able to make an enterprise agreement in relation to a new enterprise with existing employees, even though the enterprise had not yet commenced operation and the employees had not yet commenced work in the new enterprise.


In early 2015, ALDI Foods Pty Limited (ALDI) was in the process of establishing a new distribution centre in Regency Park, South Australia. In April 2015 ALDI sought expressions of interest from its existing employees in existing ALDI stores in other regions to work in the new Regency Park region. In late May 2015, ALDI offered employment to a number of employees who had expressed interest, seventeen of whom subsequently accepted such offers.

ALDI commenced bargaining with the seventeen employees for an enterprise agreement to cover the Regency Park region. Neither the Transport Workers’ Union of Australia (TWU) nor the Shop, Distributive and Allied Employees Association (SDA) were involved in the bargaining as bargaining representatives for the proposed agreement. ALDI put the proposed agreement to a vote, with sixteen (of seventeen) employees casting a valid vote, and fifteen of those voting in favour. At the time of the vote, the Regency Park distribution centre was still under construction and had not yet commenced trading.

ALDI submitted the agreement to the Fair Work Commission for approval on 4 August 2015, and it was approved by Deputy President Bull on 22 September 2015.

The SDA and the TWU filed notices of appeal with the Full Bench of the Fair Work Commission, challenging the approval decision of DP Bull. The unions contended, amongst other things, that the agreement should have been made as a “greenfields agreement” under s 172(2)(b) of the Fair Work Act 2009 (Cth) (FW Act) because ALDI was establishing a new enterprise and had not employed in that new enterprise any of the persons who would be necessary for the normal conduct of the enterprise. They also argued that the agreement did not pass the Better Off Overall Test (BOOT) for the purposes of s 186(2)(d) of the FW Act.

Both contentions were rejected and the appeal was dismissed by the Full Bench (Vice President Watson, Deputy President Kovacic and Commissioner Wilson).

The SDA then applied to the Full Court of the Federal Court for judicial review of the decisions of both Bull DP and the Full Bench. A majority of the Full Court of the Federal Court upheld the SDA’s appeal, finding that the seventeen employees were not “covered by the agreement”, for the purposes of establishing that the agreement has been genuinely agreed to, as required under s 186(2)(a) of the Act, as no employees could be “covered” by the agreement until it had commenced operating. The Full Court also held that the Full Bench of the Fair Work Commission had not properly compared the agreement with the relevant modern award in order to properly assess whether the agreement passed the BOOT.

ALDI appealed to the High Court of Australia.


The High Court unanimously upheld the appeal against the Full Court’s decision that an enterprise agreement for a new enterprise cannot be made with existing employees of the employer who do not yet work in the new enterprise. The SDA’s contentions in this regard, which had been successful in the courts below, were rejected.

The High Court noted the difference between an agreement’s “coverage” and its “application” within the meaning of ss 52 and 53 of the FW Act. An enterprise agreement “covers” an employee if it is expressed to cover the employee. It applies to an employee in relation to particular employment, if the agreement covers the employee and the agreement is in operation.

The High Court observed that it was irrelevant that ALDI could have instead made a greenfields agreement covering the Regency Park operations. The agreement was made as a non-greenfields agreement, as permitted by the FW Act.

The High Court upheld the Full Court’s decision regarding the BOOT issue, and ordered that the Full Bench of the Fair Work Commission proceed to determine the appeal made to it regarding the agreement’s BOOT assessment.


This decision provides employers with further clarity around the enterprise agreement making options available to them in relation to new enterprises.

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