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Unions misconstrue ‘fairly chosen’ rule, says Full Bench

AREEA senior workplace policy adviser Lisa Matthews covers the recent Fair Work Commission (FWC) Full Bench decision to uphold the approval of an ALDI enterprise agreement, rejecting union arguments the deal should instead have been made as a greenfields (i.e. new enterprise) agreement, that employees who voted on it were not ‘fairly chosen’, and that it failed the BOOT.

Lisa Matthews
Lisa Matthews

IN its 22 February 2016 decision, the Full Bench comprising VP Graeme Watson, DP John Kovacic and Commissioner Nick Wilson upheld an earlier decision by DP Geoff Bull that approved the ALDI Regency Park Agreement 2015.

The Transport Workers Union (TWU) and the Shop, Distributive and Allied Employee’s Union (SDA) appealed the approval on three grounds, all of which were rejected by the Bench.

Was it a greenfields site?

The unions argued ALDI was establishing a new enterprise and had not employed any of the persons necessary for the normal conduct of the enterprise at the time the agreement was made. Therefore, the new stores at Regency Park represented the commencement of a significant new operation or ‘genuine new enterprise’, they said.

The relevant workplaces were ‘nothing more than construction sites’ and were not operating in any sense at the time the agreement was purported to be made, they argued.

While each of the 17 employees who voted on the agreement might be an employee of ALDI, none of them were employed to work in the new enterprise at the time the agreement was made given the new enterprise had not yet commenced operating, the unions said.

Offers of employment were expressly stated not to commence until the new stores opened.

In those circumstances, the Fair Work Act only permitted the approval of a greenfields agreement, which required the involvement of at least one trade union, the unions argued.

Coverage and application issues

In the Bench’s view, the concepts of ‘coverage’ and ‘application’ in sections 52 and 53 of the Act were keys to interpreting the phrase ‘who will be covered by the agreement’ in s172(2)(a) and s182(1) which would determine what type of agreement could be made.

In this case, the employees who accepted offers of employment in the Regency Park region were employed by ALDI at the time the agreement was made.

“Further, as their employment comprehended work within the scope of the Regency Park Agreement they were covered by the Agreement. It was legitimate and necessary for them to be included in the group of employees asked to approve the agreement,” the Bench said.

In this case, only those employees who had accepted offers of employment to work at Regency Park had voted on the agreement.

Under s172(2), an enterprise agreement either had to be made with the employees who were employed at the time the agreement was made who would be covered by the agreement; or with one or more relevant unions if the agreement related to a genuine new enterprise and the employer had not employed any of the persons who would be necessary for the normal conduct of that enterprise and would be covered by that agreement.

Given that the 17 employees who voted on the agreement would be covered by the agreement and were already employed by ALDI, the company was entitled to make an agreement with those employees as a single enterprise agreement rather than a greenfields agreement, the Bench said.

Were employees fairly chosen?

The SDA in the second ground of appeal argued those who voted on the agreement were not ‘fairly chosen’ because 17 employees were selected to make an agreement for a much larger group of employees. Those employees were not representative of those that would ultimately be covered by the agreement, the SDA said, noting seven of the 17 employees were managers or assistant store managers.

The Bench said the union’s arguments on that point were ‘misconceived’. It pointed out that the test under s186(3) as to whether a group of employees was ‘fairly chosen’ required consideration of the employees covered by the agreement, not the employees who voted for the agreement at the time it was made.

In CFMEU v John Holland Pty Ltd [2015] FCAFC 16, it was confirmed the correct application of the ‘fairly chosen’ rule was whether a company had acted fairly in choosing the employees to be covered by an agreement, not in relation to which employees voted on the agreement.

The Full Court of the Federal Court in John Holland said it was not relevant to an assessment of s186(3) that the FWC did not know how many employees would, or might in future, be covered by an agreement. There would often be employees who would be covered by an agreement who were ‘potential’ or ‘unknown’ at the time of making the agreement who would never have a chance to bargain, including anyone taken on during the term of an agreement. But that was not relevant to the fairly chosen test, the Full Court had found in John Holland.

In the current case, because that aspect of the union appeal had been expressly overruled in the separate John Holland case, the ground of appeal relating to the ‘fairly chosen’ test must fail, the Bench said.

Did it pass the BOOT?

The SDA unsuccessfully argued the BOOT was not properly applied to the ALDI agreement because rosters said to be ‘typical’ were not in use at the relevant operations because those operations had not commenced.

The Bench pointed out that the agreement contained a clause saying remuneration for each classification had been set to ensure employees were better off overall under the agreement than under the relevant modern award which would otherwise apply.

“This clause creates an enforceable right to payments to employees equal to or higher than those contained in the award. There is no limitation on its availability,” the Bench said.

DP Bull had therefore properly considered the BOOT and reached a decision based on a sound analysis. The final ground of appeal was therefore dismissed.

Implications for employers

This decision clarifies that the Fair Work Act’s ‘fairly chosen’ test only applies to the group of workers chosen by the employer to be covered by an agreement, not to those who vote on an agreement.

It also confirms that the critical question to be decided in whether a single enterprise non-greenfields agreement can be made is whether the employees who voted to approve the agreement are ‘employees who are employed at the time the agreement is made and who will be covered by the agreement’.

In this case, while the voting employees had not yet started work at the new operation, they were considered to be employed by the enterprise at another site and were deemed to be covered by the agreement given they had accepted offers of employment.

Click here to view the decision.

To discuss the implications of this decision for your business plans, contact an employee relations consultant at your nearest AREEA office.

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